What is VAT?

Value Added Tax (VAT) is an indirect tax on the consumption of goods and services. Businesses apply it at each stage of production and distribution, but consumers ultimately bear the cost.

In Kenya, businesses registered for VAT collect it on their sales (output VAT), claim deductions for VAT paid on business expenses (input VAT), and remit the difference to the Kenya Revenue Authority (KRA).

VAT Rates in Kenya

Kenya applies three main VAT rates:

• Standard Rate – 16%: Applies to most taxable goods and services, including imports.
• Zero Rate – 0%: Covers exports, international passenger transport, and certain approved goods and services (e.g. supplies to Export Processing Zones).
• Exempt Rate: Applies to goods and services that don’t attract VAT at all, such as financial services, education, and unprocessed food items.

Who Needs to Register for VAT in Kenya?

Any individual, business, company, or partnership that supplies taxable goods or services and earns over Ksh 5,000,000 annually must register for VAT.

VAT registration links directly to your Personal Identification Number (PIN) from the Kenya Revenue Authority—no separate VAT number is issued.

How VAT Works for Businesses

Here’s a quick overview of the VAT process for registered businesses:

1. Charge Output VAT

Add VAT (usually 16%) to the selling price of taxable goods and services.

2. Claim Input VAT

Deduct VAT paid on eligible business-related purchases. You must claim input VAT within six months from the supply or importation date.

3. Calculate VAT Payable

Subtract input VAT from output VAT to determine the net amount payable (or refundable) to KRA.

4. File Monthly Returns

Submit VAT returns via iTax by the 20th of each month. Delays attract penalties and interest.

Time of Supply (Tax Point)

VAT becomes due at the earliest of the following events:

• Delivery of goods or rendering of services
• Issuance of an invoice
• Receipt of payment (full or partial)
• Issuance of a completion certificate (for construction projects)

Record-Keeping Requirements

VAT-registered businesses in Kenya must maintain accurate and complete records of all taxable transactions. These records may be physical or electronic and must be kept for at least five years. Proper documentation helps ensure smooth claims and audit readiness.