What you need to know about Value Added Tax (VAT)

Value Added Tax is charged on supply of taxable goods or services made or provided in Kenya and on importation of taxable goods or services into Kenya.

Persons or corporates with sales of Kshs. 5,000,000 and above within 12 months period; are required to register for VAT.

VAT Rates

There are 3 types of VAT tax rates;

1. 0% - for Zero rated supplies. Goods listed in the 2nd Schedule to the VAT Act e.g. Exportation of goods/services, goods supplied to EPZ, LPG, Privileged persons and public bodies etc.

2. 8% - Petroleum oils obtained from bituminous, Motor Spirits (Diesel Supero, AViation spirit etc.)

3. 14% - General rate for other Goods and Services

VAT returns are submitted and paid monthly via iTax on or before the 20th of the following month.

Persons with no VAT to declare are required to submit a NIL return.

What is the penalty for late filing and paying of VAT?

Penalty on late filing: Whichever is higher between, Kshs. 10,000 and 5% of the tax due

Penalty on late payment: 5% of the tax due and a late payment interest of 1% per month on the unpaid tax until the tax is paid in full.

Withholding VAT

When a trader supplies and invoices an appointed withholding VAT Agent the payment for supply is made less VAT charged or that which ought to have been charged regardless of whether the supplier is registered for VAT or not.

Withholding VAT is charged at the rate of 2% of the value of taxable supplies.

No VAT is withheld on exempt goods, exempt services and Zero rated supplies.