When must a business register for VAT in Kenya?
Value Added Tax becomes compulsory once your taxable sales reach KES 5 million in any 12 months. Here is how the threshold works and what changes once you register.
VAT is a tax on the sale of goods and services. Registered businesses charge it to their customers, deduct the VAT they paid on their own purchases, and pay the difference to KRA.
The threshold
You must register for VAT once your taxable supplies reach KES 5 million or more in a period of 12 months. Registration must be done within 30 days of becoming liable.
The 12 months are any 12 consecutive months, not just the calendar year, so keep an eye on your running total.
Voluntary registration
Businesses below KES 5 million can register voluntarily. This can make sense if most of your customers are VAT-registered businesses, because they can claim back the VAT you charge, and you can claim back the VAT on your own purchases.
Digital services
Suppliers of imported digital services delivered over the internet or through a digital marketplace must register whatever their turnover.
What changes once you are registered
- Rate: the general VAT rate is 16%. Some goods and services are zero-rated or exempt.
- Invoices: issue tax invoices through eTIMS.
- Returns: file a VAT return and pay any VAT due by the 20th of the following month, even in months with no sales.
- Records: keep sales and purchase records so you can claim the VAT you paid on business costs.
How to register
Log in to iTax with your KRA PIN and apply to add the VAT obligation. KRA may ask for supporting documents about your business before approving it.
Sources
This article is general information, not financial advice.