VAT Registration and Filing in Kenya
Complete guide to Value Added Tax for businesses in Kenya.
What is VAT?
In Simple Terms
VAT (Value Added Tax) is a tax on goods and services. When you sell something, you add 16% VAT to the price. When you buy something for your business, you pay VAT, but you can claim it back. You only pay KRA the difference between what you collected and what you paid.
Official Definition (KRA)
VAT is a consumption tax levied on the supply of goods and services in Kenya. It's charged at the standard rate of 16% on taxable supplies. Registered persons collect VAT on their sales (output VAT) and can claim back VAT on their purchases (input VAT), paying KRA the net difference.
When Must You Register for VAT?
Mandatory Registration
You must register for VAT if your annual turnover exceeds KES 5 million.
This is calculated on a rolling 12-month basis. Once you hit KES 5M, you have 30 days to register.
Optional Registration
You can choose to register for VAT even if your turnover is below KES 5M if:
- You want to claim back VAT on business purchases
- You supply mainly to VAT-registered businesses
- You want to appear more established to customers
Note: Once registered, you must remain registered for at least 2 years.
How VAT Works
Worked Example
Let's say you run a business selling electronics:
In a month, you:
You also:
What you pay KRA:
(KES 16,000 collected - KES 8,000 paid = KES 8,000)
Key Concepts
Output VAT
VAT you charge and collect from your customers when you sell goods or services.
Input VAT
VAT you pay when you buy goods or services for your business. You can claim this back from KRA.
Net VAT
The difference between output VAT and input VAT. This is what you pay (or get refunded) from KRA.
eTIMS Requirement
Mandatory for VAT-Registered Businesses
All VAT-registered businesses must use eTIMS (Electronic Tax Invoice Management System) to generate invoices.
eTIMS ensures all invoices are automatically transmitted to KRA in real-time. This is mandatory and non-compliance can result in penalties.
Filing Requirements
Monthly VAT Returns
- Due Date: 20th of the following month
- Payment: Must be made by the 20th
- Filing: Done through iTax portal
What You Need to File
- Total sales (excluding VAT)
- Output VAT collected
- Total purchases (excluding VAT)
- Input VAT paid
- Net VAT payable or refundable
Common Questions
What if I forget to file my VAT return?
Late filing attracts penalties. You'll pay KES 10,000 or 5% of the tax due, whichever is higher, plus interest on any unpaid tax.
Can I claim VAT on all purchases?
Only on purchases that are used for business purposes. Personal expenses, entertainment, and certain items may not be claimable. Keep all VAT invoices for your records.
What if my input VAT exceeds output VAT?
You can claim a VAT refund from KRA. This is common for businesses that are starting up or investing heavily in equipment. The refund process can take 30-90 days.
Calculate VAT
Use our calculator to work out VAT-inclusive and exclusive amounts.