Kenya VAT System - Complete Guide

📘 What is VAT in Kenya?

Kenya’s Value Added Tax (VAT) is a consumption tax levied on the supply of goods and services and on imports. It is governed by the VAT Act, 2013, and administered by the Kenya Revenue Authority (KRA). VAT is collected at each stage of the supply chain, and businesses can claim input VAT on purchases.

The Kenyan government continues to modernize VAT through digitalization and inclusion of the digital economy within the tax net.

📊 VAT Rates in Kenya

🔸 Standard Rate: 16%

Applies to most goods and services sold within Kenya.

🟡 Reduced Rate: 8%

Applies to specific fuel products.

🟢 Zero-rated (0%) Supplies:

• Exported goods
• Certain agricultural supplies
• Donor-funded projects

🚫 Exempt Supplies:

• Financial services
• Education and medical services
• Residential rent
• Insurance services

🏢 VAT Registration in Kenya

✅ Mandatory Registration:

Businesses must register for VAT if:

• Annual taxable turnover exceeds KES 5 million (~USD 38,000)
• They are non-resident digital service providers supplying services to Kenyan consumers

🌍 Digital Marketplaces & Foreign Providers:

As per Kenya’s Digital Marketplace Supply Regulations, all non-resident digital businesses must register for VAT if they:

• Supply digital services to users in Kenya
• Operate platforms facilitating digital transactions

This includes:

• Streaming services
• Software, apps, and e-books
• Cloud storage and web hosting
• Online gaming
• Subscription-based digital media

🌐 Digital Services VAT in Kenya

Kenya imposes VAT at 16% on digital services provided to Kenyan residents by foreign entities.

🧾 Key Points:

• Registration is required via KRA’s simplified VAT system
• Monthly returns must be filed
• Foreign businesses can pay in foreign currency

🔢 Kenya VAT Number Format

A registered business in Kenya receives a Personal Identification Number (PIN) from KRA, used for all tax transactions including VAT.

🧾 Format Example:

P051234567Z

This number must be quoted on all VAT invoices, returns, and correspondence with KRA.

🧾 VAT Invoice Requirements

VAT-registered businesses must issue tax invoices containing:

• Supplier name, address & PIN
• Buyer’s details (if available)
• Invoice date and number
• Description of goods/services
• VAT rate and amount
• Total payable including VAT

Invoices must be generated through Electronic Tax Registers (ETRs) integrated with KRA’s eTIMS system.

🧮 VAT Calculation Example

Example:

A business sells software worth KES 200,000:

• VAT @ 16% = KES 32,000
• Total invoice = KES 232,000
• Input VAT on purchases = KES 10,000
• Net VAT payable = KES 22,000

📅 VAT Filing & Payment

🗓️ Filing Frequency:

• VAT returns must be filed monthly
• Deadline: 20th of the following month

💻 Portal:

• Filing is done via the KRA iTax portal: https://itax.kra.go.ke

💳 Payment:

• Payment must be made electronically using bank transfers or mobile money

Note: Late filing attracts penalties and interest.

🌍 VAT on Imports & Exports

• Imports: Subject to 16% VAT, collected at the border by the Kenya Revenue Authority (Customs)
• Exports: Generally zero-rated, but documentation must be properly maintained

🚫 VAT Exempt Goods and Services

Some goods and services are exempt from VAT, meaning no output VAT is charged, and input VAT cannot be claimed. These include:

• Financial and insurance services
• Residential housing
• Medical services and devices
• Educational services
• Certain agricultural inputs

✅ Compliance Checklist for Kenya VAT

• ✔️ Register for VAT if turnover > KES 5 million or if supplying digital services
• ✔️ Issue valid VAT invoices via eTIMS
• ✔️ File monthly returns by the 20th
• ✔️ Pay VAT electronically
• ✔️ Maintain business records for at least 5 years
• ✔️ Separate VAT on standard, zero-rated, and exempt goods
• ✔️ Foreign suppliers must register through KRA’s simplified portal

📌 Conclusion

Kenya’s VAT system is becoming more robust and digitally advanced, especially in the taxation of online services and cross-border transactions. Businesses both local and foreign must stay updated with changing regulations and file on time to remain compliant.

👉 Try our 🇰🇪 Kenya VAT Calculator on GSTCal.org to calculate VAT quickly and correctly.