Value Added Tax (VAT) in Kenya is a consumption tax levied on the sale of goods and services.
As of 2024, the standard VAT rate is set at 16%. This tax is applied to most products and services at each stage of the supply chain, from production to the point of sale, with the end consumer ultimately bearing the cost.
The administration of VAT in Kenya is overseen by the Kenya Revenue Authority (KRA), which is responsible for tax collection and enforcement of tax laws.
The legal framework governing VAT is outlined in the Value Added Tax Act of 2013, which has undergone various amendments to accommodate changes in the economy and tax policies.
VAT is a significant source of revenue for the government, funding public services and infrastructure.
Businesses that are registered for VAT are required to charge this tax on their taxable goods and services and remit it to the KRA. They are also entitled to reclaim VAT that they have paid on business-related goods and services, known as input tax, provided they are registered for VAT.
There are some exemptions and zero-rated goods and services under the Kenyan VAT system.
Zero-rated items include exports of goods and services and certain items that are considered essential, such as unprocessed food and health services.
Exempt goods and services, on the other hand, are not subject to VAT at the point of sale, but unlike zero-rated items, VAT paid on inputs for these cannot be reclaimed.
For consumers in Kenya, it’s important to note that the prices of goods and services often include VAT, and one should always ask for a tax invoice when making purchases, especially if you are a business owner who needs to reclaim input VAT.
Businesses with taxable supplies exceeding the registration threshold are required to register for VAT.
The KRA has made the registration process more accessible by providing online services through its iTax platform, where businesses can also file their VAT returns and make payments.
Thus, VAT is an integral part of Kenya’s tax system, affecting both consumers and businesses. Understanding how it works can help individuals and businesses comply with tax regulations and manage their finances effectively. For the latest information on VAT rates, exemptions, and regulations, taxpayers should refer to the KRA website or consult with a tax professional.