How To Calculate Vat In Kenya

How To Calculate Vat In Kenya

The value-added tax(VAT) is a tax that is applicable to the sale or import of taxable goods and services and is administered by the Kenya Revenue Authority (KRA).

In this article Keweb. co tries to answer the question by publishing the ways one can calculate vat in Kenya

Below are the most helpful ways to calculate vat in Kenya

The VAT you pay to your seller when you buy something from them for resale is called input VAT, while the VAT you charge your buyer while making a sale is called output VAT.

VAT is the difference between the Output and Input tax.

VAT payable = Output VAT – Input VAT

For instance, if you bought clothes for 1,000 KES taxed at 16%, you would have to pay 160 as the input VAT. So, the total amount you would have to pay would be 1,160 KES. Then, if you sell the same clothes at a profit of 10% of the price (10% of 1,000) for 1,100 and add the output VAT of 16% (176), the total selling price would be 1,276 KES.

So, the VAT payable = Output VAT – Input VAT (176 – 160 = 16 KES)

How To Register For VAT

If you are making taxable sales (except the sale of capital goods) in Kenya worth KES 5 million annually, you need to register for VAT.

You can register online via iTax, the official portal to register and file returns.

Once you’ve registered, you need to start collecting VAT from your customers whenever you make taxable sales or issue invoices. You can start collecting VAT as soon as you receive your Personal Identification Number (PIN). This PIN can also be used to pay the VAT amount after filing your returns. In the case of imports, you need to collect the amount from your customer as soon as the customs clearance for imports has been completed.

Note: There’s a 16% VAT on online services (such as software downloads, movies, e-learning, and more) provided by non-residents via digital marketplaces. So, non-residents have to register for VAT (there is no VAT registration threshold), but there won’t be an option to recover Kenyan input VAT through this registration.

VAT exempt supplies

VAT-exempt supplies are those that won’t be subject to VAT, and would not qualify for an input tax deduction.

Some exempt supplies include:

  • Unprocessed agricultural products and agricultural services
  • Medical supplies (like physiotherapy accessories, treadmills, and ventilators)
  • Financial services and insurance

Suppliers of imported digital services will also be exempt from VAT, as they are excluded from meeting the KES 5 million VAT registration threshold.

Filing VAT returns

VAT returns have to be filed on a monthly basis via iTax. For each month, the return should be filed by the 20th of the following month. If you don’t have any VAT to declare, you need to file a nil return.

After filing it online, you have to generate an E-slip (from the same iTax portal) which is used to to physically pay the tax amount at KRA-appointed banks. However, instead of showing up physically, you can also authorize your bank to pay your VAT through a direct credit payment to the Commissioners account at the Central Bank of Kenya.