VAT in Kenya: when to register and how to file monthly returns

When registration becomes compulsory

A business must register for VAT when its taxable supplies reach, or are expected to reach, KES 5 million in any twelve-month period. Watch the running total rather than waiting for year-end, because the duty to register starts when the threshold is crossed.

The standard rate is 16%. Some goods and services are zero-rated and others are exempt, and the difference matters: zero-rated suppliers can usually recover input VAT, exempt suppliers cannot.

Monthly returns and payment

VAT returns are filed on iTax and any VAT due is paid by the 20th day of the following month. A registered business files every month, including a nil return when there were no sales.

Late filing attracts a fixed penalty or a percentage of the tax due, whichever is higher, and late payment adds a further penalty and interest, so treat the 20th as a firm deadline and prepare from the 10th.

Input VAT depends on your suppliers

Input VAT on purchases reduces what you pay, but claims are matched against suppliers' electronic tax invoices. An invoice that was not issued through the system, or that carries the wrong PIN, can mean a claim that is disallowed.

Input VAT generally has to be claimed within six months, so chase missing supplier invoices early and review your purchase listing against the iTax data before each return.

Keep VAT separate in your head and your books

VAT collected from customers is not your money. Keeping it visible, or even in a separate account, avoids the cash squeeze when the return is due.