Value Added Tax is one of the taxes used by the Kenya government to collect tax from supplies. The country uses consumption based VAT. The tax system has been in use since January 1990.
Supplies Subject to VAT
VAT is based on a supply. The supplies in the country are either:
- Goods
- Services
- Digital products
- Software
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Transactions Subject to VAT
All supplies are grouped into two depending on where transactions take place.
- Local or domestic supplies
- Imports
Current VAT Rates
VAT is not applied to the supplies at the same tax rate. The application of VAT is grouped into three:
a. Vatable supplies
- General rate – currently 16%
- Zero rate – 0% in 2nd Schedule of VAT Act, 2013 or with an exemption letter.
- Any other rate that may be introduced
b. Non-vatable supplies – exempted in 1st Schedule of the VAT Act, 2013
Always Remember this…
- All supplies NOT in the 1st Schedule (exempted ) or 2nd Schedule (Zero rate) are taxed at the general rate.
- All supplies before VAT registration are exempt supplies.
- All supplies after VAT deregistration are exempt supplies
VAT on Local Sales (goods and services).
Currently, the tax rates are 0 % and 16 %. Other rates may be introduced. The tax is payable by the 20th of the following month by VAT-registered taxpayers. The monthly VAT returns are also made by the same day by the registered taxpayer. You can make the payment or file the VAT return before the 20th of the following month.
For illustration only I Gothenburg Source: Pixabay
Withholding VAT
There are taxpayers who are appointed to withhold certain percentages of VAT from suppliers payments and remit to the tax authority as VAT payments on behalf of the supplier. The withholding is only done when the supplier has charged the VAT.
The withholding tax rate for resident suppliers of goods and services is currently at 2%. This rate may change. The law requires the appointed agents to pay the withheld tax within 14 days of withholding. This number of days may change. There are no withholding VAT returns.
VAT on Imported Services
Some imported services are subject to VAT in the country. For all imported services, the tax rates are similar to those applicable on local supplies. The supply is either exempt, or taxable at the current rates of 0% or 16%.
VAT on imported services is remitted by the 20th of the following month by the importer of services who have exempt supplies. The tax return is also made on the same day by the importer of services.
Note that VAT registration is not a requirements to remit VAT on imported services. VAT on imported services is by ALL importers of imported services.
VAT on Commercial Rental Properties
Rental of properties for commercial purposes is subject to VAT. The VAT on commercial rental is at the current tax rate of 16 %. The tax is payable by the 20th of the following month by the registered taxpayer. The monthly tax returns are also made by the registered taxpayer or their representatives e.g. rent agents.
Withholding VAT on Commercial Rental Income
There are provisions for withholding Value Added Tax on commercial rental income. Like any other supply subject to withholding VAT, commercial rental income is subject to the tax where applicable.
For resident landlords, the tax is withheld at the current rate of 2%. The tax is payable by the 20th of the following month by the appointed agents (tenants).
For non-residents, withholding VAT tax on commercial rental income is also applicable at the same tax rate currently at 2%. The appointed agents remit the tax by the 20th of the following month.
There are no withholding VAT returns.
This post was on Value Added Tax: the Basic Facts.
We trust you have learnt something.
Dr. Wakaguyu wa-Kiburi
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Tax Quiz No. 2 VAT De-registration
