After persons offering blogging services register for VAT, they should familiarise themselves with VAT compliance requirements. In this article, we will examine some requirements for bloggers to comply with VAT requirements.
Withholding VAT
The tax commissioner appoints certain persons as withholding VAT agents. This means that any time a VAT registered blogger raises an invoice with the VAT component, the withholding VAT agents will withhold 6% of the VAT amount from the blogger’s pay and remit it to the tax commissioner on behalf of the blogger. Keep in mind that the blogger needs to have registered for VAT for this to happen.
The tax commissioner will inform the blogger about the remittance of the money. Any money remitted is a payment in advance for the blogger for that month’s VAT. The tax commissioner will send a VAT withholding certificate to the blogger’s email.
Hence, when making a VAT payment for that month, the blogger will pay less than the amount already remitted by the client. However, the blogger must be having a certificate. If the client has not remitted the Withheld amounts, the blogger should follow up and claim the amount in subsequent months. It is an offence to withhold the 6% unless a person is an appointed VAT agent.
Input tax
Bloggers make various purchases for their business. In the normal business of a blogger, they will pay VAT on the various purchases, for example stationeries. If bloggers register for VAT, they can reclaim the VAT on purchases that apply to their blogging business. This VAT is referred to as input tax.
This means that from the VAT the blogger has charged in a month, they will deduct the VAT on purchases and remit the difference to the tax commissioner. It will be a case of deducting the input VAT from the output VAT and remitting the difference.
Imported services
Sometimes, bloggers receive services from persons who are not based in Kenya. For example, bloggers receive imported services such as hosting services. The international service providers will not charge the blogger in Kenya VAT because they are not registered for VAT in Kenya.
However, sometimes, some of the international companies may be registered for VAT in the country. In that case, the companies will charge the bloggers VAT. This is equivalent to the local service providers have charged the blogger hosting their blog in Kenya VAT. To make it fair competition for all service providers, all service providers are required to pay VAT in Kenya.
But how do non-Kenyan service provider pay VAT in Kenya and they do not have a personal identification number (PIN)? The tax law provides that the person who receives the services is the one responsible for paying the VAT to the KRA.
Therefore, the blogger is expected to pay to KRA 16% of the amount they pay to the service provider based out of the country. In the next VAT period, the blogger will use the amount paid to the tax commissioner on behalf of the service provider as an input tax.
Note that only the VAT registered bloggers should pay this VAT. Failure to pay the VAT to KRA means the blogger cannot deduct it as an input tax.
Records and Documents to Maintain
Once a blogger is registered for VAT, they are expected to maintain several records and documents. The following are some records that should be maintained:
1. Copies of tax invoices and simplified tax invoices (cash sales receipts) serially numbered;
2. Copies of debit and credit notes which should be serially numbered;
3. Purchase invoices, receipts;
4. Order documents (LPO, contracts, tenders etc.);
5. Bank statements, pay in slips, cheque counterfoils;
6. ETR details.
7. Details of bloggers’ credit and debit cards.
8. Any customs document in cases of imports.
Also, for imported services
1. Evidence identifying the supplier and recipient.
2. Nature and quantity of services supplied.
3. Time of supply.
4. Place of supply.
5. Consideration of the supply.
6. Extent to which the recipient has used the supply for a particular purpose.
Please note these are just a few of the records and documents that are supposed to be maintained. In case there are other records and documents that will assist you where the tax commissioner may require you to provide evidence of tax compliance, maintain them.
Period to Retain Records and Documents
The law requires that the records and documents should be retained for 5 years, with a few exceptions. It is important to note that though the law requires the taxpayers to maintain the records and documents for a period of 5 years, the best things to do is to retain them for a longer period.
Scan and retain the records and documents for long. We have seen cases where the tax commissioner has demanded for evidence tax compliance (e.g. Legacy entries) for periods longer than 5 years. .
VAT Analysis
After every end of the calendar month, the VAT-registered blogger is expected to determine the amount of VAT payable. This is done by undertaking a monthly tax analysis. In the tax analysis, which is also referred to as a monthly VAT summary, the blogger will determine:
1. Output tax, which will include all the VAT the blogger has charged during that month, any VAT on imported services and any VAT on debit notes.
2. Input tax, which will include all the input tax charged, any VAT on imported services from previous periods
3. Any VAT from credit carried forward.
The taxpayer will deduct the net input tax from the net output tax. Then, they will deduct any VAT deducted at sources as withholding tax.
VAT Monthly Balance
The blogger may have any of the following balance for the VAT month:
Debit balance
The output tax less input tax plus any input tax credits carried forward and any withholding VAT is a positive balance,. Here, there will be tax to pay. A debit balance can also arise because of the taxpayer having sales but no purchases.
Credits balance
The output tax less input tax plus input tax credit carried forward from the previous month and any withholding VAT will be a negative balance. There will be no tax to pay, but the balance will be carried forward to be utilised in subsequent months. A credit balance can also be because of the taxpayer not having sales but has purchases.
Zero balance
The output tax is equal to the input tax plus any VAT credits carried forward from previous months and any withholding VAT.
Nil balance
The blogger taxpayer did not transact any business. There were no sales and there were no purchases in that month.
VAT Returns
The blogger taxpayer is expected to submit the monthly VAT return on i-Tax by the 20th day of the following month. The VAT tax return is the basis of tax self-assessment and should be submitted together with the tax payments. The due date is the 20th day of the following month (Note the government may change this date).
How to file a tax return
The tax returns are currently submitted through the i-Tax platform. The blogger will simply log into i-tax using their PIN, follow all the steps and file the VAT monthly return. Once the VAT return is filed, the blogger will know the amount of VAT due.
Tax payment
Once the blogger has established the amount of VAT due, then they will generate a pay-in-slip for the tax amount due.
The blogger will choose the mode of tax payments and the particular bank that they will use to make the payment. The blogger should maintain copies of all VAT payments.
How can bloggers improve VAT compliance?
Tax non-compliance is expensive. There are many steps any bloggers can take to improve their tax compliance.The following are four major steps:
- Improve tax literacy – attend seminars, read blogs on tax, visit the tax commissioner’s website occasionally, read newspaper articles, tax books, go back to school, etc.
- Get a personal identification number (PIN).
- Register for VAT obligation when qualified.
- Comply with the VAT requirements – pay tax, remit tax returns, maintain tax records, etc.
Conclusion
That is all about VAT compliance requirements for blogger. There are other articles on this website on bloggers and tax. The aim of these articles is not to make bloggers tax experts (but if they become, we welcome that). The aim is for them to appreciate the responsibility they have so that they do not fall on the wrong side of the tax law.
Thank you for reading the post. Let us know your thoughts in the comments.
Dr Wakaguyu
taxkenya@gmail.com
