How To Register For VAT Obligation In Kenya

This article provides a step-by-step guide on how to register for a VAT obligation in Kenya. Value Added Tax VAT is an indirect tax that is paid by the person who consumes taxable goods and taxable services supplied in Kenya and/or imported into Kenya. A person is required to register for VAT if they supply or expect to supply taxable goods and services with a value of Kshs 5 Million or more in a year.

VAT operates under the input and output tax system in which the input tax refers to a tax paid by a registered person on the purchase of goods or services for the purpose of their business while the output tax refers to tax charged on the sales of taxable goods or services. The difference between the two will indicate the tax payable by the taxpayer.

Taxpayers registered under VAT are required to be onboarded onto eTIMS, a software solution from KRA that provides real-time invoice transmission enhancing accuracy in tax invoice declarations and reconciliation between filed returns and payments. This is after the authority retired the Electronic Tax Register ETR machines. eTIMS can accessed through various electronic devices including computers and mobile phone Apps.

Value Added Tax (VAT) Rates

KRA has three VAT rates as we’ve listed below.

0% (zero rate) – it is applicable to certain categories of supplies that are listed in the second schedule of the VAT Act 2013.
8% – this is applicable to goods listed in Section B (1) of the First Schedule of the VAT Act 2013.
16% (general rate) – this is applicable to all taxable goods and taxable services other than zero-rated supplies.

VAT Registration Requirements

KRA PIN Number
PINS of partners in a partnership
PIN of a company in a Limited Liability Company
Copy of incorporation certificate for a company
Copy of business name registration certificate from the registrar of companies for sole proprietors and partners
National ID Card
Alien ID card for foreigners
Actual taxable turnover of Ksh 5 million or more in 12 months
Physical business premise
Active Email Address
Access to iTax portal

How to Register for VAT Obligation on Itax

Begin by logging into the iTax portal using your KRA PIN and password.
Upon successful login, locate the Registration Tab and choose the “Amend Pin Details” option.
In this section, opt for the “Online Form” as your mode of amendment and proceed by clicking “Next.”
On the Amendment tab, check the box corresponding to your PIN. This action will unveil the sections you intend to modify. Specifically, tick the box for “Source of Income.”
If there are no further amendments, progress to the “Obligation Details” tab. Here, mark the VAT checkbox and indicate your desired registration date, usually the date of application. Provide an estimate of your turnover for the upcoming year.
Within the “Source of Income Details” section, indicate your involvement in business income by selecting “Yes.” Proceed to input your business specifics and click the “Add” button upon completion. Indicate the sector of the economy your business operates in. Remember to repeat the “Add” button step. You have the option to use either your Business Registration Certificate or Single Business Permit for verification.
Concluding the process, click on the “Submit” button. Download the acknowledgment form, which can also be accessed from your iTax registered email.
Upon successful application for VAT obligation, visit any KRA office with the acknowledgment receipt and your business registration certificate for verification and approval. Once approved, you can initiate the filing of VAT charged on your taxable supplies.

VAT is due on or before the 20th day of the following month. This includes both the return and payments and is submitted online via iTax. Remember to file a Nil VAT return if your business has no activity in a particular month.

Obligations of a VAT registered Taxpayer

As a Taxpayer, KRA requires that you;

File tax returns on time
Pay penalties and interest (where applicable).
Pay tax due on time.
Notify the commissioner in writing in case of any change of name, including business name, address, place of business, or nature of business. Notification should be made within 21 days of the change.

Late Submission and Payment Consequences

In adherence to tax regulations, the stipulated filing date is on or before the 20th of the subsequent month. In the event of delayed submission, a penalty is imposed, based on the greater of Kshs. 10,000 or 5% of the outstanding tax amount. Additionally, late payment incurs a penalty equal to 5% of the unpaid tax. An accompanying late payment interest of 1% per month is applicable on the outstanding tax until it is completely settled.