VAT regulations in Kenya

The Cabinet Secretary for National Treasury and Planning through Legal notice 189 dated 10th September 2020 published The Value Added Tax (Electronic Tax Invoice) Regulations, 2020

(https://www.kra.go.ke/images/publications/L.N.-189—VAT-ELECTRONIC-TAX-INVOICE-REGULATIONS-2020.pdf)

herein referred to as “regulations”. These regulations provided for the following:

  1. Adoption and usage of electronic tax invoicing or receipting systems by companies as provided for under section 67 of The Value Added Tax Act, 2015;
  2. Obligations of the users of such systems;
  3. The requirements of a valid tax invoices;
  4. Specification of the systems to be adopted; and
  5. Transition period amongst other requirements.


Section 13 of these regulations provided a 12 months transition period (1st August 2021), however KRA issued a further 12 months extension period through their public notice dated 9th September 2021

 (https://kra.go.ke/news-center/public-notices/extension-of-time-to-comply-with-the-value-added-tax-electronic-tax-invoice-regulations,-2020). 

In effect therefore companies are required to ensure that they have complied with these regulations beginning 1st August 2022.


What this means to your Company

Effective 1st August 2022, every VAT registered company/tax payer will be required to have a tax register in place capable of transmitting information to KRA in real time and meeting all the other specifications as provided for in the regulations. 

It is advisable you contact the ETR suppliers as published in the KRA website

 (https://www.kra.go.ke/images/publications/List-of-Approved-ETR-Suppliers–Manufacturers-as-at-30-March-2022.pdf )

so that they can assess whether your existing ETR machines can be upgraded to comply with the current requirements or you will be required to purchase a new one.


Failure to comply with the registration

Non-compliance with these regulations will lead to a penalty of not exceeding KES 1 million or to imprisonment or to both.


Frequently asked questions

Below is a link of the frequently asked question with regards to the regulations as well as the ETR machines (https://kra.go.ke/helping-tax-payers/faqs/electronic-tax-invoice)


Other VAT Compliance

KRA has increasingly been raising questions as a result of variances between sales declared in the monthly VAT returns and the sales declared in the annual income tax return. It is therefore advisable that taxpayers should conduct a voluntary reconciliation of the sales as declared in their VAT returns vis-à-vis the sales a per books of accounts and the resulting differences addressed. There is also need a proper reconciliation of the sales accounts before filing of VAT returns. Zero rated sales and exempt sales should also be declared in the monthly VAT returns as required.


Some Tax Due Dates

Below are the filing and payment due dates for the various taxes, kindly take note of the same to avoid penalties and interest. In the event of inability to pay by the due date, there is need to inform the Kenya Revenue Authority and request for a payment plan.

Tax Obligation

Filing /payment due dates

Filing Corporate & individual income tax return

The return is due on or before the sixth month after accounting year end

PAYE

On or before the 9th of the following month

VAT, MRI, WHT, WHT VAT, DST & TOT

On or before the 20th of the following month

First installment tax *

On or before the 20th of the fourth month after accounting year end.

Second installment tax*

On or before the 20th of the sixth month after accounting year end

Third Installment tax*

On or before the 20th of the ninth month after accounting year end

Fourth Installment tax*

On or before the 20th of the twelfth month after accounting year end

Final tax tax*

On or before the 30th of the fourth month after accounting year end.


*Installment taxes are applicable to companies/individuals who have posted business profits in the previous tax period or anticipate making taxable profits in the current financial year.


Entities whose last financial year ended 31 December 2021

For entities whose last financial year ended on 31 December 2021, they should work to ensure that their financial statements are completed on time and the tax returns are filed before the 30 June 2022 to avoid last minute rush.

 Similarly, where applicable, they should ensure that their first installments tax for year 2022 is paid by the 20 April 2022 and the final tax for year 2021 is paid by the 30 April 2022 

Team

For any clarification on the above kindly contact our Tax Service members on the below contacts:

Jeremiah Mvera – Tax Manager

T: 254 724 814 751

 E:JMvera@mgkconsult.co.ke

Bearice Kamau – Tax & Outsourcing Partner

T: +254 721 281 430

E: BKamau@mgkconsult.co.ke

James Gichuru – Audit Partner

T: 254 722 100 337

E: JGichuru@mgkconsult.co.ke

Daniel Muhia – Managing Partner

T: +254 722 875 999

E: DMuhia@mgkconsult.co.ke