Kenya VAT guidelines

Overview

Kenya levies Value Added Tax (VAT) under the Value Added Tax Act (Cap. 476), originally the VAT Act, 2013, which commenced on 2 September 2013. ^[1] Procedure (registration documents, records, electronic invoicing, penalties) sits in the Tax Procedures Act (Cap. 469B). Both are administered by the Kenya Revenue Authority (KRA). This guide quotes the Kenya Law consolidations that KRA hosts: the VAT Act as at 1 July 2026 and the Tax Procedures Act as at 1 September 2026. ^{[2] [3]}

Authority, currency, period and layering

• What is taxed. VAT is charged on a taxable supply made by a registered person in Kenya, on the importation of taxable goods and on a supply of imported taxable services (VAT Act s.5(1)). ^[2]
• Currency. "The unit of currency in books of account, records, paper registers, tax returns or tax invoices shall be in Kenya shillings" (Tax Procedures Act s.23(2)). The exceptions for non-resident digital suppliers are under Currency and language. ^[3]
• Tax period. One calendar month, unless regulations prescribe another period (VAT Act s.2). ^[2]
• Layering. VAT is a single national tax collected by KRA. For Turnover Tax and the Significant Economic Presence tax, see the Kenya KRA PIN guide.
• Portals. Registration, returns and payment run through iTax; invoices run through eTIMS. See Important websites.

Registration

Who must register and the threshold

A person who, in the course of a business, has made or expects to make taxable supplies of KES 5,000,000 or more in any period of twelve months, or is about to start making supplies reasonably expected to exceed that figure, "shall be liable for registration under this Act and shall, within thirty days of becoming so liable, apply to the Commissioner for registration" (VAT Act s.34(1)). ^[2] The test is taxable supplies, measured over any rolling twelve-month period. Sales of a capital asset, and supplies made only because the business is sold or closed, are left out of the calculation (s.34(2)). KRA's VAT page gives the same KES 5 million figure. ^[4]

A person who makes only exempt supplies does not need to register, because exempt supplies are not taxable supplies. ^[4]

Source snapshot captured 2026-11-04 — original

Non-resident registration

• Digital services: no threshold. The proviso to s.34(1) reads: "a person supplying imported digital services over the internet, an electronic network or through a digital marketplace shall register whether or not the taxable supplies meet the turnover threshold of five million shillings." ^[2] KRA's FAQ: "There is no threshold required for registration of VAT Digital Marketplace Supplies." A foreign supplier without a fixed place of business in Kenya may register under KRA's simplified registration framework on iTax; if it does not, it must appoint a tax representative. ^[5]
• Other non-residents. The KES 5 million threshold applies. A non-resident with no fixed place of business in Kenya that is required to register "shall appoint a tax representative in Kenya in writing" (Tax Procedures Act s.15A(1)). ^[3]

Tax registration number (KRA PIN)

KRA does not issue a separate VAT number. "VAT registered persons are identified with Personal Identification Numbers (PINs) with a VAT obligation." ^[4] KRA's eTIMS validation rules state the format: "The PIN starts with a letter A for individuals/sole proprietors and P for companies, followed by 9 digits and ends with a letter and must be exactly 11 characters", with the example P123456789Z. ^[6] KRA's PIN and eTIMS pages publish no checksum algorithm for the final letter.

The Kenya KRA PIN guide covers the PIN in detail. To check a PIN, use KRA's PIN Checker on iTax (see Important websites) or the Lookuptax Kenya PIN validator.

How to register

Registration is online through iTax. The documents KRA asks for depend on the applicant: for residents, a national ID or alien ID, an employer's PIN or a business registration certificate; for a non-Kenyan investor, a tax agent's letter, proof of investment and either a KenInvest endorsement (investment above USD 100,000) or a Class G permit (below). ^[7] A VAT-registered business must also sign up on eTIMS; KRA's eTIMS FAQ says taxpayers can now self-onboard without KRA approving a service request. ^[8] KRA's VAT, PIN and eTIMS pages state no processing time for registration.

Voluntary registration

Available. A person who makes or intends to make taxable supplies may apply below the threshold (s.34(3)). The Commissioner registers the applicant if satisfied that it is making or will make taxable supplies, has a fixed place of business, has kept proper records and complied with other revenue laws (if already trading), and can be expected to keep records and file regular, reliable returns (s.34(4)). ^[2] A business might want this so it can deduct input tax, for example an exporter whose zero-rated sales leave it in a refund position.

Deregistration

• A registered person who stops making taxable supplies must apply in writing within thirty days of stopping (s.36(1)).
• A person whose taxable supplies no longer exceed the threshold may apply, but does not have to (s.36(2)).
• After cancellation the person must "submit a final return and pay all tax due ... within fifteen days after the date of cancellation" (s.36(7)(b)). Trading stock on hand on which input tax was deducted is treated as supplied (s.36(9)). ^[2]
• KRA says a taxpayer that has applied to deregister "should continue submitting returns until advised to stop." ^[4]

Group registration

Not in operation. Section 34(9) says "The Cabinet Secretary may, in regulations, provide for the registration of a group of companies as one registered person for the purposes of the Act." ^[2] KRA's VAT pages describe no group-registration procedure. See the VAT grouping explainer for how grouping works elsewhere.

Rates

All rates as at 2026-11-04. The rate rules are in s.5(2)–(2B) of the VAT Act. ^[2]

Rate	Applies to	Legal basis
16% (standard)	All taxable goods and services other than zero-rated supplies	VAT Act s.5(2)(b)
0% (zero rate)	Supplies listed in the Second Schedule, for example exports of goods and services	s.5(2)(a), s.7, Second Schedule
8% (temporary)	Premium motor spirit (tariff 2710.12.20), illuminating kerosene (2710.19.22) and automotive gas oil (2710.19.31) only	Tax Laws (Amendment) Bill, 2026, passed by the National Assembly (no assented Act officially published); previously s.5(2A)–(2B) (Act No. 10 of 2026) and Legal Notice No. 128 of 2026 (to 14 Oct 2026); see the fuel rate
Exempt (no VAT, no input-tax deduction)	Supplies listed in the First Schedule	s.2, First Schedule; see Exemptions

Source snapshot captured 2026-11-04 — original

Standard rate: 16%

"In any other case, sixteen per cent of the taxable value of the taxable supply, the value of imported taxable goods or the value of a supply of imported taxable services" (s.5(2)(b)). ^[2] KRA: "16% (General rate) – this rate applies to all taxable goods and taxable services other than zero-rated supplies." ^[4] The VAT Act, 2013 commenced on 2 September 2013. ^[1]

The Cabinet Secretary may vary a rate by Gazette order, but only "by an amount not exceeding twenty-five per cent of the rate specified in section 5(2)(b)" (s.6(1)). ^[2]

Zero rate: 0%

"Where a registered person supplies goods or services and the supply is zero rated, no tax shall be charged on the supply, but it shall, in all other respects, be treated as a taxable supply" (s.7(1)), so input tax remains deductible. ^[2] Examples from Part A of the Second Schedule: ^[2]

• the exportation of goods (para 1) and of taxable services (para 23);
• supplies to an export processing zone business (para 2) and to a special economic zone developer, operator or enterprise (para 12);
• transport of passengers by air carriers on international flights (para 5);
• ordinary bread (para 13A); milk and cream, not concentrated and without added sugar (para 15);
• liquefied petroleum gas (para 27).

The Finance Act, 2026 deleted paragraphs 11 and 35 of Part A and amended paragraphs 31 and 32. ^[9]

There are no reduced rates other than the temporary fuel rate below. A previous 8% rate (s.5(2)(aa) and (ab)) was "deleted by Act No. 4 of 2023", the Finance Act, 2023; KRA notes it "applied to certain supplies (petroleum products) prior to 1st July 2023". ^{[2] [4]}

Temporary 8% rate on three petroleum products

The 8% rate covers only premium motor spirit (2710.12.20), illuminating kerosene (2710.19.22) and automotive gas oil (2710.19.31). It has rested on three instruments so far:

1. April 2026. The consolidated VAT Act records the rate being amended by Legal Notice No. 69 of 2026 on 14 April 2026 and then by the Value Added Tax (Amendment) Act, 2026 (Act No. 10 of 2026) on 15 April 2026. Act No. 10 inserted s.5(2A), which sets "eight percent of the taxable value" for the three products, and s.5(2B): "The provisions of subsection (2A) shall be in effect for a period of ninety (90) days from the date of coming into effect of this Act: Provided that the Cabinet Secretary may by notice in the Gazette, extend the period under this subsection for a further ninety (90) days." ^[2]
2. 15 July – 14 October 2026. Legal Notice No. 128 of 2026 (Kenya Gazette Supplement No. 178, 14 July 2026), made under s.6(1), "reduces the rate of tax specified in section 5 (2) (b) of the Act from sixteen per cent to eight per cent in respect of the goods listed in the Schedule hereto, with effect from the 15th July, 2026 up to the 14th October, 2026." ^[10]
3. From October 2026: Tax Laws (Amendment) Bill, 2026. The Bill (National Assembly Bills No. 65, Kenya Gazette Supplement No. 236, 28 September 2026) would re-enact s.5(2A) at 8% for the same three products, and a new s.5(2B) keeps it "in effect for a period of ninety days from the date of coming into effect of this Act", extendable by Gazette notice "for a further ninety days". The Bill as published provided that the Act would come into effect upon publication. ^[11] On 16 October 2026 Parliament reported "the passage of the Tax Laws (Amendment) Bill (National Assembly Bill No. 65 of 2026) by the National Assembly". ^[26] Neither KRA's nor Parliament's website has published an assented Act, so the start and end of the current 8% period cannot yet be confirmed from an official source. Check KRA public notices before pricing or filing.

Source snapshot captured 2026-11-04 — original

Announced future rates

None for the standard or zero rate. The only pending rate measure is the 8% fuel period above.

Cross-border rules

Imports and exports

• Imports of goods. "Tax on the importation of taxable goods shall be charged as if it were duty of customs and shall become due and payable by the importer at the time of importation" (s.5(5)). ^[2] The VAT Act contains no general low-value de-minimis for imported goods. KRA's Finance Act 2026 guidance says the VAT-free allowance for goods brought in by a returning resident is aligned with the East African Community customs rules, at USD 2,000. ^[12]
• Import records. From 1 September 2026 an importer must obtain and keep the export declaration, export entry, customs export certificate or equivalent document from the country of export (Tax Procedures Act s.23B, inserted by Finance Act, 2026 s.43). ^[3] KRA: "Keep the records for at least five years." ^[12]
• Exports. Exports of goods and of taxable services are zero-rated (Second Schedule paras 1 and 23). Since May 2026, export data in KRA's customs system (iCMS) pre-fills the zero-rated supplies in the VAT return, and exporters and their agents "must capture the exporter's PIN and valid TIMS/eTIMS zero-rated invoice number when lodging export documents in iCMS" (KRA public notice 2368). ^[13]

Imported services and place of supply

• Reverse charge. "If a supply of imported taxable services is made to any person, the person shall be deemed to have made a taxable supply to himself" (s.10(1)). This does not apply to digital marketplace supplies under s.5(7) (s.10(1A)). ^[2] KRA: "Any importer of an imported service irrespective of his VAT registration status is liable to pay VAT on the imported service (Reverse VAT)", and tax paid on imported services used in the registered person's taxable business "may be deducted as input tax in subsequent VAT returns." ^[4]
• Services. A supply of services is made in Kenya if the supplier's place of business is in Kenya (s.8(1)). Services from a non-resident supplier are treated as supplied in Kenya where, among other cases, they are physically performed in Kenya, are directly related to immovable property in Kenya, are electronic services delivered to a person in Kenya, or relate to a copyright, patent, trademark or similar right in Kenya (s.8(2)). ^[2]
• Goods. Goods are taxed at the border on import (s.5(5)) and zero-rated on export; s.11 of the VAT Act sets the place-of-supply rule for goods.

Foreign companies selling into Kenya — B2B and B2C

Supply by a non-resident	To a Kenyan business (B2B)	To a Kenyan consumer (B2C)
Digital services over the internet, an electronic network or a digital marketplace	The non-resident registers (no threshold) and charges 16%. KRA: the non-resident supplier "will account for VAT on all transactions"; the reverse charge is switched off (s.10(1A)). A VAT-registered Kenyan buyer can claim the VAT on the supplier's invoice as input tax.	The same: the non-resident registers and charges 16%.
Other services	The Kenyan recipient self-accounts under the reverse charge (s.10(1)) and may deduct it as input tax in a later return if used for taxable supplies.	The non-resident must register if its taxable supplies in Kenya reach KES 5 million, and appoint a tax representative if it has no fixed place of business (s.34(1); TPA s.15A).
Goods	Import VAT is paid by the importer at customs (s.5(5)).	Import VAT at customs. KRA: VAT on digital marketplace supply "does not apply on goods since VAT on goods will be accounted for at the point of entry".

Sources: KRA digital marketplace FAQ ^[5]; VAT Act ss.5, 10, 34 ^[2]; Tax Procedures Act s.15A. ^[3] See also the reverse charge explainer.

Digital services

VAT on Digital Marketplace Supply took effect on 9 October 2020, with a six-month transition under the VAT (Digital Marketplace Supply) Regulations, 2020. ^[5] KRA's FAQ says it applies to services "supplied to both businesses and consumers in Kenya". A registered non-resident supplier:

• charges 16% and pays it in Kenya shillings by "the 20th day of the succeeding month in which the digital service was performed, invoice raised or payment made whichever comes earlier";
• cannot deduct Kenyan input VAT and, as KRA's FAQ puts it, is "not entitled to a tax refund since they cannot claim input VAT";
• is exempt from the eTIMS e-invoicing rules (KRA public notice 1797) but must still issue an invoice or receipt. ^{[5] [14]}

See the explainer on VAT on digital services from non-resident suppliers for how Kenya compares.

Marketplace and platform deemed-supplier liability

The VAT Act defines a "digital marketplace" as "an online platform which enables users to sell goods or provide services to other users" (s.5(9)) and charges VAT on supplies made through one (s.5(7)). No provision of the VAT Act makes the platform itself liable as the supplier of goods sold through it. ^[2] KRA's Reverse Invoicing tool, which lets an approved platform raise invoices for its sellers, is an invoicing mechanism, not a transfer of liability (see Self-billing). See the marketplace deemed-supplier explainer.

Invoice requirements

Two laws set the rules. The VAT Act says when a tax invoice must be issued and who may show VAT on it (ss.16, 42, 43). The Tax Procedures Act says every invoice must be an electronic tax invoice issued through eTIMS, and lists what it must contain (s.23A). KRA's eTIMS technical specification adds the device and software fields.

Mandatory content

Tax Procedures Act s.23A(2A) requires an electronic tax invoice to contain: ^[3]

#	Field	Note
(a)	The words "TAX INVOICE"
(b)	Supplier's name, address and PIN
(c)	Purchaser's name, address and PIN, "if any"	The statute makes the buyer PIN optional. The buyer needs an eTIMS invoice to deduct the expense and the input VAT.
(d)	Serial number of the tax invoice
(e)	Date and time of issue, and the date and time of supply if different
(f)	Description of the supply, including quantity of goods or type of services
(g)	Details of any discount allowed at the time of supply
(h)	The consideration
(i)	Tax rate charged and total tax
(j)	Any other prescribed information

Source snapshot captured 2026-11-04 — original

eTIMS fields. KRA's Technical Specification of TIS for OSCU/VSCU (version 2.0, April 2023) also requires the invoicing software to print an "SCU information" block: the date and time from the sales control unit, the SCU ID, the CU invoice number, internal data, a receipt signature and a QR code, plus the official KRA logo ("6.28. print official KRA logo on each receipt regardless the type"). ^[15] These are technical requirements of eTIMS, not items in s.23A(2A).

A specimen of a compliant invoice

KRA publishes an annotated Normal Invoice specimen on page 8 of the TIS specification. It labels each field: trade name, address and supplier PIN, the words TAX INVOICE, the buyer PIN (marked "optional"), item lines with a tax designation letter, discount, totals, a rate table (EX, 16%, 0%, Non-VAT, 8%), the SCU information block and the QR code. KRA's note on page 7: "The format of the Invoice is at the discretion of the trader. It must, however, contain all the prescribed fields as indicated in the sample below." ^[15]

Source snapshot captured 2026-11-04 — original

Read the specimen as a layout, not as a worked calculation:

• It predates the Finance Act, 2025 version of s.23A(2A): it has no buyer name or address and no separate date and time of supply.
• Its figures do not reconcile: the 16% row's taxable amount and VAT add up to the grand total, which also includes the exempt bread line. Do not copy its arithmetic.
• The 8% row in its rate table reflects the petroleum rate that still applied when the specification was released in April 2023. That rate was deleted from 1 July 2023 and has returned in 2026 only for the three fuel products.
• PINs on the specimen (P000000000Z, A000000000Z) are KRA's own placeholders.

Page 10 of the same specification shows a credit note specimen, headed "CREDIT NOTE" and quoting the original CU invoice number. ^[15]

Issuance deadline

"A registered person who makes a supply shall, at the time of the supply furnish the purchaser with the tax invoice containing the prescribed details for the supply" (VAT Act s.42(1)). Since 1 July 2026, s.42(2), substituted by the Finance Act, 2026 (s.30), reads: "An invoice showing an amount that purports to be tax shall only be issued in respect of a taxable supply." ^[2] KRA's summary: "VAT must only appear on taxable supplies." ^[12] A registered person issues only one original tax invoice, credit note or debit note; a copy clearly marked as such may be given to a registered person who says it lost the original (s.42(4)).

Numbering and sequencing

• The tax invoice carries a serial number (TPA s.23A(2A)(d)). Records include "copies of all tax invoices and simplified tax invoices issued in serial number order" (VAT Act s.43(2)(a)). ^[2]
• The TIS specification requires a "serial number of the receipt from an uninterrupted ascending number series per receipt type". ^[15]
• A business that uses more than one eTIMS solution gets more than one series: "Each solution will have its own unique invoice number sequence." ^[16]

Source snapshot captured 2026-08-06 — original

Credit and debit notes

Where the value of a supply is reduced after a tax invoice has been issued, a credit note is issued, but "only within six months after the issue of the relevant tax invoice", or, where the price is the subject of a commercial dispute in court, "within thirty days after the determination of the matter" (s.16(1)). A debit note "shall show on it the details of the tax invoice issued at the time of the original supply" (s.16(4)). ^[2] In eTIMS, "credit notes can only be generated from the solution where the original invoice was raised." ^[16]

Currency and language

• Currency. Tax invoices are in Kenya shillings (TPA s.23(2)). The exceptions: a non-resident carrying on business through a digital marketplace uses "convertible foreign currency as may be approved by the Commissioner" (s.23(2A)), and s.23(2) does not apply to a non-resident that files and pays through a resident tax representative or has a permanent establishment (s.23(2B)). ^[3] KRA's digital marketplace FAQ says the tax itself is "payable in Kenyan currency (KES)". ^[5]
• Exchange rate. The VAT Act, the Tax Procedures Act and KRA's VAT pages set no rule for which exchange rate, or which date's rate, converts foreign-currency consideration.
• Language. Documents are kept "in either of the official languages" (TPA s.23(1)(a)), and VAT records "in English or Kiswahili" (VAT Act s.43(1)).

Document types

The full electronic tax invoice above is the standard document. The VAT Act mentions "simplified tax invoices" as a record category (s.43(2)(a)), but neither the VAT Act nor TPA s.23A sets a value threshold or reduced field list for them, and KRA's VAT and eTIMS pages publish none. Credit notes and debit notes are covered above.

Self-billing

• Purchases from small suppliers. "Where a supply is received from a small business or a small-scale farmer, whose annual turnover does not exceed five million shillings, the purchaser shall issue a tax invoice for the purpose of ascertaining tax liability" (TPA s.23A(3A)). ^[3] KRA's Buyer Initiated Invoicing solution does this. eTIMS checks the seller's PIN and onboarding status and "blocks the issuance of invoices for VAT-registered sellers". The seller has thirty days to accept or reject the invoice, after which it is automatically rejected. ^[6]
• Reverse Invoicing. A registered buyer can generate tax invoices on behalf of its sellers through an OSCU or VSCU integration, but "Buyers are required to be approved by KRA for Reverse Invoicing through the Know Your Customer (KYC) process before implementation." ^[17]

Retention and audit trail

• Retention. A person keeps "a full and true written record, whether in electronic form or otherwise, in English or Kiswahili of every transaction he makes and the record shall be kept for a period of five years from the date of the last entry made therein" (VAT Act s.43(1)). ^[2] The current text sets no requirement on where the records are kept. The Tax Procedures Act sets five years from the end of the reporting period (s.23(1)(c)). ^[3] KRA: "These records may be maintained electronically." ^[4]
• Stock records. A person who carries on business must "maintain a record of stocks in the system" (TPA s.23A(2)(b)). KRA's stock-management functionality in eTIMS has been announced but has no go-live date (see E-invoicing status).
• Audit trail. The TIS specification requires the invoicing system to keep an electronic journal or log of all sales (6.13), not to record a sale without printing a receipt (6.14), not to correct a transaction without first cancelling the original, with each cancellation referring to the original SCU receipt number (6.16), and to "print only one original receipt. Reprint shall have a watermark with mention Copy" (6.17). ^[15]

E-invoicing status

Status (as at 2026-11-04): mandatory, continuous transmission to KRA through eTIMS, for every person carrying on business. ^[3] eTIMS is KRA's own system, not Peppol or UBL: software connects through KRA's OSCU/VSCU specifications. See the explainer on e-invoicing models and the fiscal devices explainer.

Timeline

Date	What happened	Source
25 Sep 2020	VAT (Electronic Tax Invoice) Regulations, 2020 (Legal Notice No. 189) gazetted, introducing the electronic tax invoice (TIMS)	KRA VAT page
1 Sep 2023	"All persons carrying on business, including those not registered for VAT, are required to electronically generate and transmit their invoices to KRA via ... (eTIMS)"	KRA public notice 2071
1 Jan 2024	"Any business expenditure not supported by an eTIMS generated tax invoice shall not be deductible for tax purposes"	KRA public notice 2071
31 Mar 2024	End of the onboarding period during which penalties were not imposed on non-VAT-registered taxpayers	KRA public notice 2077
Nov 2024 period	VAT returns pre-filled; input VAT not validated through TIMS/eTIMS or customs import declarations disallowed	KRA public notice 2156
May 2026	Export data in iCMS integrated with zero-rated supplies in the VAT return	KRA public notice 2368
31 Aug 2026	eTIMS–IFMIS integration: government suppliers need a matching eTIMS invoice to be paid	KRA public notice 2388
7 Sep 2026	Stock-management functionality announced; forums from September 2026; no go-live date	KRA public notice 2390
13 Sep 2026	Importer details (name, PIN, ID, phone, item description, value) required on consolidated cargo; KRA working with consolidators so eTIMS invoices can be issued to importers (notice of 28 Oct 2026)	KRA public notice 2406

Scope. B2B, B2G and B2C are covered alike: the duty in TPA s.23A(2) falls on the seller whoever the buyer is. B2G invoices must also match the invoice submitted through IFMIS for payment. ^[18] VAT-registered taxpayers that adopted TIMS ETR devices "may continue using the devices". ^[8]

Costs that do not need an eTIMS invoice. KRA lists: emoluments (salaries and wages), imports, air passenger ticketing, investment allowances, interest, fees charged by financial institutions, expenses subject to a final withholding tax, and services from a non-resident without a permanent establishment in Kenya. ^[19] TPA s.23A(4) gives the legal basis.

Solutions. KRA offers eTIMS Lite (web through eCitizen, USSD *222# and a mobile app) "for the small and micro taxpayers not registered for VAT", an Online Portal for service businesses, the eTIMS Client for goods, VSCU and OSCU system integrations, and Reverse Invoicing and Buyer Initiated Invoicing. ^{[8] [20]} The software is "offered free of charge by KRA"; integrations built through a third-party integrator may cost money. A buyer can check an invoice by scanning its QR code or using the "Invoice number checker" on iTax. ^[8]

The penalty for failing to issue an electronic tax invoice is under Offences and penalties.

Filing and payment

Filing frequency and due date

Every registered person files monthly. The tax period is "one calendar month or such other period as may be prescribed in the regulations" (VAT Act s.2), and the VAT Act provides no turnover-based quarterly or annual option. "Every registered person shall submit a return, in the prescribed form and manner, in respect of each tax period not later than the twentieth day after the end of that period" (s.44(1)). ^[2] KRA: "VAT is due on or before the 20th day of the following month. This includes both the return and payment. Returns are submitted online via iTax." ^[4]

Source snapshot captured 2026-11-04 — original

Payment

The payment deadline is the same 20th. KRA's VAT page describes paying through a payment slip generated on iTax, at a bank or by M-PESA using the payment registration number as the account. ^[4]

Pre-filled returns and eTIMS validation

From the November 2024 tax period, "the VAT return will be pre-filled with tax information available to KRA", and "Any input VAT claim that is not validated through TIMS/eTIMS or against existing customs import declarations for import VAT claims will not be allowed for deduction in the return" (KRA public notice 2156). ^[21] The pre-filled return remains a self-assessment return (KRA public notice 2074). ^[22]

Withholding VAT

KRA may appoint withholding agents to withhold 2% of the taxable value when paying for taxable supplies; the tax withheld "shall be remitted to the Commissioner within five working days after the deduction was made" (Tax Procedures Act s.42A(1), (4B)). ^[3] KRA's guidelines exclude payments for official aid-funded projects, zero-rated supplies, registered manufacturers with investment of at least KES 2 billion on 31 December 2024, and non-VAT-registered persons. ^[23] The penalty for not withholding or remitting is 10% of the amount (s.42A(4C)). See the VAT withholding explainer.

Source snapshot captured 2026-11-04 — original

Input-tax recovery and blocked items

• Time limit. Input tax is deductible "within six months after the end of the tax period in which the supply or importation occurred" (s.17(2) proviso). ^[2]
• Blocked items (s.17(4)): passenger cars and minibuses, including repair, maintenance and spare parts, unless the business deals in or hires them; and entertainment, restaurant and accommodation services, unless provided in the ordinary course of business (and not to an associate or employee) or while the recipient is away from home on business.
• Mixed supplies. Input tax is apportioned between taxable and exempt supplies under the formula in s.17(6).
• Supplies that become exempt. Since 1 July 2026, s.17A requires input tax to be accounted for on unsold stock when the supplies it relates to become exempt (Finance Act, 2026 s.28). ^[2]

Refunds

• Excess input tax is refunded only where it comes from zero-rated supplies or from VAT withheld by agents, among the cases in s.17(5), and the claim is lodged "within twelve months from the date the tax becomes due and payable" (s.17(5)(d)). From 1 July 2026 excess input tax attributable to exempt supplies to the Kenya Defence Forces, the Defence Forces Welfare Services, the National Intelligence Service and the National Police Service (First Schedule paras 57 and 101) also qualifies (s.17(5)(e)). ^[2] Otherwise excess input tax is carried forward.
• Bad debts. A registered person that has paid the VAT but not been paid may apply for a refund "after a period of three years from the date of the supply", or earlier if the customer is placed under statutory management (administrator, receiver or liquidator). No application may be made "after the expiry of ten years from the date of supply" (s.31(1) and proviso (a)). The Finance Act, 2026 (s.29) changed "two years" back to "three years" from 1 July 2026. ^[2]
• Non-residents registered for digital services get no refund (see Digital services).

Source snapshot captured 2026-11-04 — original

Finance Act, 2026 VAT changes

The Finance Act, 2026 (Act No. 19 of 2026) was assented to on 23 June 2026 and published in Kenya Gazette Supplement No. 157 on 26 June 2026. Section 1 brings most of it into force on 1 July 2026, section 43 on 1 September 2026, and sections 17, 18 and 24 on 1 January 2027. ^[9] The VAT changes, all in force since 1 July 2026 and all visible in the consolidated VAT Act: ^{[2] [12]}

• Labour outsourcing (s.13(5A)–(5B)). "Where a supplier provides labour, outsourcing or employee placement services and incurs employee-related costs, such costs shall be deemed to be disbursements made by the supplier on behalf of the client." Employee-related costs include "salaries, wages, statutory deductions and such other related costs". Because s.13(5) excludes disbursements from the taxable value, VAT falls on the supplier's own fee.
• Hire purchase (s.13(6)(a)). The exclusion of finance charges from consideration is limited to a person licensed to carry on hire purchase business under an agreement registered under the Hire Purchase Act.
• Defence and security (s.17(5)(e), (7), (8)). Input tax on exempt supplies to the KDF, DEFWES, NIS and NPS becomes deductible and refundable (see Refunds).
• Bad debts (s.31(1)). The waiting period returns to three years; the ten-year limit is unchanged.
• Tax invoices (s.42(2)). Tax may be shown only on an invoice for a taxable supply.
• Payment-service-provider fees. See below.
• New exemptions (First Schedule Part I paras 158–166, Part II paras 39–40) and deletions; see Exemptions.

The same Act recast the e-invoicing penalty in Tax Procedures Act s.86 (see Offences and penalties).

Payment-service-provider fees

Money transfer services remain exempt. First Schedule Part II para 1(b) exempts "the issue, transfer, receipt and other dealing with money, including money transfer services, and accepting over the counter payments of household bills, but does not include— ... (ii) payment processing, settlement, merchant acquiring, gateway, aggregation services supplied over a software or platform for a fee or commission by a payment service provider". ^[2] A "payment service provider" is a person that owns, operates, manages or controls a public switched network for payment services, or processes or stores data for one. KRA: "Fees charged by payment service providers for digital payment services, including payment processing, settlement, merchant acquiring, gateway and aggregation services, are not exempt from VAT." ^[12] Those fees are therefore taxed at 16% from 1 July 2026.

Source snapshot captured 2026-11-04 — original

Source snapshot captured 2026-11-04 — original

Exemptions

Exempt supplies

Exempt supplies are listed in the First Schedule: Part I for goods, Part II for services. ^[2] Examples from Part II:

• financial services (para 1), including money transfer, but not payment-service-provider fees (see above);
• insurance and reinsurance, with listed exclusions (para 2);
• education services (para 3); medical, veterinary, dental, ambulance and nursing services (para 4);
• passenger transport by any means other than international air transport (para 7);
• sale, renting, leasing, hiring or letting of land or residential premises (para 8);
• betting, gaming and lotteries (para 17);
• tour operators' services, excluding in-house supplies (para 25);
• transfer of a business as a going concern (para 35).

Added by the Finance Act, 2026 (Part I unless stated): dialyzers (158); scrap metal (159); inputs for manufacturing pharmaceutical products on the health Cabinet Secretary's recommendation (160); bioethanol vapour stoves (161); goods for public-private partnership infrastructure projects (162); goods for National Infrastructure Fund projects (163); plant, machinery, equipment and spare parts for projects of at least KES 3 billion (164); goods for liquefied petroleum gas storage of at least KES 5 billion (165); advances and credit, including realisation of collateral and repossessed assets (166); services for PPP infrastructure projects (Part II para 39) and for LPG storage infrastructure (Part II para 40). Each approval-based exemption needs the Cabinet Secretary's approval as the paragraph sets out.

Exempt is not zero-rated

KRA: "Exempt supplies are not taxable supplies and any related input tax is therefore not deductible." ^[4] A zero-rated supply, by contrast, is "treated as a taxable supply" (s.7(1)): the supplier charges 0%, deducts its input tax and can claim a refund of the excess (s.17(5)(a)). An exporter (zero-rated) recovers its VAT costs; a school or a residential landlord (exempt) does not. See zero-rated vs exempt.

Special regimes

• Export processing zones and special economic zones. Supplies to an EPZ business and to an SEZ developer, operator or enterprise are zero-rated (Second Schedule Part A paras 2 and 12). ^[2]
• Small businesses. Below the KES 5 million threshold a business need not register for VAT. For Turnover Tax, see the Kenya KRA PIN guide.
• Cash accounting, flat-rate and margin schemes. The VAT Act contains none.

Offences and penalties

Offences

Criminal offences, tried in court:

• Registration. Failing to apply for registration, and other breaches of the registration rules, carry "a fine not exceeding two hundred thousand shillings or ... imprisonment for a term not exceeding two years, or ... both" (VAT Act s.37). ^[2]
• Invoices. A person who issues an invoice showing tax in breach of s.42(2) "commits an offence and any tax shown thereon shall become due and payable to the Commissioner within seven days of the date of the invoice" (s.42(3)).
• Records. Failing to keep records as s.43 requires is an offence (s.43(5)).
• General penalty. Where no other penalty is set, an offence under the VAT Act carries "a fine not exceeding one million shillings, or ... imprisonment for a term not exceeding three years, or ... both" (s.63). ^[2]

Penalties

Administrative penalties under the Tax Procedures Act (consolidation as at 1 September 2026): ^{[3] [24]}

Exposure	Amount	Legal basis
Late filing of a VAT return	5% of the tax due or KES 10,000, whichever is higher	TPA s.83(1)(c)
Late payment	5% of the tax due	TPA s.83A
Late-payment interest	1% per month or part of a month, simple interest	TPA s.38(1), (3)
Failure to issue an electronic tax invoice (or to file or pay electronically)	After a notice and the taxpayer's reasons: the higher of 5% of the tax due and KES 100,000 (company) or KES 10,000 (individual)	TPA s.86, as amended by Finance Act, 2026 s.48
Withholding VAT not withheld or not remitted	10% of the amount	TPA s.42A(4C)
Fraudulent refund claim	Two times the amount of the claim	TPA s.88

Since 1 July 2026, s.86 works in two steps. The Commissioner "shall issue a notice in writing to the taxpayer requiring the taxpayer to provide reasons for the non-compliance", considers whether the failure was beyond the taxpayer's control, not wilful, and fixed as soon as practicable, and only then, if not satisfied, imposes "the higher of the following penalties— (a) five percent of the tax due; (b) one hundred thousand shillings, in the case of a company; or (c) in the case of an individual, ten thousand shillings." ^[3]

Source snapshot captured 2026-11-04 — original

Tax amnesty, 1 July – 31 December 2026. KRA public notice 2391: "the Tax Amnesty Programme is in effect from 1st July, 2026 to 31st December, 2026. The amnesty covers interest, penalties and fines relating to tax liabilities for periods up to 31st December,2025". The principal tax must be paid in full by 31 December 2026, and unfiled returns for those periods filed. ^[25]

Frequently asked questions

What is the standard VAT rate in Kenya, and is the 8% fuel rate different?

The standard rate is 16% of the taxable value (VAT Act, Cap. 476, s.5(2)(b)), and zero-rated supplies listed in the Second Schedule are taxed at 0%. A separate 8% rate applies only to premium motor spirit (tariff 2710.12.20), illuminating kerosene (2710.19.22) and automotive gas oil (2710.19.31). It began in April 2026: Legal Notice No. 69 of 2026 amended the rate on 14 April 2026, and the Value Added Tax (Amendment) Act, 2026 (Act No. 10 of 2026), in effect from 15 April 2026, inserted section 5(2A) and (2B), which set 8% for 90 days, extendable once by 90 days by Gazette notice. Legal Notice No. 128 of 2026 then applied 8% from 15 July 2026 up to 14 October 2026. The Tax Laws (Amendment) Bill, 2026, published on 28 September 2026, would keep 8% on the same three products for 90 days from the date the Act comes into effect, with one further 90-day extension possible. Parliament reported on 16 October 2026 that the National Assembly had passed the Bill (Parliament of Kenya, parliament.go.ke/index.php/node/26555). Neither KRA's nor Parliament's website has published an assented Act, so the start and end of the current 8% period cannot yet be confirmed from an official source. The 8% rate does not change the 16% rate for anything else.

What is a KRA PIN and how do I register for one?

The KRA PIN (Personal Identification Number) is the number KRA uses for every tax, including VAT. KRA does not issue a separate VAT number: a VAT-registered person is a PIN holder with a VAT obligation. KRA's eTIMS validation rules describe the format: the PIN starts with A for individuals and sole proprietors or P for companies, is followed by 9 digits, ends with a letter and is exactly 11 characters (KRA's example is P123456789Z). KRA publishes no checksum algorithm. PINs are registered online through iTax (itax.kra.go.ke). The documents KRA asks for depend on the applicant, for example a national ID or alien ID for residents, and a tax-agent letter and proof of investment for a non-Kenyan investor. A business that becomes liable for VAT must apply within 30 days to add the VAT obligation to its PIN.

What is the VAT registration threshold in Kenya, and does it apply to foreign digital suppliers?

A person who has made or expects to make taxable supplies of KES 5,000,000 or more in any period of twelve months must apply to register within 30 days of becoming liable (VAT Act s.34(1)). Sales of capital assets and of the business itself are left out of the calculation. Below the threshold a business may apply for voluntary registration if it meets the conditions in s.34(4), such as having a fixed place of business and keeping proper records. The threshold does not apply to a person supplying imported digital services over the internet, an electronic network or through a digital marketplace: under the proviso to s.34(1) such a supplier registers whether or not it reaches KES 5 million. KRA lets these non-resident suppliers register through a simplified iTax framework or through a tax representative, and they cannot deduct Kenyan input VAT.

How does Kenya's Finance Act, 2026 change VAT for labour-outsourcing and staffing arrangements?

From 1 July 2026, section 13(5A) of the VAT Act, inserted by the Finance Act, 2026 (Act No. 19 of 2026), provides that where a supplier provides labour, outsourcing or employee placement services and incurs employee-related costs, those costs are deemed to be disbursements made by the supplier on behalf of the client. Section 13(5B) says employee-related costs include salaries, wages and statutory deductions. Section 13(5) excludes disbursements from the taxable value, so the effect is that 16% VAT is charged on the supplier's own fee rather than on the payroll costs it passes through. KRA's Finance Act 2026 guidance says employee-related costs are treated as disbursements where a supplier provides labour, outsourcing or employee placement services.

Is eTIMS e-invoicing mandatory in Kenya, and what happens if my invoice is not eTIMS-compliant?

Yes. Section 23A(2) of the Tax Procedures Act requires every person who carries on business to issue electronic tax invoices through KRA's electronic Tax Invoice Management System (eTIMS) and to keep stock records in it. KRA public notice 2071 states that from 1 September 2023 this covers all persons carrying on business, including those not registered for VAT, and that from 1 January 2024 business expenditure not supported by an eTIMS invoice is not deductible for tax purposes. KRA also disallows input VAT that is not validated through TIMS/eTIMS or against a customs import declaration. Where the supplier is a small business or small-scale farmer with annual turnover of KES 5 million or less, section 23A(3A) makes the buyer issue the tax invoice, which KRA supports through Buyer Initiated Invoicing. If KRA finds that an electronic tax invoice was not issued, section 86 of the Tax Procedures Act, as amended by the Finance Act, 2026, requires it first to issue a notice asking for reasons. If it is not satisfied, the penalty is the higher of 5% of the tax due and KES 100,000 for a company or KES 10,000 for an individual.

Important websites

Site	What it is for
iTax	Register a PIN and the VAT obligation, file monthly returns, generate payment slips
iTax PIN Checker	Check that a KRA PIN is valid, and whether a person is an appointed withholding VAT agent
eTIMS portal	Sign up for eTIMS and issue invoices through the online portal
KRA eCitizen	eTIMS Lite (web) and Buyer Initiated Invoicing; eTIMS Lite is also on USSD *222#
KRA — Value Added Tax	Rates, registration, due dates and payment channels
KRA — What is eTIMS	eTIMS solutions, onboarding and the costs that need no eTIMS invoice
KRA — VAT on digital marketplace supply FAQ	Simplified registration and filing for non-resident digital suppliers
KRA public notices	Rate orders, eTIMS changes and deadlines as KRA announces them
Lookuptax Kenya PIN validator	Check the format of a Kenyan PIN

Invoices can be checked by scanning the QR code or with the "Invoice number checker" on iTax.

Recent changes

• 2026-10-28 — KRA public notice 2406: consolidators must declare each importer's name, PIN, ID number, telephone number, item description and value for consolidated cargo (required since 13 September 2026), and KRA is working with consolidators so that eTIMS invoices can be issued to importers, so that eligible VAT-registered importers can claim input VAT. (Kenya Revenue Authority)
• 2026-10-16 — Parliament reported that the National Assembly passed the Tax Laws (Amendment) Bill, 2026 (National Assembly Bill No. 65, published 28 September 2026): 8% VAT on premium motor spirit, illuminating kerosene and automotive gas oil for 90 days from the date the Act comes into effect, extendable once by 90 days. Neither KRA's nor Parliament's website has published an assented Act. (Parliament of Kenya; Bill text)
• 2026-09-07 — KRA public notice 2391: tax amnesty on interest, penalties and fines for periods up to 31 December 2025, running 1 July to 31 December 2026; and public notice 2390: eTIMS stock-management functionality announced, with forums from September 2026 and no go-live date. (KRA notice 2391; KRA notice 2390) — see event
• 2026-08-31 — eTIMS–IFMIS integration: suppliers to government entities must generate a valid eTIMS invoice before submitting it for payment through IFMIS, and the details must match. (Kenya Revenue Authority) — see event
• 2026-07-15 — Legal Notice No. 128 of 2026: 8% VAT on the three fuel products from 15 July 2026 up to 14 October 2026. (Kenya Gazette Supplement No. 178, hosted by KRA) — see event
• 2026-07-01 — Finance Act, 2026 (Act No. 19 of 2026) VAT changes in force: employee-related costs of outsourcing suppliers deemed disbursements (s.13(5A)–(5B)); payment-service-provider fees no longer exempt, while money transfer services stay exempt (First Schedule Part II para 1(b)); input tax on supplies to the defence and security services deductible (s.17(5)(e), (7), (8)); bad-debt wait back to three years (s.31); new exemptions in First Schedule Part I paras 158–166 and Part II paras 39–40; e-invoicing penalty recast (TPA s.86). (Finance Act, 2026, hosted by KRA) — see event
• 2026-04-15 — Value Added Tax (Amendment) Act, 2026 (Act No. 10 of 2026) inserts s.5(2A)–(2B): 8% on the three fuel products for 90 days, after Legal Notice No. 69 of 2026 amended the rate on 14 April 2026. (VAT Act consolidation, hosted by KRA) — see event

For the full chronology, see Kenya tax changes on Lookuptax.

Reference links

Legislation (Kenya Law consolidations and Gazette copies hosted by KRA; National Assembly):

• [1] Value Added Tax Act, 2013 — Revised Edition 2021
• [2] Value Added Tax Act (Cap. 476) — legislation as at 1 July 2026
• [3] Tax Procedures Act (Cap. 469B) — legislation as at 1 September 2026
• [9] Finance Act, 2026 (Act No. 19 of 2026), Kenya Gazette Supplement No. 157
• [10] Legal Notice No. 128 of 2026 — VAT (Amendment of Rate of Tax) Order
• [11] Tax Laws (Amendment) Bill, 2026 (National Assembly Bills No. 65)
• [26] Parliament of Kenya — passage of the Tax Laws (Amendment) Bill (National Assembly Bill No. 65 of 2026), 16 October 2026

Kenya Revenue Authority guidance:

• [4] Value Added Tax
• [5] VAT on Digital Marketplace Supply — FAQ
• [6] Buyer Initiated Invoicing
• [7] Requirements for KRA PIN registration
• [8] Learn about eTIMS — FAQ
• [12] Finance Act 2026 — what it means for you
• [15] Technical Specification of TIS for OSCU/VSCU, v2.0 (April 2023)
• [16] Types of eTIMS solutions
• [17] Reverse Invoicing
• [19] What is eTIMS
• [20] How to onboard on eTIMS
• [23] Taxpayer Guidelines for Withholding VAT
• [24] Business offences and penalties
• Value Added Tax e-brochure 2023/24

KRA public notices:

• [13] 2368 — Integration of the export process in iCMS with the VAT return in iTax
• [14] 1797 — Exemption of non-resident suppliers of digital services from the VAT Electronic Tax Invoice Regulations, 2020
• [18] 2388 — Implementation of the eTIMS–IFMIS integration
• [21] 2156 — Update on simplification of VAT return filing
• [22] 2074 — Simplification of the VAT return filing process
• [25] 2391 — Tax amnesty on interest, penalties and fines
• 2071 — On-boarding of non-VAT taxpayers on eTIMS
• 2077 — Electronic tax invoicing for non-VAT registered persons
• 2390 — Implementation of the stock management functionality for electronic invoicing
• 2406 — Declaration of importer details for consolidated cargo and issuance of electronic tax invoices

Related on Lookuptax:

• Kenya KRA PIN guide
• Kenya PIN validator
• Kenya tax changes
• VAT withholding regimes
• VAT on digital services from non-resident suppliers
• Fiscal devices and certified cash registers
• Zero-rated vs exempt supplies
• Reverse charge
• E-invoicing models: clearance, reporting and interchange
• Marketplace deemed-supplier rules