Kenya opens input VAT recovery on exempt supplies to the defence and security services
This page records one dated change. For the rules in Kenya as they stand today, see the Kenya guide →
- Jurisdiction
- 🇰🇪 Kenya
- Tax
- VAT
- Change type
- Update
- Status
- In force
- Impact
- Action required
- Announced
- 23 June 2026
- Effective
- 1 July 2026
- Instrument
- KE-FINACT-19-2026
- Authority
- National Council for Law Reporting (Kenya Law)
- Systems
- Tax engine, ERP, Reporting
- Verified
- Corroborated against official id · medium confidence
Registered persons supplying the Kenya Defence Forces, the Defence Forces Welfare Services, the National Intelligence Service or the National Police Service.
Allow full deduction of input VAT directly attributable to supplies to the Kenya Defence Forces, DEFWES, the National Intelligence Service and the National Police Service, without apportionment, subject to Commissioner-prescribed documentation.
Tax engineERPReporting
Kenya’s Finance Act, 2026 amends section 17 of the VAT Act, CAP 476 to allow registered persons to deduct input VAT directly attributable to supplies made to the Kenya Defence Forces, the Defence Forces Welfare Services, the National Intelligence Service and the National Police Service, where those supplies are exempt under paragraphs 57 and 101 of the First Schedule. Such input VAT was previously irrecoverable. A new subsection provides that this input tax is not subject to apportionment where it is wholly attributable to those supplies.
What changed in detail
Kenya’s Finance Act, 2026 amends section 17 of the VAT Act, CAP 476 to allow registered persons to deduct input VAT directly attributable to supplies made to the Kenya Defence Forces, the Defence Forces Welfare Services, the National Intelligence Service and the National Police Service, where those supplies are exempt under paragraphs 57 and 101 of the First Schedule.
Such input VAT was previously irrecoverable. A new subsection provides that this input tax is not subject to apportionment where it is wholly attributable to those supplies.
What it means
An exempt supply that no longer carries an irrecoverable input-tax cost is a structural change to how these contracts are priced, not a rounding adjustment — the supplier was previously absorbing the VAT on its own inputs. The apportionment carve-out is the part to get right: it only applies where the input tax is wholly attributable, so mixed-use overheads still apportion, and treating the whole business as recoverable would overclaim.