Kenya allows relief for VAT credits stranded by the 2022 rate cuts and drops the 90/10 input tax de minimis rule

What changed in detail

Section 19 of the Tax Laws (Amendment) Act, 2024 (No. 12 of 2024, Kenya Gazette Supplement No. 215 of 13 December 2024; commenced 27 December 2024) amends section 17 of the VAT Act, CAP 476, which governs input tax credits.

It inserts paragraph (ea) into section 17(5). The paragraph covers excess input tax on a taxable supply that is zero-rated or exempted, where the excess arose from a permanent credit position caused by the difference between the rate applicable on 1 July 2022 and a lower rate of tax, and the credit position existed on the date the supply became zero-rated or exempted. A proviso requires a registered person who incurred such a credit to apply to the Commissioner for relief within six months after the provision commenced.

The section also deletes:

• section 17(7), the 0.90/0.10 de minimis rule for apportioned input tax;
• section 17(8), the input tax deduction for manufacturers on supplies to official aid-funded projects.

What it means

This provision is superseded. Its six-month window ran from 27 December 2024 to 27 June 2025. The Finance Act 2025 (s.34(c)) then deleted this paragraph (ea) from 1 July 2025 and substituted a different one, for excess credits on supplies that became zero-rated on 1 July 2023, with its own six-month window, so a business with a stranded credit should look at that provision, not this one. The numbers s.17(7) and (8) have since been reused by the Finance Act 2026 for a different rule (input tax on supplies to Kenya’s defence and national security services); the de minimis rule itself has not come back. The deletion of the 0.90/0.10 rule is the lasting change: partially exempt businesses whose ratio of taxable supplies sat near either end no longer get the round-up or round-down, so they apportion input tax on the actual ratio. That is more work, and the recoverable amount moves at both ends.