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Kenya’s value-added tax for electronically supplied services

Despite an average of 5 percent growth for nearly a decade, Kenya’s economy has been stunted by weak governance, insufficient infrastructure and corruption. Agriculture is the country's primary industry, and unemployment is extremely high.

The following content was reviewed and updated as of Jan. 8, 2019.

Legislative effective date

Sept. 2, 2013

Name of tax

Value-added tax (VAT)

Statute of limitation

Five years. However, there is no statute of limitation in case of willful negligence or fraud.

Standard rate of VAT

16 percent

Electronic supplies

Electronically supplied services means, but is not limited to, any of the following services when provided or delivered on or through a telecommunications network:

  1. Websites, web-hosting, or remote maintenance of programs and equipment
  2. Software and the updating of software
  3. Images, text, and information
  4. Access to databases
  5. Self-education packages
  6. Music, films and games, including games of chance
  7. Political, cultural, artistic, sporting, scientific and other broadcasts, and events including broadcast television

Registration

A resident supplier is liable to register for VAT if the person has made, expects to make, or is about to commence making worldwide taxable supplies in excess of 5,000,000 Kenyon shillings (approximately $50,000 U.S. dollars) in a 12-month period. Once this threshold is met, the taxable person is required to register for VAT within 30 days.

Nonresident suppliers of electronic services are not subject to the above registration threshold and are required to register for Kenyan VAT and appoint a tax representative for any business-to-consumer (B2C) supplies made into Kenya.

Nonresident suppliers of electronic services are not required to register if only making business-to-business (B2B) supplies, as the business customer is required to self-assess VAT via the reverse charge mechanism.

Customer identification

VAT is an obligation which is associated with a taxable person’s personal identification number (PIN), which also acts as the taxpayer’s tax identification number for VAT purposes.

B2B customers are identified by their PIN, which is to be provided to the supplier at the time of the transaction.

Customer location

Services provided by a supplier with a place of business in Kenya:

Electronic services provided for use or consumption in Kenya by a business established in Kenya are taxable at the standard rate of 16 percent. Electronic services provided for use or consumption outside Kenya by a business located in Kenya are taxable at zero percent.

Services provided to a registered person in Kenya (B2B transaction) by a supplier whose place of business is not in Kenya:

Electronic services provided by a business established outside of Kenya to a registered person in Kenya (B2B transaction), are taxed under a reverse charge procedure by the recipient business.

Supplier identification

Generally, a supplier is identified by the terms and conditions of contracts or agreements related to the transaction. VAT is an obligation that is added onto the supplier’s PIN. Therefore, if registered, the PIN is the supplier’s identification for VAT purposes.

A supplier that is not registered for VAT, is not required to register for VAT and does not have VAT obligations, is not allowed to charge VAT and is not required to register for VAT or submit periodical VAT returns.

Procedural matters

  • VAT returns should be filed and payments made by the 20th of the month following the tax period. The tax period is a calendar month.
  • Input VAT can only be claimed to the extent that the expense for the supply has been incurred to generate taxable supplies.
  • Where a nonresident person with no fixed place of business in Kenya is required to register for VAT, the nonresident person is required to appoint a tax representative within Kenya. Where the taxable person fails to properly appoint a representative, the commissioner may, by notice in writing, appoint a local representative on the taxable person’s behalf.
  • Once a PIN is obtained by the nonresident person, the taxing authority’s online platform will provide additional functionality, including the ability to meet filing requirements as relevant to each taxpayer.

Historic transactions

VAT assessments by the commissioner:

The effective date of VAT registration is the beginning of the first tax period after the person is required to apply for registration, or a later period if specified on the person’s PIN certificate.

The commissioner is allowed to raise a VAT assessment only within five years immediately following the last date of the reporting period to which the assessment relates, or at any time in the case of gross or willful neglect, evasion, or fraud by, or on behalf of, the taxpayer.

The assessment will include the VAT due, plus late payment interest at 1 percent per month chargeable until the principal tax is fully settled, up to a maximum of 100 percent of the principal tax due.

Claim of input VAT:

For supplies purchased within 24 months immediately prior to registration, a person may, within three months from the date of registration, claim relief from any tax shown to have been incurred on taxable supplies which are intended for use in making taxable supplies.

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