How To Calculate VAT in Kenya. Are you an owner of a business and have been wondering how to do your KRA Vat Returns? well, worry no more because we got you. By the end of this blog, you will have known How To Calculate VAT in Kenya. So let’s dive in!
What is VAT?
Value Added Tax is charged on supply of taxable goods or services made or provided in Kenya and on importation of taxable goods or services into Kenya [Source/kra.go.ke] provided you have a business in Kenya you are obligated to pay VAT Tax every month. Any person, individual, company, or partnership that has supplied or expects to supply taxable goods worth Kshs. 5,000,000 and above within 12 months; you MUST register for VAT.
- What are the VAT Rates in Kenya?
There are 3 types of tax rates;
- 0% – for Zero-rated supplies. Goods listed in the 2nd Schedule to the VAT Act e.g. Exportation of goods/services, goods supplied to EPZ, Privileged persons and Public bodies, etc.
- 8% – Petroleum oils obtained from bituminous, Motor Spirits (Diesel Supero, AViation spirit, etc.)
- 16% – General rate for other Goods and Services
How To Calculate VAT in Kenya
While as you may have an accountant to prepare your VAT returns, Not many companies are able to pay an in-house accountant to handle these Kinds of Jobs. You may want to know how to calculate VAT in Kenya for your own benefit and at least save some money in these hard economical times we have ahead of us. So how does VAT operate exactly?
- VAT operates on an Input-Output Principle. A registered person should maintain a record of his sales and purchases for a tax period.
- Input tax refers to VAT charged on purchases of taxable purchases and expenses for business purposes.
- Output tax refers to the VAT charged on the sales of taxable goods or services.
Tax payable is the difference between the output tax and the Input tax.
- Output Tax – Input Tax = VAT Payable
- If positive, tax due is payable on or before the 20th of the following month.
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How do I file my KRA Returns?
VAT returns are submitted monthly via iTax on or before the 20th of the following month.
Persons with no VAT to declare are required to submit a NIL return. Penalty on late filing: Whichever is higher between, Kshs. 10,000 and 5% of the tax due [Source/Kra.go.ke]
- You should always be punctual when paying your KRA VAT returns before the 20th of Every month to avoid such penalties which can be costly to the business.
How do I pay for VAT?
After filing the VAT return online via iTax, you are required to generate an E-slip which is used to physically pay the tax at the KRA-appointed Banks. You may however authorize your bank to pay the tax through a direct credit transfer to the Commissioners to account at the Central Bank of Kenya.
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