Kenya VAT (VAT-3) Skill v2.0

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Section 1 — Quick reference

Field	Value
Country	Kenya (Republic of Kenya)
Tax	VAT (Value Added Tax)
Currency	KES (Kenyan Shilling / Ksh)
Tax year	Calendar year (1 Jan – 31 Dec)
Standard rate	16%
Zero rate	0% (exports; certain agricultural inputs; medicines; specified goods under Second Schedule)
Exempt	Financial services, education, medical services, agricultural products (raw), passenger transport
Registration threshold	KES 5,000,000 per year
Tax authority	KRA (Kenya Revenue Authority)
Return form	VAT-3 (monthly)
Filing portal	iTax (https://itax.kra.go.ke)
Filing deadline	20th of the month following the tax period
Tax invoice	ETR (Electronic Tax Register) receipt or e-Invoice required
PIN	Personal Identification Number — tax registration
Contributor	Open Accountants Community
Validated by	Pending — requires sign-off by a Kenyan CPA(K) or tax practitioner
Skill version	2.0

Key VAT-3 return fields

Field	Meaning
Section A	Standard-rated sales at 16%
Section B	Zero-rated sales
Section C	Exempt sales
Section D	Total output tax
Section E	Standard-rated purchases (input tax)
Section F	Zero-rated purchases
Section G	Total input tax
Section H	Net VAT payable (D − G)
Section I	Excess credit c/f or refund

Conservative defaults

Ambiguity	Default
Unknown rate on a sale	16% standard
Unknown counterparty country	Domestic Kenya
Unknown export qualification	16% until evidence confirmed
Unknown business-use %	0% input tax
Unknown ETR/e-Invoice availability	No input credit
Unknown whether exempt or taxable	Taxable at 16%

Red flag thresholds

Threshold	Value
HIGH single transaction	KES 500,000
HIGH tax delta on single default	KES 80,000
MEDIUM counterparty concentration	>40%
MEDIUM conservative default count	>4 per return
LOW absolute net VAT position	KES 200,000

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Section 2 — Required inputs and refusal catalogue

Required inputs

Minimum viable — bank statement for the month. KRA PIN (tax PIN).

Recommended — ETR receipts or e-invoices for all purchases, sales invoices issued, prior period excess credit.

Ideal — complete purchase/sales register from iTax, import entry documents (IDF/Entry), asset register.

Refusal if minimum missing — SOFT WARN. No bank statement = hard stop. "Input tax requires ETR receipts or compliant e-invoices. All credits provisional pending verification."

Refusal catalogue

R-KE-1 — Non-registered vendor. "Only KRA VAT-registered taxpayers (above KES 5M threshold) can charge and recover VAT. Confirm registration."

R-KE-2 — Partial exemption. "Businesses with both taxable and exempt supplies must apportion input tax. Out of scope without full-year data."

R-KE-3 — Withholding VAT (WHT-VAT). "Government agencies withhold 6% (or 100%) of VAT on payments. Track WHT-VAT certificates — escalate if significant."

R-KE-4 — Digital marketplace suppliers. "Non-resident digital service providers must register for Kenyan VAT. Complex cross-border treatment — escalate for non-resident client situations."

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Section 3 — Supplier pattern library

3.1 Kenyan banks — fees (exempt / exclude)

Pattern	Treatment	Notes
KENYA COMMERCIAL BANK, KCB	EXCLUDE (fees)	Financial service — exempt
EQUITY BANK, EQUITY GROUP	EXCLUDE (fees)	Same
COOPERATIVE BANK, CO-OP BANK	EXCLUDE (fees)	Same
ABSA BANK KENYA	EXCLUDE (fees)	Same
STANDARD CHARTERED KENYA	EXCLUDE (fees)	Same
NCBA BANK, NCBA GROUP	EXCLUDE (fees)	Same
I&M BANK	EXCLUDE (fees)	Same
DIAMOND TRUST BANK, DTB	EXCLUDE (fees)	Same
MPESA, M-PESA (SAFARICOM)	EXCLUDE (fees)	Mobile money — financial service
AIRTEL MONEY	EXCLUDE (fees)	Same
BANK CHARGES, INTEREST	EXCLUDE	Bank fee/interest — exempt

3.2 Kenyan government and statutory (exclude)

Pattern	Treatment	Notes
KENYA REVENUE AUTHORITY, KRA	EXCLUDE	Tax payment
NATIONAL SOCIAL SECURITY FUND, NSSF	EXCLUDE	Social insurance
NATIONAL HOSPITAL INSURANCE FUND, NHIF	EXCLUDE	Health insurance
NITA, NATIONAL INDUSTRIAL TRAINING	EXCLUDE	Statutory levy
NTSA, NATIONAL TRANSPORT AND SAFETY	EXCLUDE	Regulatory fee

3.3 Kenyan utilities (taxable at 16%)

Pattern	Treatment	Rate	Notes
KENYA POWER, KPLC	Input 16%	16%	Electricity — taxable
NAIROBI CITY WATER, NCWSC	Input 16%	16%	Water — taxable
SAFARICOM (data/voice)	Input 16%	16%	Telecom — taxable
AIRTEL KENYA	Input 16%	16%	Mobile — taxable
TELKOM KENYA, TELKOM	Input 16%	16%	Telecom — taxable
ZUKU FIBER, WANANCHI GROUP	Input 16%	16%	Internet — taxable
LIQUID TELECOM KENYA	Input 16%	16%	Internet — taxable

3.4 Transport and logistics

Pattern	Treatment	Rate	Notes
KENYA AIRWAYS, KQ	Check route	0%/16%	International 0%; domestic 16%
JAMBOJET	Input 16%	16%	Domestic — 16%
AFRICAAIRWAYS	Check route	0%/16%	Check
UBER KENYA	Input 16%	16%	Ride-hailing — taxable
BOLT KENYA	Input 16%	16%	Ride-hailing — taxable
LITTLE CAB	Input 16%	16%	Ride-hailing — taxable
DHL KENYA	Input 16%	16%	Courier — taxable
FEDEX KENYA	Input 16%	16%	Courier — taxable
G4S KENYA, WELLS FARGO (courier)	Input 16%	16%	Security/courier — taxable
POSTA KENYA (parcel)	Input 16%	16%	Parcel — taxable
POSTA KENYA (stamps)	EXEMPT	0%	Universal stamps — exempt

3.5 Food and retail

Pattern	Treatment	Rate	Notes
NAKUMATT, NAIVAS SUPERMARKET	Input 16%/0%	Mixed	Non-food 16%; basic food may be zero-rated
QUICKMART SUPERMARKET	Input 16%/0%	Mixed	Same
CARREFOUR KENYA	Input 16%/0%	Mixed	Same
CHANDARANA FOODPLUS	Input 16%/0%	Mixed	Supermarket — split
TUSKYS SUPERMARKET	Input 16%/0%	Mixed	Same
KWAL, DEL MONTE KENYA (packaged food)	Input 16%	16%	Processed food — 16%
UNGA LIMITED (maize flour)	Input 0%	0%	Basic staple — zero-rated

3.6 SaaS — international suppliers

Foreign digital service providers must register with KRA if providing services to Kenyan consumers/businesses.

Pattern	Treatment	Notes
GOOGLE (Workspace, Ads)	Reverse charge 16%	Self-assess if not KRA-registered
MICROSOFT (365, Azure)	Reverse charge 16%	Same
META, FACEBOOK ADS	Reverse charge 16%	Same
ZOOM, SLACK, NOTION	Reverse charge 16%	Same
AWS	Reverse charge 16%	Same

3.7 Payment processors (exempt)

Pattern	Treatment	Notes
MPESA TRANSACTION FEE	EXCLUDE	Financial service — exempt
PESAPAL (fees)	EXCLUDE	Payment gateway — exempt
STRIPE (fees)	EXCLUDE	Same
PAYPAL (fees)	EXCLUDE	Same

3.8 Internal transfers and exclusions

Pattern	Treatment	Notes
INTERNAL TRANSFER, OWN ACCOUNT	EXCLUDE	Internal movement
LOAN, REPAYMENT	EXCLUDE	Loan principal
SALARY, PAYROLL	EXCLUDE	Outside VAT scope
DIVIDEND	EXCLUDE	Out of scope
ATM, CASH WITHDRAWAL	Tier 2 — ask	Default exclude

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Section 4 — Worked examples

Six classifications from a hypothetical Nairobi-based IT consultant. Format: KCB Bank statement.

Example 1 — Domestic B2B revenue (16%)

Input line: 15/04/2025 Credit SAFARICOM PLC Invoice KE-2025-041 Ksh 1,160,000 Ksh 5,000,000

Reasoning: Incoming Ksh 1,160,000 from Safaricom for IT consulting. Standard 16%. Gross 1,160,000 includes VAT. Net = Ksh 1,000,000 + Ksh 160,000 output VAT. Issue ETR receipt or e-invoice; report on VAT-3 Section A.

Classification: Output tax 16% — Ksh 160,000. Net: Ksh 1,000,000.

Example 2 — Export service (zero-rated)

Input line: 22/04/2025 Credit ACME CORP USA Consulting USD 5,000 (Ksh 645,000) Ksh 5,645,000

Reasoning: USD from foreign client for services. Zero-rated if services exported outside Kenya. Evidence: contract, FX payment. Report Ksh 645,000 on Section B. Output tax: Ksh 0.

Classification: Zero-rated — Ksh 645,000. Output tax: Ksh 0.

Example 3 — Electricity (16%)

Input line: 10/04/2025 Debit KENYA POWER April bill -Ksh 11,600 Ksh 4,988,400

Reasoning: Kenya Power electricity. 16% VAT. Gross Ksh 11,600. Net = Ksh 10,000 + Ksh 1,600 input tax. ETR receipt from KPLC — input credit Ksh 1,600.

Classification: Input tax 16% — Ksh 1,600. Net: Ksh 10,000.

Example 4 — M-Pesa transaction fee (exempt)

Input line: 08/04/2025 Debit SAFARICOM M-PESA Transaction fees -Ksh 232 Ksh 4,988,168

Reasoning: M-Pesa transaction fee. Mobile money is a financial service — exempt from VAT. No input tax. EXCLUDE from VAT-3.

Classification: EXEMPT — no input tax.

Example 5 — International SaaS (reverse charge)

Input line: 05/04/2025 Debit GOOGLE IRELAND Workspace April -Ksh 3,480 Ksh 4,984,688

Reasoning: Google Workspace. If Google is not KRA-registered for digital services, the Kenyan business must self-assess 16% VAT. Ksh 3,480 net; self-assessed VAT = Ksh 557. Both output and input in same period for fully taxable business.

Classification: Reverse charge — self-assess Ksh 557 output and input. Net: Ksh 0.

Example 6 — Domestic courier (16%)

Input line: 12/04/2025 Debit DHL KENYA Shipping invoice -Ksh 5,800 Ksh 4,978,888

Reasoning: DHL courier. 16% VAT. Gross Ksh 5,800. Net = Ksh 5,000 + Ksh 800 input tax. DHL Kenya issues ETR receipts — input credit Ksh 800.

Classification: Input tax 16% — Ksh 800. Net: Ksh 5,000.

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Section 5 — Tier 1 rules (compressed)

5.1 Standard rate 16%

Default rate for all taxable supplies. Legislation: VAT Act 2013 (No. 35 of 2013) Section 5.

5.2 Zero rate

Second Schedule goods and services: exports, certain agricultural inputs (fertilizers, seeds), medicines, textbooks, ambulance services. Legislation: VAT Act 2013 Second Schedule.

5.3 Exempt supplies

First Schedule: financial services, education, medical/health services, raw agricultural products sold by farmers, passenger transport. Legislation: VAT Act 2013 First Schedule.

5.4 ETR / e-Invoice requirement

Electronic Tax Register (ETR) receipts required for retail; e-invoices via iTax for B2B. Input tax credit requires a compliant ETR or e-invoice from a KRA VAT-registered supplier.

5.5 Withholding VAT

Government departments and designated agents withhold 6% VAT on payments to suppliers; 100% on payments to foreign entities not registered in Kenya. Track withholding tax certificates (WHT-VAT form).

5.6 Filing deadlines

Obligation	Due date
VAT-3 return	20th of following month
VAT payment	20th of following month
Late penalty	5% of unpaid tax + 1% per month interest

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Section 6 — Tier 2 catalogue

6.1 Withholding VAT from government clients

What it shows: Payment from government that appears less than invoiced. What's missing: WHT-VAT certificate amount. Conservative default: Record full output tax on invoice; offset WHT-VAT certificate. Question to ask: "Do you have the WHT-VAT withholding certificate from the government agency?"

6.2 Export service qualification

What it shows: Revenue from a foreign client. What's missing: Evidence services were exported. Conservative default: 16%. Question to ask: "Foreign client contract + FX payment evidence available?"

6.3 Zero-rated vs. exempt food items

What it shows: Grocery or agricultural purchase. What's missing: Whether the specific items are zero-rated (Second Schedule) or simply out of scope. Conservative default: 16% on all. Question to ask: "What exactly was purchased? Itemised receipt available?"

6.4 International SaaS — KRA registration status

What it shows: Payment to foreign digital provider. What's missing: Whether provider is KRA-registered. Conservative default: Self-assess 16% reverse charge. Question to ask: "Does the foreign provider's invoice show a KRA PIN? If yes, treat as standard. If no, self-assess."

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Section 7 — Excel working paper template

KENYA VAT-3 WORKING PAPER
Period: ____________  PIN: ____________

A. OUTPUT TAX
  A1. Standard-rated sales 16% (net)           ___________
  A2. Output tax (A1 × 16%)                    ___________
  A3. Zero-rated exports                       ___________
  A4. Exempt sales                             ___________
  A5. Reverse charge output self-assessed      ___________

B. INPUT TAX
  B1. Standard-rated purchases 16% (net)       ___________
  B2. Input tax (B1 × 16%)                     ___________
  B3. Import input tax                         ___________
  B4. Reverse charge input self-assessed       ___________
  B5. Total input (B2+B3+B4)                  ___________
  B6. WHT-VAT credits                          ___________

C. NET VAT
  C1. Net (A2 − B5)                            ___________
  C2. WHT-VAT credits (B6)                     ___________
  C3. Prior credit                             ___________
  C4. Net payable (C1−C2−C3)                   ___________

REVIEWER FLAGS:
  [ ] ETR/e-invoices confirmed?
  [ ] Export evidence held?
  [ ] WHT-VAT certificates collected?
  [ ] Reverse charge self-assessed?

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Section 8 — Bank statement reading guide

Common Kenyan bank formats

Bank	Key columns	Date format	Amount
KCB	Date, Description, Debit, Credit, Balance	DD/MM/YYYY	KES
Equity Bank	Date, Narrative, Withdrawal, Deposit, Balance	DD/MM/YYYY	KES
Co-op Bank	Date, Description, Debit, Credit, Balance	DD/MM/YYYY	KES
ABSA Kenya	Date, Description, Amount, Balance	DD/MM/YYYY	KES

Key Kenyan banking terms

Term	Meaning	Hint
Credit / Deposit	Incoming	Potential revenue
Debit / Withdrawal	Outgoing	Potential expense
M-PESA	Mobile money	Check if fee or transfer
Bank Charges	Fee	Exempt
Interest	Interest	Exempt
Balance	Balance	Ignore

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Section 9 — Onboarding fallback

KENYA VAT ONBOARDING — MINIMUM QUESTIONS
1. KRA PIN (Personal Identification Number)?
2. VAT registration number?
3. Month covered by this bank statement?
4. Export sales (zero-rated)? Evidence held?
5. Government clients who withhold VAT? WHT-VAT certificates?
6. International SaaS subscriptions — self-assess reverse charge?
7. Prior period excess credit carried forward?

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Section 10 — Reference material

Topic	Reference
VAT Act	VAT Act 2013 (No. 35 of 2013)
Standard rate	Section 5
Zero rate	Second Schedule
Exemptions	First Schedule
Withholding VAT	Section 17
ETR requirement	Section 27
Penalties	Section 53

Known gaps

• Partial exemption apportionment — escalate
• WHT-VAT reconciliation for large government contracts — specialist
• Digital marketplace complex cross-border — escalate
• Property/land transactions — escalate

Self-check

• ETR/e-invoices held for all input credits
• Export evidence confirmed
• WHT-VAT certificates collected from government clients
• Reverse charge self-assessed for foreign digital services
• Prior credit carried forward correctly

Changelog

Version	Date	Change
1.0	2024	Initial
2.0	April 2026	v2.0 rewrite

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Prohibitions

• NEVER claim input credit without ETR receipt or compliant e-invoice
• NEVER zero-rate exports without customs documentation or FX evidence
• NEVER ignore WHT-VAT from government clients
• NEVER present calculations as definitive — direct to CPA(K)

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Disclaimer

This skill is for informational purposes only. All outputs must be reviewed by a qualified professional. Updated version at openaccountants.com.

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Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

The most up-to-date, verified version of this skill is maintained at openaccountants.com. Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes.

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