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openaccountants/skills/kenya-vat.md
kenya-vat.md453 lines16.4 KB
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1---
2name: kenya-vat
3description: Use this skill whenever asked to prepare, review, or classify transactions for a Kenya VAT return (VAT-3), classify transactions for Kenyan VAT purposes, or advise on VAT registration and filing in Kenya. Trigger on phrases like "Kenya VAT", "KRA VAT", "VAT-3 Kenya", "input tax Kenya", "output tax Kenya", "Kenya Revenue Authority VAT", or any Kenya VAT request. ALWAYS read this skill before touching any Kenya VAT work.
4version: 2.0
5jurisdiction: KE
6tax_year: 2025
7category: international
8depends_on:
9 - vat-workflow-base
10---
11 
12# Kenya VAT (VAT-3) Skill v2.0
13 
14---
15 
16## Section 1 — Quick reference
17 
18| Field | Value |
19|---|---|
20| Country | Kenya (Republic of Kenya) |
21| Tax | VAT (Value Added Tax) |
22| Currency | KES (Kenyan Shilling / Ksh) |
23| Tax year | Calendar year (1 Jan – 31 Dec) |
24| Standard rate | 16% |
25| Zero rate | 0% (exports; certain agricultural inputs; medicines; specified goods under Second Schedule) |
26| Exempt | Financial services, education, medical services, agricultural products (raw), passenger transport |
27| Registration threshold | KES 5,000,000 per year |
28| Tax authority | KRA (Kenya Revenue Authority) |
29| Return form | VAT-3 (monthly) |
30| Filing portal | iTax (https://itax.kra.go.ke) |
31| Filing deadline | 20th of the month following the tax period |
32| Tax invoice | ETR (Electronic Tax Register) receipt or e-Invoice required |
33| PIN | Personal Identification Number — tax registration |
34| Contributor | Open Accountants Community |
35| Validated by | Pending — requires sign-off by a Kenyan CPA(K) or tax practitioner |
36| Skill version | 2.0 |
37 
38### Key VAT-3 return fields
39 
40| Field | Meaning |
41|---|---|
42| Section A | Standard-rated sales at 16% |
43| Section B | Zero-rated sales |
44| Section C | Exempt sales |
45| Section D | Total output tax |
46| Section E | Standard-rated purchases (input tax) |
47| Section F | Zero-rated purchases |
48| Section G | Total input tax |
49| Section H | Net VAT payable (D − G) |
50| Section I | Excess credit c/f or refund |
51 
52### Conservative defaults
53 
54| Ambiguity | Default |
55|---|---|
56| Unknown rate on a sale | 16% standard |
57| Unknown counterparty country | Domestic Kenya |
58| Unknown export qualification | 16% until evidence confirmed |
59| Unknown business-use % | 0% input tax |
60| Unknown ETR/e-Invoice availability | No input credit |
61| Unknown whether exempt or taxable | Taxable at 16% |
62 
63### Red flag thresholds
64 
65| Threshold | Value |
66|---|---|
67| HIGH single transaction | KES 500,000 |
68| HIGH tax delta on single default | KES 80,000 |
69| MEDIUM counterparty concentration | >40% |
70| MEDIUM conservative default count | >4 per return |
71| LOW absolute net VAT position | KES 200,000 |
72 
73---
74 
75## Section 2 — Required inputs and refusal catalogue
76 
77### Required inputs
78 
79**Minimum viable** — bank statement for the month. KRA PIN (tax PIN).
80 
81**Recommended** — ETR receipts or e-invoices for all purchases, sales invoices issued, prior period excess credit.
82 
83**Ideal** — complete purchase/sales register from iTax, import entry documents (IDF/Entry), asset register.
84 
85**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."
86 
87### Refusal catalogue
88 
89**R-KE-1 — Non-registered vendor.** "Only KRA VAT-registered taxpayers (above KES 5M threshold) can charge and recover VAT. Confirm registration."
90 
91**R-KE-2 — Partial exemption.** "Businesses with both taxable and exempt supplies must apportion input tax. Out of scope without full-year data."
92 
93**R-KE-3 — Withholding VAT (WHT-VAT).** "Government agencies withhold 6% (or 100%) of VAT on payments. Track WHT-VAT certificates — escalate if significant."
94 
95**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."
96 
97---
98 
99## Section 3 — Supplier pattern library
100 
101### 3.1 Kenyan banks — fees (exempt / exclude)
102 
103| Pattern | Treatment | Notes |
104|---|---|---|
105| KENYA COMMERCIAL BANK, KCB | EXCLUDE (fees) | Financial service — exempt |
106| EQUITY BANK, EQUITY GROUP | EXCLUDE (fees) | Same |
107| COOPERATIVE BANK, CO-OP BANK | EXCLUDE (fees) | Same |
108| ABSA BANK KENYA | EXCLUDE (fees) | Same |
109| STANDARD CHARTERED KENYA | EXCLUDE (fees) | Same |
110| NCBA BANK, NCBA GROUP | EXCLUDE (fees) | Same |
111| I&M BANK | EXCLUDE (fees) | Same |
112| DIAMOND TRUST BANK, DTB | EXCLUDE (fees) | Same |
113| MPESA, M-PESA (SAFARICOM) | EXCLUDE (fees) | Mobile money — financial service |
114| AIRTEL MONEY | EXCLUDE (fees) | Same |
115| BANK CHARGES, INTEREST | EXCLUDE | Bank fee/interest — exempt |
116 
117### 3.2 Kenyan government and statutory (exclude)
118 
119| Pattern | Treatment | Notes |
120|---|---|---|
121| KENYA REVENUE AUTHORITY, KRA | EXCLUDE | Tax payment |
122| NATIONAL SOCIAL SECURITY FUND, NSSF | EXCLUDE | Social insurance |
123| NATIONAL HOSPITAL INSURANCE FUND, NHIF | EXCLUDE | Health insurance |
124| NITA, NATIONAL INDUSTRIAL TRAINING | EXCLUDE | Statutory levy |
125| NTSA, NATIONAL TRANSPORT AND SAFETY | EXCLUDE | Regulatory fee |
126 
127### 3.3 Kenyan utilities (taxable at 16%)
128 
129| Pattern | Treatment | Rate | Notes |
130|---|---|---|---|
131| KENYA POWER, KPLC | Input 16% | 16% | Electricity — taxable |
132| NAIROBI CITY WATER, NCWSC | Input 16% | 16% | Water — taxable |
133| SAFARICOM (data/voice) | Input 16% | 16% | Telecom — taxable |
134| AIRTEL KENYA | Input 16% | 16% | Mobile — taxable |
135| TELKOM KENYA, TELKOM | Input 16% | 16% | Telecom — taxable |
136| ZUKU FIBER, WANANCHI GROUP | Input 16% | 16% | Internet — taxable |
137| LIQUID TELECOM KENYA | Input 16% | 16% | Internet — taxable |
138 
139### 3.4 Transport and logistics
140 
141| Pattern | Treatment | Rate | Notes |
142|---|---|---|---|
143| KENYA AIRWAYS, KQ | Check route | 0%/16% | International 0%; domestic 16% |
144| JAMBOJET | Input 16% | 16% | Domestic — 16% |
145| AFRICAAIRWAYS | Check route | 0%/16% | Check |
146| UBER KENYA | Input 16% | 16% | Ride-hailing — taxable |
147| BOLT KENYA | Input 16% | 16% | Ride-hailing — taxable |
148| LITTLE CAB | Input 16% | 16% | Ride-hailing — taxable |
149| DHL KENYA | Input 16% | 16% | Courier — taxable |
150| FEDEX KENYA | Input 16% | 16% | Courier — taxable |
151| G4S KENYA, WELLS FARGO (courier) | Input 16% | 16% | Security/courier — taxable |
152| POSTA KENYA (parcel) | Input 16% | 16% | Parcel — taxable |
153| POSTA KENYA (stamps) | EXEMPT | 0% | Universal stamps — exempt |
154 
155### 3.5 Food and retail
156 
157| Pattern | Treatment | Rate | Notes |
158|---|---|---|---|
159| NAKUMATT, NAIVAS SUPERMARKET | Input 16%/0% | Mixed | Non-food 16%; basic food may be zero-rated |
160| QUICKMART SUPERMARKET | Input 16%/0% | Mixed | Same |
161| CARREFOUR KENYA | Input 16%/0% | Mixed | Same |
162| CHANDARANA FOODPLUS | Input 16%/0% | Mixed | Supermarket — split |
163| TUSKYS SUPERMARKET | Input 16%/0% | Mixed | Same |
164| KWAL, DEL MONTE KENYA (packaged food) | Input 16% | 16% | Processed food — 16% |
165| UNGA LIMITED (maize flour) | Input 0% | 0% | Basic staple — zero-rated |
166 
167### 3.6 SaaS — international suppliers
168 
169Foreign digital service providers must register with KRA if providing services to Kenyan consumers/businesses.
170 
171| Pattern | Treatment | Notes |
172|---|---|---|
173| GOOGLE (Workspace, Ads) | Reverse charge 16% | Self-assess if not KRA-registered |
174| MICROSOFT (365, Azure) | Reverse charge 16% | Same |
175| META, FACEBOOK ADS | Reverse charge 16% | Same |
176| ZOOM, SLACK, NOTION | Reverse charge 16% | Same |
177| AWS | Reverse charge 16% | Same |
178 
179### 3.7 Payment processors (exempt)
180 
181| Pattern | Treatment | Notes |
182|---|---|---|
183| MPESA TRANSACTION FEE | EXCLUDE | Financial service — exempt |
184| PESAPAL (fees) | EXCLUDE | Payment gateway — exempt |
185| STRIPE (fees) | EXCLUDE | Same |
186| PAYPAL (fees) | EXCLUDE | Same |
187 
188### 3.8 Internal transfers and exclusions
189 
190| Pattern | Treatment | Notes |
191|---|---|---|
192| INTERNAL TRANSFER, OWN ACCOUNT | EXCLUDE | Internal movement |
193| LOAN, REPAYMENT | EXCLUDE | Loan principal |
194| SALARY, PAYROLL | EXCLUDE | Outside VAT scope |
195| DIVIDEND | EXCLUDE | Out of scope |
196| ATM, CASH WITHDRAWAL | Tier 2 — ask | Default exclude |
197 
198---
199 
200## Section 4 — Worked examples
201 
202Six classifications from a hypothetical Nairobi-based IT consultant. Format: KCB Bank statement.
203 
204### Example 1 — Domestic B2B revenue (16%)
205 
206**Input line:**
207`15/04/2025 Credit SAFARICOM PLC Invoice KE-2025-041 Ksh 1,160,000 Ksh 5,000,000`
208 
209**Reasoning:**
210Incoming 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.
211 
212**Classification:** Output tax 16% — Ksh 160,000. Net: Ksh 1,000,000.
213 
214### Example 2 — Export service (zero-rated)
215 
216**Input line:**
217`22/04/2025 Credit ACME CORP USA Consulting USD 5,000 (Ksh 645,000) Ksh 5,645,000`
218 
219**Reasoning:**
220USD 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.
221 
222**Classification:** Zero-rated — Ksh 645,000. Output tax: Ksh 0.
223 
224### Example 3 — Electricity (16%)
225 
226**Input line:**
227`10/04/2025 Debit KENYA POWER April bill -Ksh 11,600 Ksh 4,988,400`
228 
229**Reasoning:**
230Kenya 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.
231 
232**Classification:** Input tax 16% — Ksh 1,600. Net: Ksh 10,000.
233 
234### Example 4 — M-Pesa transaction fee (exempt)
235 
236**Input line:**
237`08/04/2025 Debit SAFARICOM M-PESA Transaction fees -Ksh 232 Ksh 4,988,168`
238 
239**Reasoning:**
240M-Pesa transaction fee. Mobile money is a financial service — exempt from VAT. No input tax. EXCLUDE from VAT-3.
241 
242**Classification:** EXEMPT — no input tax.
243 
244### Example 5 — International SaaS (reverse charge)
245 
246**Input line:**
247`05/04/2025 Debit GOOGLE IRELAND Workspace April -Ksh 3,480 Ksh 4,984,688`
248 
249**Reasoning:**
250Google 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.
251 
252**Classification:** Reverse charge — self-assess Ksh 557 output and input. Net: Ksh 0.
253 
254### Example 6 — Domestic courier (16%)
255 
256**Input line:**
257`12/04/2025 Debit DHL KENYA Shipping invoice -Ksh 5,800 Ksh 4,978,888`
258 
259**Reasoning:**
260DHL courier. 16% VAT. Gross Ksh 5,800. Net = Ksh 5,000 + Ksh 800 input tax. DHL Kenya issues ETR receipts — input credit Ksh 800.
261 
262**Classification:** Input tax 16% — Ksh 800. Net: Ksh 5,000.
263 
264---
265 
266## Section 5 — Tier 1 rules (compressed)
267 
268### 5.1 Standard rate 16%
269 
270Default rate for all taxable supplies. Legislation: VAT Act 2013 (No. 35 of 2013) Section 5.
271 
272### 5.2 Zero rate
273 
274Second Schedule goods and services: exports, certain agricultural inputs (fertilizers, seeds), medicines, textbooks, ambulance services. Legislation: VAT Act 2013 Second Schedule.
275 
276### 5.3 Exempt supplies
277 
278First Schedule: financial services, education, medical/health services, raw agricultural products sold by farmers, passenger transport. Legislation: VAT Act 2013 First Schedule.
279 
280### 5.4 ETR / e-Invoice requirement
281 
282Electronic 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.
283 
284### 5.5 Withholding VAT
285 
286Government 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).
287 
288### 5.6 Filing deadlines
289 
290| Obligation | Due date |
291|---|---|
292| VAT-3 return | 20th of following month |
293| VAT payment | 20th of following month |
294| Late penalty | 5% of unpaid tax + 1% per month interest |
295 
296---
297 
298## Section 6 — Tier 2 catalogue
299 
300### 6.1 Withholding VAT from government clients
301 
302**What it shows:** Payment from government that appears less than invoiced.
303**What's missing:** WHT-VAT certificate amount.
304**Conservative default:** Record full output tax on invoice; offset WHT-VAT certificate.
305**Question to ask:** "Do you have the WHT-VAT withholding certificate from the government agency?"
306 
307### 6.2 Export service qualification
308 
309**What it shows:** Revenue from a foreign client.
310**What's missing:** Evidence services were exported.
311**Conservative default:** 16%.
312**Question to ask:** "Foreign client contract + FX payment evidence available?"
313 
314### 6.3 Zero-rated vs. exempt food items
315 
316**What it shows:** Grocery or agricultural purchase.
317**What's missing:** Whether the specific items are zero-rated (Second Schedule) or simply out of scope.
318**Conservative default:** 16% on all.
319**Question to ask:** "What exactly was purchased? Itemised receipt available?"
320 
321### 6.4 International SaaS — KRA registration status
322 
323**What it shows:** Payment to foreign digital provider.
324**What's missing:** Whether provider is KRA-registered.
325**Conservative default:** Self-assess 16% reverse charge.
326**Question to ask:** "Does the foreign provider's invoice show a KRA PIN? If yes, treat as standard. If no, self-assess."
327 
328---
329 
330## Section 7 — Excel working paper template
331 
332```
333KENYA VAT-3 WORKING PAPER
334Period: ____________ PIN: ____________
335 
336A. OUTPUT TAX
337 A1. Standard-rated sales 16% (net) ___________
338 A2. Output tax (A1 × 16%) ___________
339 A3. Zero-rated exports ___________
340 A4. Exempt sales ___________
341 A5. Reverse charge output self-assessed ___________
342 
343B. INPUT TAX
344 B1. Standard-rated purchases 16% (net) ___________
345 B2. Input tax (B1 × 16%) ___________
346 B3. Import input tax ___________
347 B4. Reverse charge input self-assessed ___________
348 B5. Total input (B2+B3+B4) ___________
349 B6. WHT-VAT credits ___________
350 
351C. NET VAT
352 C1. Net (A2 − B5) ___________
353 C2. WHT-VAT credits (B6) ___________
354 C3. Prior credit ___________
355 C4. Net payable (C1−C2−C3) ___________
356 
357REVIEWER FLAGS:
358 [ ] ETR/e-invoices confirmed?
359 [ ] Export evidence held?
360 [ ] WHT-VAT certificates collected?
361 [ ] Reverse charge self-assessed?
362```
363 
364---
365 
366## Section 8 — Bank statement reading guide
367 
368### Common Kenyan bank formats
369 
370| Bank | Key columns | Date format | Amount |
371|---|---|---|---|
372| KCB | Date, Description, Debit, Credit, Balance | DD/MM/YYYY | KES |
373| Equity Bank | Date, Narrative, Withdrawal, Deposit, Balance | DD/MM/YYYY | KES |
374| Co-op Bank | Date, Description, Debit, Credit, Balance | DD/MM/YYYY | KES |
375| ABSA Kenya | Date, Description, Amount, Balance | DD/MM/YYYY | KES |
376 
377### Key Kenyan banking terms
378 
379| Term | Meaning | Hint |
380|---|---|---|
381| Credit / Deposit | Incoming | Potential revenue |
382| Debit / Withdrawal | Outgoing | Potential expense |
383| M-PESA | Mobile money | Check if fee or transfer |
384| Bank Charges | Fee | Exempt |
385| Interest | Interest | Exempt |
386| Balance | Balance | Ignore |
387 
388---
389 
390## Section 9 — Onboarding fallback
391 
392```
393KENYA VAT ONBOARDING — MINIMUM QUESTIONS
3941. KRA PIN (Personal Identification Number)?
3952. VAT registration number?
3963. Month covered by this bank statement?
3974. Export sales (zero-rated)? Evidence held?
3985. Government clients who withhold VAT? WHT-VAT certificates?
3996. International SaaS subscriptions — self-assess reverse charge?
4007. Prior period excess credit carried forward?
401```
402 
403---
404 
405## Section 10 — Reference material
406 
407| Topic | Reference |
408|---|---|
409| VAT Act | VAT Act 2013 (No. 35 of 2013) |
410| Standard rate | Section 5 |
411| Zero rate | Second Schedule |
412| Exemptions | First Schedule |
413| Withholding VAT | Section 17 |
414| ETR requirement | Section 27 |
415| Penalties | Section 53 |
416 
417### Known gaps
418 
419- Partial exemption apportionment — escalate
420- WHT-VAT reconciliation for large government contracts — specialist
421- Digital marketplace complex cross-border — escalate
422- Property/land transactions — escalate
423 
424### Self-check
425 
426- [ ] ETR/e-invoices held for all input credits
427- [ ] Export evidence confirmed
428- [ ] WHT-VAT certificates collected from government clients
429- [ ] Reverse charge self-assessed for foreign digital services
430- [ ] Prior credit carried forward correctly
431 
432### Changelog
433 
434| Version | Date | Change |
435|---|---|---|
436| 1.0 | 2024 | Initial |
437| 2.0 | April 2026 | v2.0 rewrite |
438 
439---
440 
441## Prohibitions
442 
443- NEVER claim input credit without ETR receipt or compliant e-invoice
444- NEVER zero-rate exports without customs documentation or FX evidence
445- NEVER ignore WHT-VAT from government clients
446- NEVER present calculations as definitive — direct to CPA(K)
447 
448---
449 
450## Disclaimer
451 
452This skill is for informational purposes only. All outputs must be reviewed by a qualified professional. Updated version at openaccountants.com.
453 

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About

Use this skill whenever asked to prepare, review, or classify transactions for a Kenya VAT return (VAT-3), classify transactions for Kenyan VAT purposes, or advise on VAT registration and filing in Kenya. Trigger on phrases like "Kenya VAT", "KRA VAT", "VAT-3 Kenya", "input tax Kenya", "output tax Kenya", "Kenya Revenue Authority VAT", or any Kenya VAT request. ALWAYS read this skill before touching any Kenya VAT work.

KEty-2025

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