Value Added Tax (VAT)
is a tax on consumer expenditure introduced in Kenya in January
1990 to replace Sales Tax, which had been in operation since 1973.
The basic law is contained in the Value Added Tax Act, Cap. 476
of the Laws of Kenya and the Regulations stemming from it. Both the
Act and the Regulations can be purchased from the Government Printers,
VAT was introduced as a measure to increase Government revenue through
the expansion of the tax base, which hitherto was confined to sale
of goods at manufacturing and importation level under the sales
tax system. VAT is levied on consumption of taxable goods and services
supplied or imported into Kenya and is collected by registered persons
at designated points who then remit it to the Commissioner. Registered
persons only act as VAT agents in collecting and paying the tax
since the tax is borne by the final consumer of goods and services.
Value Added Tax is charged on the supply of taxable goods or services
made or provided in Kenya and on the importation of taxable goods
or services into Kenya. Taxable goods and services are contained
in the various schedules to the VAT Act.
The VAT Act constitutes the following schedules: -
I. 1stSchedule -Part1-Specifies the general rate of tax which is
-Part 11-Taxable services at 14%.
II. 2nd Schedule – EXEMPT GOODS- (Non-Taxable Goods) Goods
that are not taxable.
III. 3rd Schedule -Lists the EXEMPT SERVICES. (Non-taxable Services)
Services outside this list are taxable.
IV. 4th Schedule -Part 1-DESIGNATED GOODS. All taxable goods are
-Part11-- DESIGNATED SERVICES. These are services, which are not
subject to the turnover limits for registration.
V. 5th Schedule -Part A--Zero-rated Supplies
-Part B--Zero-Rated goods.
VI. 6th schedule -Registration & deregistration procedures
and changes affecting registration.
VII. 7th Schedule -Invoices, records and returns
VI. 8th Schedule-Part A-Public Bodies, privileged persons and institutions
with Zero-rated status on imports and purchases.
-Part B- Special goods subjected to zero rating.
-Part C-Zero-rating of goods and services imported or purchased
by persons with diplomatic privileges.