In the production process, there are multiple varying stages and VAT (value-added tax) is charged at every point of the chain, from start to point of sale. The VAT amount paid by a user depends on the cost of the product and whether it has already been taxed. The VAT prices vary across the world with more than 160 countries already having a system of VAT in place. Simply put, VAT is not based on the individual’s income but on the amount they consume.

Much like many countries before it, Kenya also has a VAT system in place, charged on taxable goods and services, along with the importation of taxable goods and services.

If an individual is running a company dealing with taxable goods and services, it has to be registered under the VAT laws. This might have been a tedious process in the past, but the process has significantly improved and can be handled online.

How to register a company for VAT, online?

All VAT related issues can be handled through the Kenya Revenue Authority’s online tax portal.

People handling the process on behalf of a company are provided with online forms to fill out their information.
They have to select the type of company they are running and add the following information relating to it.

• Basic details of the company
• Obligations of the company
• Details of Directors and Associates
• Agent details (if any)

How do you register a company for VAT, offline?

Older entrepreneurs running companies might not be comfortable handling VAT registration online so can get it done in person. The process has to be handled at the office of the General Directorate of Taxes at the Kenya Revenue Authority.
The VAT registration process comprises of filling out forms and submitting supporting documents to affirm these forms.

The certificate of incorporation of the company

• PSV licence of the company
• The registration licenses of the company
• The details of the business
• Income details of the company
• Type and subtype of the business
• Business registration certificate number
• Business name and registration date
• The physical as well as the postal address of the company
• The details of the company’s ownership structure
  Post submission and review of the VAT registration form, the VAT registration certificate is issued.

Are there any additional documents to be submitted?

It is wise to carry the below-mentioned documents to avoid an additional trip, on the slight chance they are asked for.

• Proof of identity
• Proof of physical and postal address, with contact numbers
• PIN of business proprietors
• Business licenses

What are the requirements for a company to be eligible for VAT registration?

• Ideally, this is handled by the owners and founders running the company. When a company reaches or optimistically expects to hit taxable supplies of 5 million shillings in a year.
• Has a fixed location where their business is conducted, are filing proper accounts, keeping thorough records, and receiving reliable tax returns, the company should get VAT registered.
• Additionally, people who trade and work using their names.
• Registered businesses functioning or being lead by one individual, or sole proprietorships. In these instances, the registration is done in the name of the owner of the business.
• Partnerships including couples or husband and wife duos should get registered
• Limited liability companies both private and public.
• Any organization not fitting in the above categories like religious organizations, or smalls restaurants, transacting taxable business

Companies, working and functioning in Kenya but registered elsewhere have to register for VAT if the amount of business they handle with Kenya crosses the VAT mark. Additionally, they should employ a VAT agent, also called a local Fiscal Representative.

Tax certificates do not have to be renewed, once received. Furthermore, VAT currently stands at 16% of the value of goods. However, certain goods and services are exempt from paying VAT
under the 2013 Amendment, passed by the National Assembly. Some of these products exempt from paying VAT include mosquito nets, man-made fishing nets of textile, unprocessed tea, solar equipment, animal feeds material, raw material supplied to pharmaceutical manufacturers in Kenya and a few other items.

How is the payment of VAT handled?

VAT like most bill payments is handled monthly but doesn’t allow for an advance to be paid since the amount cannot be foreseen since it depends on the business handled in that month. Furthermore, it should be handled before the 20th of the following month. Banks can be given direct orders to make the payment directly or it has to be handled in person