Value Added Tax (VAT) is a multi-stage consumption tax that is applied to the sale of goods and services at all stages of the production and distribution chain.
VAT (Value Added Tax) was introduced in Kenya in January, 1990 CAP 470 Laws of Kenya to replace sales tax which had been in operation since 1973. It’s a cascading (multi-stage consumption tax) , that is charged on sale of goods and services which are made or imported into Kenya. A tax incidence is on the final consumer. VAT was introduced as a measure to increase Government revenue through the expansion of the Kenya Revenue Authority’s tax base. For ease of VAT administration, the Kenya Revenue Authority appoints registered VAT taxpayers as VAT Agents. The registered Agents collect (withhold VAT) at 6% and remit the same the Kenya Revenue Authority on/or before the 20th of every month.
CAP 470 Laws of Kenya contains various schedules which guide VAT Agents and taxpayers on the appropriate applicable rates in changing VAT.
The following are the VAT schedules in operation:
1stSchedule
- Part1-Specifies the general rate of tax which is 16
- Part 11-Taxable goods at the rate of 12%.
2nd Schedule
- EXEMPT GOODS- (Non-Taxable Goods) Goods that are not taxable.
- All other goods outside this schedule are taxable at either 0%, 12% or 16%.
3rd Schedule
- Lists the EXEMPT SERVICES. (Non-taxable Services) Services outside this list are taxable at either 0% or 16 %
4th Schedule
- Repealed by Finance Act 2007
5th Schedule
- Part A–Zero-rated Supplies. These are supplies which attract VAT at 0%
- Part B–Zero-Rated goods. These are specific goods which attract VAT at 0%
- Part C- Additional Zero rated goods
6th schedule
- Registration & deregistration procedures and changes affecting registration.
7th Schedule
- Invoices, records and returns to be issued or maintained by a registered person.
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.
KENYA FINANCE BILL 2015 HIGHLIGHTS TO CHANGES TO VAT ACT
In the 2015/2016 budget statement read on 11th June 2015, the government proposed a budget of over 2 trillion shillings .It targeted revenue collection of 1.3 trillion to partly finance the budget. Amendments were introduced on various taxes and duties. The following changes were made to VAT Tax.
- The Refund filing period.
This is contained in Section 17 of the VAT Act. Taxpayers will lodge their VAT refund claims for a period of up to twelve months from the date the tax becomes due. This is with effect from 12th June 2015.
- Plastic biogas digesters are now VAT exempt
This is effective from 12th June 2015
- ICT and primary schools laptop project
Laptop Parts imported or purchased locally for primary school laptops are exempted from VAT. This is effective from 12th June 2015
- Film industry inputs
Goods purchased locally or imported for use by the Kenya Film Commission are VAT exempt.
- Construction of industrial and recreational parks
Goods and services for the construction of infrastructure works in industrial and recreational parks of 100 acres or more in Nairobi, Nakuru, Kisumu, Mombasa and Eldoret will be VAT exempt
- Services provided to Goods in Transit
Taxable Services provided in respect to goods in transit are now zero rated
- Left Hand Drive for Right Hand Drive –VAT and Duty Free
Owners of left hand drive (LHD) motor vehicles returning to Kenya will be allowed to sell and import a right hand drive vehicle, of equivalent value, free of VAT and duty, provided that they owned the vehicle for at least 12 months prior to importation.
Proof of transfer of the motor vehicle must be provided
- Aircraft engines
VAT is exempted on aircraft engines and parts (tariff no. 8407.10.00, 8409.10.00, 8803 & 4011.30.00)
- Aid funded projects
VAT is exempted on all raw materials (other than motor vehicles) and taxable services to be applied in official aid funded projects .This is subject to approval of the CS –National Treasury
- Duty Free Goods
Goods purchased from duty free shops by passengers departing to places outside Kenya now zero-rated
- Manufacturers of Agricultural Machinery
Inputs and raw materials locally purchase or imported for use by the manufacturers of agricultural machinery and implements are now exempt
- Special Economic Zones(SEZ)
The supply of taxable goods and services to special economic zones enterprises, developers and operators licensed under the Special Economic Zones Act will be VAT exempt
Courtesy of http://www.krestonkm.com/
