openaccountants Kenya VAT (VAT-3) Skill v2.0
General reference only. This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.
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 |
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."
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 |
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.
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 |
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."
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?
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 |
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?
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 |
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)
Disclaimer
This skill is for informational purposes only. All outputs must be reviewed by a qualified professional. Updated version at openaccountants.com.
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.
Source: OpenAccountants — open tax Guides for AI, reviewed by named CPAs/CAs/EAs. Quality: source-cited draft. For always-current figures and named-accountant backing, connect the OpenAccountants MCP server (openaccountants-mcp).