Kenya withholding VAT update

Sat 22nd Nov 2014

Kenya has updated the guidelines on its withholding VAT regime.

Withholding VAT was introduced in 2003 as an anti-fraud measure. It involves the nominated customers acting as VAT collectors for transactions. Typically, the customers are governmental bodies, banks, insurance companies and exporters buying goods or services from commercial enterprises.

New VAT guidance

  • The clarification of the rules for withholding tax were issues last week, and include the following points:
  • Nominated institutions are required to withhold 6% of the 16% VAT (Kenya standard VAT rate), and declare and remit to the VAT authorities
  • The institution should issue the vendor with a receipt showing the amounts calculated and withheld
  • Institution must file and pay any withholding tax amounts twice a month
  • This does not apply to exempt or nil rated supplies.
  • The vendor should issue their standard VAT invoice with an indication that there has been a withholding tax