Kenya withholding VAT

Mon 10th Oct 2016

Kenya has reintroduced its withholding VAT, backdated it to 19 January 2016.

The measure, designed to prevent VAT evasion, was first introduced in 2003. It is effectively a VAT split payment regime, similar to the one recently deployed in Italy.  It allows for the Kenyan Revenue Authority to collect VAT directly from the customer in a VAT transaction, and effectively turns VAT into a Sales Tax-type of regime.

Specific organisations which are the recepiants  of taxable supplies must act as VAT agents for the government. These include: banks; public bodies; and exporters. When the agents are charged VAT, they must pay it directly to the tax authorities rather than the supplier. The agent will provide the supplier with a VAT certificate which the supplier can use as proof of VAT charged in their return.

VAT withholding VAT agents must declare the amounts withheld on a weekly basis to the tax authorities.