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At Gichuri and Partners, we share practical guides and expert tips to help entrepreneurs and businesses make informed decisions and stay compliant with local regulations.
Learn how to file VAT returns in Kenya using iTax, step by step. Our guide covers registration, requirements, and deadlines for hassle-free tax compliance. Value Added Tax (VAT) is a significant source of revenue for the Kenyan government. It is imposed on the supply of goods and services at every stage of production and distribution.
As a business owner or a self-employed individual, filing VAT returns is not only a legal requirement but also a crucial part of maintaining compliance with tax regulations. In Kenya, VAT returns are submitted electronically through the Kenya Revenue Authority (KRA) online platform, iTax. This blog post will walk you through the VAT filing process, ensuring you understand every step to avoid penalties and ensure compliance.
Who Should File VAT Returns?
VAT applies to businesses that supply taxable goods or services with an annual turnover exceeding Ksh 5 million. Additionally, businesses that voluntarily opt for VAT registration must file returns. Common categories include:
- Importers of goods
- Suppliers of taxable services
- Manufacturers
- Retailers and wholesalers
If you fall into any of these categories, you must file monthly VAT returns with the KRA.
Understanding VAT Rates in Kenya
Kenya imposes three VAT rates:
- Standard Rate (16%): This applies to most goods and services in Kenya.
- Zero-rated (0%): This is applied to exports and certain categories like medical supplies.
- Exempt: Some goods and services, such as financial services and certain agricultural products, are exempt from VAT.
Understanding which category your business activities fall under is crucial when filing VAT returns.
How to Register for VAT on iTax
If you are required to file VAT returns, the first step is to register your business for VAT. Here’s how to register through the iTax platform:
- Visit the KRA iTax portal https://itax.kra.go.ke.
- Log in using your KRA PIN and password.
- Navigate to the “Registration” tab and select “Amend PIN Details.”
- In the “Tax Obligation Details” section, select VAT.
- Submit your application, and KRA will review and approve your VAT registration.
Once your VAT registration is complete, you will receive a VAT Certificate from KRA.
Documents and Information Required for VAT Filing
Before you start filing your VAT returns, ensure you have the following details:
- Invoices for sales and purchases: Ensure all VAT-inclusive invoices are accurate and readily available.
- Credit notes and debit notes: Any adjustments to your VAT must be supported with these documents.
- Import declarations (if applicable): For businesses importing goods, you will need your import declaration forms (IDF) and customs documents.
- KRA PIN and iTax login credentials: This is mandatory to access the iTax platform.
Step-by-Step Process of Filing VAT Returns on iTax
Step 1: Log in to iTax Portal
Go to iTax and log in using your KRA PIN and password.
Step 2: Navigate to VAT Returns
Once logged in, navigate to the “Returns” tab, and select “File Returns.” Choose VAT as the tax obligation.
Step 3: Download the VAT Excel Template
KRA provides a VAT return form in an Excel template format (VAT3 form). Download the template and ensure it’s the correct version for the tax period.
Step 4: Fill in the VAT Template
The VAT3 template requires you to input details of your taxable sales and purchases, including:
- Sales (output VAT): Input the total sales for the period and the VAT charged at 16%, 0%, or the exempt rate.
- Purchases (input VAT): Input the total purchases and the corresponding VAT you paid.
Ensure accuracy in entering the amounts, as mistakes can result in penalties or additional scrutiny from KRA.
Step 5: Validate and Upload the Form
Once the template is fully filled, validate it using the built-in validation tool in the Excel sheet. After validation, save the validated form as a zip file.
Step 6: Upload the VAT Return
Return to the iTax portal, navigate to the “Returns” tab, and click on “Upload VAT Return.” Browse and select the validated VAT3 file, then submit.
Step 7: Acknowledge the Return
Once submitted, you will receive an acknowledgment receipt from KRA, which serves as proof of filing. You can download this receipt and save it for future reference.
Payment of VAT Due
If your VAT return shows that you owe KRA any VAT, you must make the payment by the due date, which is the 20th of the following month. Late payment or failure to file on time will attract penalties.
Payment Methods
- iTax Pay: You can generate a payment slip through iTax and pay via banks or mobile money services like M-Pesa.
- Bank Transfer: Payments can be made directly to KRA through its partner banks.
- Real-Time Gross Settlement (RTGS): For larger amounts, RTGS can be used.
After making payment, you should receive an e-slip and an acknowledgment from KRA that your VAT has been paid.
VAT Refunds and Credits
If your input VAT (the VAT you pay on purchases) exceeds your output VAT (the VAT you charge on sales), you may be eligible for a refund. KRA allows VAT-registered businesses to apply for a refund under certain conditions. However, this process can be lengthy, and you must provide sufficient documentation to support your claim.
You can also carry forward any excess input VAT to offset future VAT liabilities.
Penalties for Late Filing or Payment
Failure to file VAT returns or pay VAT on time can result in penalties, including:
- Late filing penalty: Ksh 10,000 or 5% of the VAT payable, whichever is higher.
- Late payment penalty: 5% of the VAT due, plus 2% interest per month on the outstanding amount.
To avoid these penalties, it is essential to file your VAT returns on time and ensure payment is made by the due date.
Common Mistakes to Avoid When Filing VAT Returns
- Failing to keep proper records: Ensure all invoices and receipts are kept for at least five years as KRA may request them for audits.
- Incorrect VAT calculations: Always double-check your input and output VAT amounts to avoid errors.
- Failing to file nil returns: Even if no business was conducted, VAT-registered businesses are required to file a nil return.
Conclusion
Filing VAT returns in Kenya may seem complex, but with the iTax system and proper record-keeping, the process is relatively straightforward. Following the steps outlined in this guide will help you file your returns correctly and on time, avoiding penalties and ensuring that your business stays compliant with Kenyan tax laws. If you have any difficulties or need professional assistance, feel free to reach out to Gichuri & Partners for expert VAT filing services.
Understanding the Pay As You Earn (PAYE) system is important, whether an employee or an employer. Accurate PAYE calculation helps employees determine their net pay and how to plan for it. On the other hand, the PAYE calculation simplifies payroll processing and empowers employers to comply with KRA tax regulations. Our online PAYE tax calculator for Kenya is designed to meet all your PAYE tax needs. Use it to determine how statutory deductions will affect your net pay for proper planning and compliance.
Understanding the PAYE System in Kenya
As the name suggests, Pay You Earn is a tax collection method where individuals pay an income tax to the government for gainful employment. Gainful employment includes steady salaries and wages. The employers deduct the income tax from the employee’s gross pay and remit it to the Kenya Revenue Authority (KRA).The PAYE system in Kenya is progressive, meaning the taxable income increases with an increase in total earnings. For instance, someone earning Ksh. 100,000 will pay a higher tax than someone earning Ksh.30,000.
Understanding the PAYE system in Kenya is crucial. For employees, it helps determine the expected payable tax and the net pay to anticipate. You can tell your take-home amount after deducting mandatory statutory deductions like PAYE, NSSF, SHIF (formerly NHIF), and Affordable Housing Levy. For employers, knowing the ins and outs of the PAYE system helps streamline staff payroll to ensure fairness in remuneration. It also helps ensure accurate remittance of employees’ income tax to maintain compliance with tax regulations. Manual PAYE calculation is complicated and tiring. That is where our online tool comes in handy. If you’re looking for the best PAYE tax calculator for Kenya , look no further.
PAYE Calculation Formula for Kenya
As we mentioned earlier, the Kenyan PAYE system is progressive. The income is categorized into tax bands and each band has an applicable tax rate. Below is the updated tax band list and applicable rates:
| Taxable Pay Per Month (Ksh.) | Taxable Pay Per Year (Ksh.) | Applicable Rate (%) |
| Up to 24,000 | Up to 288,000 | 10 |
| 24,001-32,333 | 288,001-388,000 | 25 |
| 32,334-500,000 | 388,001-6,000,000 | 30 |
| 500,001-800,000 | 6,000,001-9,600,000 | 32.5 |
| Above 800,000 | Above 9,600,000 | 35 |
Every employee is entitled to a monthly personal tax relief of Ksh. 2,400. So how do you calculate PAYE in Kenya? Follow the below steps:
- Deduct non-taxable allowances from the gross pay to determine the taxable income.
- Calculate the income tax using the applicable rate for your tax band.
- Deduct the personal tax relief from the total tax.
You’ve successfully calculated the PAYE.
Other Statutory Deductions
Besides PAYE, KRA deducts other statutory deductions from employees’ income. These deductions include:
- National Social Security Fund (NSSF)
- Social Health Insurance Fund (SHIF)- formerly known as NHIF
- Affordable Housing Levy
- Higher Education Loans Board (HELB) where applicable
- Other deductions like loan repayments, union fees, pension contributions
Net Income
How do you calculate your take-home income from the gross pay? To determine your net income, deduct the PAYE and other statutory deductions from your gross pay. Does all that seem tedious and time-consuming? That’s why we developed the best PAYE tax calculator for Kenya. This online tool is specially designed for accuracy and convenience.
Benefits of Using a PAYE Calculator
A good PAYE calculator offers many benefits to both employees and employers. Here are reasons why you should use an online PAYE calculator for your taxes:
Avoid Errors
Manual calculations are tedious and exhausting. If the calculations involve complex salary structures, allowances, non-taxable, and multiple deductions, the whole process is tiring. Complex calculations are also prone to errors. An online PAYE calculator guides you into entering the required parameters and then does the heavy calculations for you.
Accuracy and Convenience
Looking for s stress-free automated method to calculate your taxes? Our online PAYE calculator is designed for the Kenyan taxpayer. We have carefully curated the necessary parameters to ensure accuracy and precision. The friendly user interface also guarantees convenience, whether you are doing the calculations on mobile or desktop devices.
Save Time
That’s right. Whatever your income structures, our online PAYE tax calculator produces instant results. You only need to key in parameters like gross pay, taxable allowances, non-taxable allowances, taxation period and statutory deductions then hit Calculate . The tool will do the calculations quickly and deliver results instantly.
What Makes Our Tool The Best PAYE Tax Calculator for Kenya?
Why choose our PAYE tax calculator for Kenya?
Accuracy
This online tool was created and designed by expert tax consultants. At Gichuri and Partners, we boast of over 10 years in Kenyan tax consulting services. We keep up with KRA regulation changes and update the tool accordingly to ensure accuracy at all times.
Designed For Kenya’s PAYE System
Our tool is specially designed for the Kenyan taxpayer, paying attention to all KRA regulations. This makes it easy for you to accurately input the required parameters.
User-Friendly Interface
When creating this tool, we had every user in mind, including mobile and desktop computer users. Whether you are accessing it on your mobile phone, tablet, or PC, the interface is easy to navigate and responsive.
Trusted By Professionals
With over 10 years in the tax consultancy business, Gichuri & Partners is trusted by professionals. Our PAYE calculator has helped hundreds of customers calculate their PAYE and net pay every month or end of the year. Ready to simplify your PAYE calculation? Try the best PAYE tax calculator for Kenya. Join over 1000 happy customers.
Capital Gains Tax (CGT) is a tax levied on the profits an individual or company gets from a transfer of assets situated in Kenya. A transfer can constitute a sale, exchange, disposal, or gifting of the property to another entity or individual. Targeted assets and properties include land, buildings, and unlisted shares (private equity).
The tax regime was first introduced in Kenya in 1975 in a bid to broaden the tax base. A decade later, CGT was suspended due to failure in implementation and negative impact on investments. It stayed suspended for three more decades, until 2015 when it was reintroduced through the Finance Bill of 2015.
From Jan 1, 2015, investors were mandated to pay a 5% tax on all gains from the transfer of property and private equity. Fast forward to Jan 1, 2023, the eligible assets were added to include any property situated within Kenya, regardless of whether the property was acquired on or before Jan 2015. In addition, the CGT rate rose threefold from 5% to 15%.
Overview of Capital Gains Tax in Kenya
CGT is one of the ambiguous tax regimes in Kenya, with most people wondering what assets are taxable and which are exempted. The scope was narrower in 2015 when the tax was first reintroduced, but as of 2023, more assets were recognized by KRA as taxable, including tangible and intangible assets. The scope now includes:
- Land
- Real estate buildings
- Shares
- Bonds
- Machinery
- Intellectual property like authored books, patents, trademarked designs, etc.
Keeping up with this scope is not easy for most taxpayers and investors.
What is the Rate of Capital Gains Tax in Kenya?
The rate of CGT in Kenya is 15% of net gain. But what is the net gain? To understand net gain in the calculation of CGT tax, we need to first define various terms used here. These are:
Transfer Value
The transfer value is the gross compensation received after transferring the asset or property. For instance, if you quoted 10 million for a piece of land and that’s what the buyer paid, that’s the transfer value of that asset.
Incidental Costs on Transfer
These are costs incurred during the transfer of the property. It includes legal fees, agent fees, advertisement costs, and other miscellaneous expenses. For the purpose of this post, let’s assume the incidental costs on transfer are 1 million.
Adjusted Cost
The cost incurred in acquiring the property, improving it (incidental costs on acquisition), and other enhancements. For example, the land you’re selling at 10 million may have cost you 1 million in purchase price, and 2 million in fencing, drilling boreholes, and planting trees. The adjusted cost in this case is 3 million (1+2).
Now,
The Net Gain = (Transfer Value – Incidental Costs on Transfer) – Adjusted Cost
From the above examples,
Net Gain = (10 -1) – 3 = 6.
The Net Gain is 6 million, and this is the taxable amount. In that case, if the CGT rate is 15% of the net gain, the payable tax will be
15% of 6 million
That is, 900,000.
What happens when you sell the property at a loss? The reason KRA calls it Capital Gains Tax is because it’s only applicable where the transfer was profitable. In the event, you make a loss during the transfer, you are not expected to pay CGT.
Allowable Costs Recognized Under Incidental and Adjusted Costs
You need to be aware of allowable incidental and adjusted costs in the calculation of CGT. This awareness will help you maximize your gains and save more money. You don’t want to lose your profits to the taxpayer. You must deduct these costs from your transfer value. They include:
- Acquisition cost or Construction costs in the case of real estate buildings
- Loan and mortgage interests
- Advertisement costs to find a buyer
- Property valuation costs
- Legal fees
- Agent fees
- Enhancement costs- costs you incurred to add value to the property
Exemptions: Transfer Gains That Are Exempted From Paying CGT
KRA exempts the following from paying capital gains tax:
- Property dealers’ income- the income is already taxed under a different tax regime
- Company shares and debentures
- Transfer of property to pay a loan or debt
- Transfer of property by a creditor after loan repayment- in a situation where the property was used as collateral
- Transfer of property to a beneficiary in administration of the estate of a deceased person
- Transfer of assets to an immediate family member, spouse, or ex-spouse in a divorce or separation
- Transfer of private residence where the individual owner has occupied the residence continuously for three years after the prior transfer
- Internal restructuring where the transfer doesn’t involve a third party
- Transfer of securities traded on the Nairobi Stock Exchange
- Transfer of land whose value is not more than 3 million
- Transfer of agricultural land less than 50 acres and situated outside a municipality, gazetted township, or urban area
- Transfer of title of immovable property to a family trust and property sold to transfer the title to a registered family trust
How to File Capital Gains Tax
CGT is a one-time tax (final tax). Once you paid the tax, there is no further taxation for that gain. The tax is due 30 days after completion of the transfer. The seller is required to declare and pay the tax within the stipulated period, failure to which a penalty is applied. Follow the steps below to file capital gains tax:
- Go to https://itax.kra.go.ke/ and log into your account using the KRA PIN and password.
- Navigate to Payments.
- Select Payment Registration.
- On the Tax head menu, select Income Tax followed by Capital Gains Tax as the subhead.
- Fill in the transaction details as needed including the Transfer Value, Acquisition Cost, and Adjusted Cost.
- Click Submit.
- You’ll receive a payment slip.
- Carry the payment slip to a KRA-partner bank and present it at the bank.
- Make the payment.
That’s all. You have successfully paid your capital gains tax.
Conclusion
This comprehensive guide explained how to file capital gains tax in Kenya. This is an income tax levied on gains from the transfer of assets like land, property, and unlisted securities. We hope you now have an idea of what this tax entails. For further clarification and assistance with your taxes get in touch with us. Gichuri & Partners is your reliable tax consultant for personalized strategies and expert guidance.
Losing access to your KRA PIN can be stressful, especially when you need it for filing tax returns, job applications, or opening a bank account. Luckily, the Kenya Revenue Authority (KRA) offers simple ways to retrieve your PIN online. This blog will guide you step-by-step on how to retrieve your KRA PIN using the iTax system, your email, or through a registered tax agent.
What is a KRA PIN?
A KRA PIN is a Personal Identification Number issued by the Kenya Revenue Authority. It is a unique identifier used for tax purposes, business registration, and other legal transactions in Kenya.
Why You Might Need to Retrieve Your KRA PIN
You may need to retrieve your PIN if:
- You misplaced or lost the original copy
- You don’t remember the email address used during registration
- Your iTax account is inaccessible
Step-by-Step Guide to Retrieve Your KRA PIN
- Retrieve KRA PIN via Email
If you registered for a KRA PIN and still have access to the email used:
- Search your inbox for “KRA PIN Certificate” or “iTax”
- The certificate is usually attached as a PDF
- Download and print for use
Tip: Check your spam or junk folder just in case!
- Retrieve KRA PIN Using iTax Portal
If you’ve forgotten your PIN but remember your iTax credentials:
- Go to the iTax Portal
- Click on “Forgot Password/Unlock Account”
- Enter your email or KRA PIN (if partially remembered)
- A reset link will be sent to your email
- After login, go to “Registration” > “Reprint PIN Certificate”
- Download your certificate
- Retrieve KRA PIN Through a Registered Tax Agent
If you cannot access your email or iTax portal:
- Contact a KRA-registered tax agent
- Provide a copy of your national ID and a signed request
- The agent can submit a formal request to KRA on your behalf
- Your PIN certificate will be retrieved within a few days
What If You Still Can’t Retrieve Your KRA PIN?
In some cases, you may need to visit a KRA Huduma Centre in person. Carry:
- Original National ID or Passport
- Any previous communication with KRA (if available)
Conculusion
Retrieving your KRA PIN in Kenya is simple if you know where to look. Whether through your email, iTax portal, or a licensed tax agent, you can easily recover your PIN and stay compliant with KRA requirements.
Tax disputes can be a daunting experience for individuals and businesses alike. In Kenya, the Tax Appeals Tribunal (TAT) serves as a critical institution for resolving disagreements between taxpayers and the Kenya Revenue Authority (KRA). Whether it’s an issue with income tax, VAT, customs duties, or excise taxes, the Tax Appeals Tribunal provides a fair, accessible, and efficient platform to address these disputes. In this comprehensive guide, we’ll explore what the Tax Appeals Tribunal is, how it works, and why it’s an essential tool for taxpayers seeking justice.
What is the Tax Appeals Tribunal?
The Tax Appeals Tribunal is a quasi-judicial body established under the Tax Appeals Tribunal Act, 2013, in Kenya. Its primary purpose is to adjudicate tax-related disputes between taxpayers and the KRA, ensuring an impartial and independent resolution process. Unlike traditional courts, the TAT is designed to handle tax matters specifically, making it a specialized forum that offers quicker and more cost-effective solutions for taxpayers.
The tribunal is composed of a chairperson and members who are experts in fields such as law, accounting, finance, and economics. This expertise ensures that the Tax Appeals Tribunal can address complex tax issues with a high degree of competence and fairness.
Why Was the Tax Appeals Tribunal Created?
Before the establishment of the Tax Appeals Tribunal, tax disputes in Kenya were primarily resolved through the regular court system, which often led to delays and high legal costs. The TAT was introduced to:
- Provide a faster and more accessible dispute resolution mechanism.
- Reduce the burden on the judiciary by handling tax-specific cases.
- Promote fairness and transparency in tax administration.
- Enhance tax compliance by offering taxpayers a clear path to challenge KRA decisions.
By creating the Tax Appeals Tribunal, the Kenyan government aimed to build trust between taxpayers and the KRA while ensuring disputes are resolved efficiently.
How Does the Tax Appeals Tribunal Work?
The Tax Appeals Tribunal operates under a structured process that ensures both taxpayers and the KRA have an opportunity to present their cases. Below is a step-by-step guide to how the TAT functions:
1. Filing an Objection with the KRA
Before a case reaches the Tax Appeals Tribunal, taxpayers must first attempt to resolve the dispute directly with the KRA. This involves:
- Lodging a written objection with the KRA Commissioner within 30 days of receiving a tax assessment or decision.
- Waiting for the Commissioner’s response, which must be provided within 60 days. If no response is received, the objection is deemed allowed.
2. Appealing to the Tax Appeals Tribunal
If the taxpayer is dissatisfied with the KRA’s decision, they can escalate the matter to the Tax Appeals Tribunal. The appeal process includes:
- Filing a Notice of Appeal: This must be submitted to the TAT within 30 days of receiving the KRA’s decision.
- Submitting Supporting Documents: Within 14 days of filing the notice, the taxpayer must provide a Memorandum of Appeal, a Statement of Facts, and any supporting evidence.
- Paying Fees and Taxes: A refundable fee (e.g., KES 20,000) is required, along with payment of any undisputed tax amounts or an agreed-upon payment plan with the KRA.
- Serving the KRA: The taxpayer must serve a copy of the appeal on the KRA Commissioner within two days of filing with the TAT.
3. Hearing and Resolution
The Tax Appeals Tribunal schedules a hearing within 90 days of receiving the appeal. During the hearing:
- Both the taxpayer and the KRA present their evidence and arguments.
- The tribunal may encourage Alternative Dispute Resolution (ADR) if both parties agree, with a 90-day timeline for settlement.
- The TAT delivers a written decision, which is binding unless appealed to the High Court within 30 days.
Key Considerations for Taxpayers
When engaging with the Tax Appeals Tribunal, taxpayers should keep the following in mind:
- Timelines: Strict adherence to deadlines is critical. Late filings may be dismissed unless an extension is granted for valid reasons (e.g., unavoidable delays).
- Evidence: The burden of proof lies with the taxpayer. Providing clear, well-documented evidence is essential to a successful appeal.
- Appeals: If either party is dissatisfied with the TAT’s decision, they can appeal to the High Court and, if necessary, the Court of Appeal.
Why the Tax Appeals Tribunal Matters?
The Tax Appeals Tribunal plays a vital role in Kenya’s tax ecosystem for several reasons:
- Efficiency: By offering a specialized forum, the TAT resolves disputes faster than traditional courts, saving taxpayers time and money.
- Fairness: The tribunal’s independence ensures that decisions are impartial, fostering trust in the tax system.
- Tax Compliance: Knowing there’s a mechanism to challenge unfair assessments encourages taxpayers to comply with tax laws.
- Legal Precedents: TAT decisions contribute to the development of tax jurisprudence in Kenya, providing clarity on complex tax issues.
Common Tax Disputes Handled by the Tax Appeals Tribunal
The Tax Appeals Tribunal handles a wide range of tax disputes, including:
- Disagreements over tax assessments (e.g., income tax or VAT calculations).
- Challenges to penalties or interest imposed by the KRA.
- Disputes over customs duties or excise taxes.
- Objections to KRA decisions on tax refunds or waivers.
By addressing these issues, the TAT ensures that taxpayers have a fair chance to contest KRA actions that they believe are unjust.
Tips for a Successful Appeal at the Tax Appeals Tribunal
To maximize your chances of success at the Tax Appeals Tribunal, consider the following tips:
- Seek Professional Advice: Engage a tax consultant or lawyer with experience in tax disputes to guide you through the process.
- Prepare Thoroughly: Gather all relevant documents, such as tax returns, receipts, and correspondence with the KRA, to support your case.
- Meet Deadlines: File your objection and appeal within the stipulated timelines to avoid dismissal.
- Understand the Law: Familiarize yourself with the relevant tax laws and regulations to strengthen your argument.
Conclusion
The Tax Appeals Tribunal is a cornerstone of Kenya’s tax dispute resolution framework, offering taxpayers a fair and efficient way to challenge KRA decisions. By understanding how the TAT works and following the proper procedures, taxpayers can protect their rights and ensure fair treatment under the law. Whether you’re an individual or a business, the Tax Appeals Tribunal provides an accessible avenue to resolve tax disputes without the complexities of the traditional court system.
If you’re facing a tax dispute with the KRA, don’t hesitate to explore your options with the Tax Appeals Tribunal. With the right preparation and guidance, you can navigate the process successfully and achieve a just outcome.