VAT in Kenya — rates, registration, returns

The 16% standard rate, what's zero-rated, what's exempt, when you must register, and how the monthly VAT3 return ties to your invoices.

Value Added Tax is the indirect tax on most goods and services supplied in Kenya. The Value Added Tax Act 2013 sets the framework. As an invoicing business you charge VAT to the buyer, hold it, and remit the net of your input VAT to KRA by the 20th of the following month.

The three rates

Rate	Applies to	Examples
16% (standard)	Most goods and services	Office furniture, software services, consultancy
8% (fuel)	Certain petroleum products only	Petrol, diesel, kerosene
0% (zero-rated)	Listed goods + most exports	Bread, milk, exported goods and services
Exempt	Listed supplies — VAT does not apply	Financial services, education, medical services, rent of residential premises

Zero-rated is NOT the same as exempt. A zero-rated supply still requires a tax invoice and the supplier can claim input VAT on related purchases. An exempt supply is outside VAT — no tax invoice, no input claim against it.

When you must register

You must register for VAT when your taxable turnover crosses KES 5,000,000 in any 12-month rolling period. Voluntary registration is allowed below the threshold and is usually worth it once your B2B customers are themselves VAT-registered (so they can claim back the VAT you charge).

Setting up VAT in Vendly

Confirm your VAT registration

Add your VAT registration certificate number on Settings → Organization. The PIN displayed on every invoice is your KRA PIN; the VAT registration is the same PIN once you've enabled the VAT obligation on iTax.

Open Organization Settings

Set default tax rates on your catalogue

Each Product / Service carries a default tax rate. Set 16% for most lines, 0% for zero-rated, leave 'exempt' for supplies outside VAT. The rate flows into every invoice line automatically.

Open Products

Filing the monthly VAT3 return

VAT returns are due by the 20th of the month following the tax period. iTax accepts the standard VAT3 form — output VAT (what you charged customers) minus input VAT (what you paid on purchases) is the amount remitted (or a refund position if input exceeds output).

Reconcile every invoice issued in the month against your sales ledger — they should match Vendly's Sales Tax Summary report.
Reconcile purchase invoices the same way (input VAT).
Calculate output VAT − input VAT.
File VAT3 on iTax and pay any net VAT due via M-Pesa Paybill 572572 or any KRA-appointed bank.

Filing nil returns is mandatory even in months with no sales — failing to file attracts the higher of KES 10,000 or 5% of the VAT due (which is KES 10,000 on a nil return).

Common mistakes to avoid

Charging VAT on an exempt supply — the buyer cannot claim it back, you lose the customer.
Not issuing tax invoices through eTIMS — the buyer can't claim the input VAT, killing the value proposition for them.
Forgetting the KRA PIN on the invoice — required for the buyer to claim input.
Mixing up zero-rated and exempt — see the callout above.

Kenya law that applies

Value Added Tax Act 2013
Standard rate 16% VAT, exempt and zero-rated supplies, the KES 5m registration threshold, monthly VAT3 return.
KRA iTax portal
Where monthly PAYE, VAT and other returns are filed.
KRA eTIMS — Electronic Tax Invoice Management System
Mandatory e-invoicing system. Every taxable supply must be issued through eTIMS — sales without an eTIMS invoice cannot be claimed as an input by the buyer.