Point in Time
Act No: No. 35 of 2013
Act Title: VALUE ADDED TAX
[ Date of commencement: 2nd September, 2013. ]
[ Date of assent: 14th August, 2013. ]
Arrangement of Sections
PART I – PRELIMINARY
1.
Short title

This Act may be cited as the Value Added Tax Act, 2013.

PART II – ADMINISTRATION
PART III – CHARGE TO TAX
5.
Charge to tax
(1)

A tax, to be known as value added tax, shall be charged in accordance with the provisions of this Act on—

(a)

a taxable supply made by a registered person in Kenya;

(b)

the importation of taxable goods; and

(c)

a supply of imported taxable services.

(2)

The rate of tax shall be—

(a)

in the case of a zero-rated supply, zero per cent; or

(b)

in any other case, sixteen per cent of the taxable value of the taxable supply, the value of imported taxable goods or the value of a supply of imported taxable services.

(3)

Tax on a taxable supply shall be a liability of the registered person making the supply and, subject to the provisions of this Act relating to accounting and payment, shall become due at the time of the supply.

(4)

The amount of tax payable on a taxable supply, if any, shall be recoverable by the registered person from the receiver of the supply, in addition to the consideration.

(5)

Tax on the importation of taxable goods shall be charged as if it were duty of customs and shall become due and payable by the importer at the time of importation.

(6)

Tax on the supply of imported taxable services shall be a liability of the registered person receiving the supply and, subject to the provisions of this Act relating to accounting and payment, shall become due at the time of the supply.

6.
Cabinet Secretary may amend the rate of tax
(1)

The Cabinet Secretary may, by order published in the Gazette, amend the rate of tax by increasing or decreasing any of the rates of tax by an amount not exceeding twenty-five per cent of the rate specified in section 5(2)(b).

(2)

Every order made under subsection (1) shall be laid before the National Assembly without unreasonable delay, and shall cease to have effect if a resolution of the National Assembly disapproving the order is passed within twenty days of the day on which the National Assembly next sits after the order is laid, but without prejudice to anything previously done thereunder.

7.
Zero rating
(1)

Where a registered person supplies goods or services and the supply is zero rated, no tax shall be charged on the supply, but it shall, in all other respects, be treated as a taxable supply.

(2)

A supply or importation of goods or services shall be zero-rated under this section if the goods or services are of the description for the time being specified in the Second Schedule.

PART IV – PLACE AND TIME OF SUPPLY
8.
Place of supply of services
(1)

A supply of services is made in Kenya if the place of business of the supplier from which the services are supplied is in Kenya.

(2)

If the place of business of the supplier is not in Kenya, the supply of services shall be deemed to be made in Kenya if the recipient of the supply is not a registered person and—

(a)

the services are physically performed in Kenya by a person who is in Kenya at the time of supply;

(b)

the services are directly related to immovable property in Kenya;

(c)

the services are radio or television broadcasting services received at an address in Kenya;

(d)

the services are electronic services delivered to a person in Kenya at the time of supply; or

(e)

the supply is a transfer or assignment of, or grant of a right to use, a copyright, patent, trademark, or similar right in Kenya.

(3)

In this section—

“electronic services” means any of the following services, when provided or delivered on or through a telecommunications network—

(a)

websites, web-hosting, or remote maintenance of programs and equipment;

(b)

software and the updating of software;

(c)

images, text, and information;

(d)

access to databases;

(e)

self-education packages;

(f)

music, films, and games, including games of chance; or

(g)

political, cultural, artistic, sporting, scientific and other broadcasts and events including broadcast television.

10.
Treatment of imported services
(1)

If a supply of imported taxable services is made to a registered person, the registered person shall be deemed to have made a taxable supply to himself.

(2)

If a registered person referred to in subsection (1) is entitled to—

(a)

a credit for part of the amount of input tax payable, the value of the taxable supply under subsection (1) shall be reduced by an amount equal to the supply that is entitled for the input tax credit; or

(b)

a full input tax credit payable on the imported taxable services under subsection (1), the value of the taxable services shall be reduced to zero.

(3)

The output tax in respect of a deemed taxable supply under subsection (1) shall be payable by the registered person at the time of the supply.

(4)

For the purposes of this section, if a registered person carries on a business, both in and outside Kenya, the part of the business carried on outside Kenya shall be treated as if it were carried out by a person separate from the registered person.

12.
Time of supply of goods and services
(1)

Subject to subsection (3), the time of supply, including a supply of imported services, shall be the earlier of—

(a)

the date on which the goods are delivered or services performed;

(b)

the date a certificate is issued by an architect, surveyor or any other person acting as a consultant in a supervisory capacity;

(c)

the date on which the invoice for the supply is issued; or

(d)

the date on which payment for the supply is received, in whole or in part.

(2)

The time of supply of goods by means of a vending machine, meter, or other device operated by use of a coin, note, or token shall be on the date the coin, note, or token is taken from the machine, meter, or other device by or on behalf of the supplier.

(3)

If—

(a)

goods are supplied under a rental agreement; or

(b)

goods or services are made by metered supplies, or under an agreement or law that provides for periodic payments,

the goods or services shall be treated as successively supplied for successive parts of the period of the lease or agreement, or as determined by law, and the time of each successive supply shall be the earlier of the date on which payment for the successive supply is due or received.

(4)

The time of supply of imported goods shall be—

(a)

in the case of goods cleared for home use directly at the port of importation, or goods entered for removal to an inland station and there cleared for home use, at the time of customs clearance;

(b)

in the case of goods removed to a licensed warehouse subsequent to importation, at the time of final clearance from the warehouse for home use;

(c)

in the case of goods removed from an export processing zone, at the time of removal for home use;

(d)

in any other case, at the time the goods are brought into Kenya.

PART V – TAXABLE VALUE
14.
Taxable value of imported goods
(1)

The taxable value of imported goods shall be the sum of—

(a)

the value of the goods ascertained for the purpose of customs duty, in accordance with the East African Community Custom Management Act, 2004, whether or not any duty of customs is payable on the goods;

(b)

to the extent not included under paragraph (a)—

(i) the cost of insurance and freight incurred in bringing the goods to Kenya; and
(ii) the cost of services treated as part of the imported goods under this section; and
(c)

the amount of duty of customs, if any, paid on those goods.

(2)

Unless the context otherwise requires, a supply of services that is ancillary or incidental to the importation of goods shall be treated as part of the importation.

15.
Deemed taxable supply
(1)

An application of taxable supplies by a registered person for use outside his business shall be a taxable supply made by the person.

(2)

A taxable supply under subsection (1) shall be deemed to have been made by the person on the date the supply is first used outside the business.

16.
Debit and credit note
(1)

Where goods are returned to the registered person or, for good and valid reason the registered person decides for business reasons, to reduce the value of a supply after the issue of a tax invoice, a credit note shall be issued for the amount of the reduction:

Provided that a credit note may be issued only within six months after the issue of the relevant tax invoice.

(2)

A registered person who issues a credit note under this section shall reduce the amount of his output tax in the tax period in which the credit note was issued by an amount that bears the same proportion to the tax originally charged as the amount credited bears to the total amount originally charged and the amount of tax so credited shall be specified on the credit note.

(3)

A registered person who receives a credit note for the supply in respect of which he has claimed deductible input tax, shall reduce the amount of deductible input tax in the month in which the credit note is received, by the amount of tax credited.

(4)

Where a registered person has issued a tax invoice in respect of a taxable supply and subsequently makes a further charge in respect of that supply, or any transaction associated with that supply, the person shall, in respect of the further charge being made, issue a debit note, and shall show on it the details of the tax invoice issued at the time of the original supply.

(5)

A registered person who receives a debit note issued in compliance with subsection (4) may, if the supply is eligible therefor and in so far as it has not previously been claimed, claim as deductible input tax such further amount of tax that is being charged, in the month in which the further charge was made, or in the next subsequent month.

(6)

A credit or debit note issued under this section shall be serially numbered and shall include details of the name, address and personal identification number of the person to whom it is issued and sufficient details to identify the tax invoice on which the supply was made and the tax that was originally charged.

PART VI – DEDUCTION OF INPUT TAX
18.
Tax paid prior to registration
(1)

Where—

(a)

on the date exempt supplies made by a registered person become taxable, and the person had incurred input tax on such supplies; or

(b)

on the date he is registered, a person has incurred tax on taxable supplies which are intended for use in making taxable supplies,

the person may, within three months from that date, claim relief from any tax shown to have been incurred on such supplies:

Provided that this subsection shall apply where such supplies are purchased, within the period of twenty-four months immediately preceding registration or the exempt supplies becoming taxable.

(2)

Where the Commissioner is satisfied that the claim for relief is justified, he shall authorise the registered person to make an appropriate deduction of the relief claimed under subsection (1) from the tax payable on his next return.

(3)

The claim for relief from tax under subsection (1) shall be made in the prescribed form.

PART VII – COLLECTION AND RECOVERY OF TAX
19.
When tax is due
(1)

Tax shall be due and payable at the time of supply.

(2)

Notwithstanding the provision of subsection (1), a registered person may defer payment of tax due to a date not later than the twentieth day of the month succeeding that in which the tax became due.

22.
Imported goods subject to customs control
(1)

A person shall not be entitled to obtain delivery of imported taxable goods from the control of the customs unless the person has paid, in full, the correct amount of tax due.

(2)

Notwithstanding the provisions of any other written law, any taxable goods which are imported by air, land or water shall be produced by the importer to a proper officer of customs at the customs station at or nearest to the place of entry, and any importer who fails to produce any such goods commits an offence and the goods in respect of which the offence was committed shall be liable to forfeiture.

(3)

The Commissioner of Customs—

(a)

shall collect tax payable under this Act on imported goods at the time of importation and shall, at that time, obtain such information as may be prescribed in respect of the importation; and

(b)

may make arrangements for such functions to be performed on his behalf in respect of imported goods through the postal service.

(4)

For the purposes of this section, the Commissioner of Customs may exercise any power conferred upon him by the East African Community Customs Management Act, 2004 (No. 8 of 2004) as if the reference to import duty in that Act includes a reference to tax payable on imported goods under this Act.

PART VIII – REFUND OF TAX
30.
Refund of tax paid in error

Where, in respect of any supply, tax has been paid in error, the Commissioner shall, except as otherwise provided by the regulations, refund such tax:

Provided that no refund shall be made under this section unless a claim in respect thereof is lodged within twelve months from the date the tax became due and payable under section 19.

31.
Refund of tax on bad debts
(1)

Where a registered person has made a supply and has accounted for and paid tax on that supply but has not received any payment from the person liable to pay the tax, he may, after a period of three years from the date of that supply or where that person has become legally insolvent, apply to the Commissioner for a refund of the tax involved and subject to the regulations, the Commissioner may refund the tax:

Provided that no application for a refund shall be made under this section after the expiry of five years from the date of the supply.

(2)

Where the tax refunded under subsection (1) is subsequently recovered from the recipient of the supply, the registered person shall refund the tax to the Commissioner within thirty days of the date of the recovery.

(3)

If payment is not made within the time specified under subsection (2), an interest of two per cent per month or part thereof of the tax refunded shall forthwith be due and payable:

Provided that the interest payable shall not exceed one hundred per cent of the refunded amount.

PART IX – REGISTRATION AND DEREGISTRATION
34.
Application for registration
(1)

A person who in the course of a business—

(a)

has made taxable supplies or expects to make taxable supplies, the value of which is five million shillings or more in any period of twelve months; or

(b)

is about to commence making taxable supplies the value of which is reasonably expected to exceed five million shillings in any period of twelve months,

shall be liable for registration under this Act and shall, within thirty days of becoming so liable, apply to the Commissioner for registration in the prescribed form.

(2)

In determining whether a person exceeds the registration threshold for a period, the value of the following taxable supplies shall be excluded—

(a)

a taxable supply of a capital asset of the person; and

(b)

a taxable supply made solely as a consequence of the person selling the whole or a part of the person’s business or permanently ceasing to carry on the person’s business.

(3)

Notwithstanding subsection (1), a person who makes or intends to make taxable supplies may apply, in the prescribed form, to the Commissioner for voluntary registration.

(4)

The Commissioner shall register a person who has applied for voluntary registration under subsection (3) if satisfied that—

(a)

the person is making, or shall make taxable supplies;

(b)

the person has a fixed place from which the person’s business is conducted;

(c)

if the person has commenced carrying on a business, the person—

(i) has kept proper records of its business; and
(ii) has complied with its obligations under other revenue laws; and
(d)

there are reasonable grounds to believe that the person shall keep proper records and file regular and reliable tax returns.

(5)

The Commissioner shall issue a registered person with a tax registration certificate in the prescribed form.

(6)

If the Commissioner is satisfied that a person eligible to apply for registration has not done so within the time limit specified in subsection (1), the Commissioner shall register the person.

(7)

The registration of a person under subsection (1) or (6) shall take effect from the beginning of the first tax period after the person is required to apply for registration, or such later period as may be specified in the person’s tax registration certificate.

(8)

The registration of a person under subsection (4) shall take effect from the date specified in the person’s tax registration certificate.

(9)

The Cabinet Secretary may, in regulations, provide for the registration of a group of companies as one registered person for the purposes of the Act.

35.
Registered person to display certificate
(1)

A registered person shall display in a conspicuous place—

(a)

the tax registration certificate at the principal place at which the person carries on business; and

(b)

a copy of the certificate at every other place at which the person carries on business.

(2)

A registered person shall notify the Commissioner, in writing, of any change in the name (including the business name), address, place of business, or nature of the business of the person within twenty-one days of the change.

37.
Offences relating to registration

A person who—

(a)

fails to apply for registration as required under this Act;

(b)

applies for cancellation of registration when still required to be registered;

(c)

fails to apply for cancellation of registration as required under this Act; or

(d)

fails to comply with section 35 or 36(7)(a),

commits an offence and shall be liable on conviction to a fine not exceeding two hundred thousand shillings or to imprisonment for a term not exceeding two years, or to both.

PART X – APPLICATION OF INFORMATION TECHNOLOGY
40.
Unauthorized access to or improper use of tax computerized system
(1)

A person who—

(a)

knowingly and without lawful authority, by any means, gains access to or attempts to gain access to any tax computerised system;

(b)

having lawful access to any tax computerized system, knowingly uses or discloses information obtained from such system for a purpose that is not authorised; or

(c)

knowing that he is not authorized to do so, receives information obtained from any tax computerized system, and uses, discloses, publishes, or otherwise disseminates such information,

commits an offence.

(2)

A person convicted of an offence under subsection (1) shall be liable—

(a)

in the case of an individual, to imprisonment for a term not exceeding two years, or to a fine not exceeding four hundred thousand shillings, or to both; or

(b)

in the case of a body corporate, to a fine not exceeding one million shillings.

41.
Interference with tax computerized system
(1)

A person who knowingly—

(a)

falsifies any record or information stored in any tax computerised system;

(b)

damages or impairs any tax computerised system; or

(c)

damages or impairs any duplicate tape or disc or other medium on which any information obtained from a tax computerised system is held or stored otherwise than with the permission of the Commissioner,

commits an offence.

(2)

A person convicted of an offence under subsection (1) shall be liable, to imprisonment for a term not exceeding three years, or to a fine not exceeding eight hundred thousand shillings, or to both.

PART XI – INVOICES, RECORDS, RETURNS AND ASSESSMENTS
42.
Tax invoice
(1)

Subject to subsection (2), a registered person who makes a taxable supply shall, at the time of the supply furnish the purchaser with the tax invoice containing the prescribed details for the supply.

(2)

No invoice showing an amount which purports to be tax shall be issued on any supply—

(a)

which is not a taxable supply; or

(b)

by a person who is not registered.

(3)

Any person who issues an invoice in contravention of this subsection commits an offence and any tax shown thereon shall become due and payable to the Commissioner within seven days of the date of the invoice.

(4)

A registered person shall issue only one original tax invoice for a taxable supply, or one original credit note or debit note, but a copy clearly marked as such may be provided to a registered person who claims to have lost the original.

43.
Keeping of records
(1)

Every registered person shall, for the purposes of this Act, keep in the course of his business, a full and true written record, whether in electronic form or otherwise, in English or Kiswahili of every transaction he makes and the record shall be kept in Kenya for a period of five years from the date of the last entry made therein.

(2)

The records to be kept under subsection (1) shall include—

(a)

copies of all tax invoices and simplified tax invoices issued in serial number order;

(b)

copies of all credit and debit notes issued, in chronological order;

(c)

purchase invoices, copies of customs entries, receipts for the

payment of customs duty or tax, and credit and debit notes received, to be filed chronologically either by date of receipt or under each supplier’s name;

(d)

details of the amounts of tax charged on each supply made or received and in relation to all services to which section 10 applies, sufficient written evidence to identify the supplier and the recipient, and to show the nature and quantity of services supplied, the time of supply, the place of supply, the consideration for the supply, and the extent to which the supply has been used by the recipient for a particular purpose;

(e)

tax account showing the totals of the output tax and the input tax in each period and a net total of the tax payable or the excess tax carried forward, as the case may be, at the end of each period;

(f)

copies of stock records kept periodically as the Commissioner may determine;

(g)

details of each supply of goods and services from the business premises, unless such details are available at the time of supply on invoices issued at, or before, that time; and

(h)

such other accounts or records as may be specified, in writing, by the Commissioner.

(3)

Every person required under subsection (1) to keep records shall, at all reasonable times, avail the records to an authorised officer for inspection and shall give the officer every facility necessary to inspect the records.

(4)

For the purposes of this section, the Commissioner may, in accordance with the regulations, require any person to use an electronic tax register, of such type and description as may be prescribed, for the purpose of accessing information regarding any matter or transaction which may affect the tax liability of the person.

(5)

A person who contravenes any of the provisions of this section commits an offence.

44.
Submission of returns
(1)

Every registered person shall submit a return, in the prescribed form and manner, in respect of each tax period not later than the twentieth day after the end of that period.

(2)

A registered person may, in writing, apply to the Commissioner for an extension of time to submit a return.

(3)

An application under subsection (2) shall be made before the due date for submission of the return.

(4)

The Commissioner may, upon satisfaction that there is reasonable cause, grant an application under subsection (2) and shall serve notice of the decision on the applicant.

(5)

A person who fails to submit a return as required under this section shall be liable to a penalty of ten thousand shillings or five per cent of the amount of tax payable under the return, whichever is higher.

PART XII – ENFORCEMENT
PART XIII – OBJECTIONS
PART XIV – FORFEITURE AND SEIZURE