VAT registration and eTIMS for small businesses in Kenya

Two tax obligations frequently catch small businesses out: VAT registration and electronic invoicing.

VAT registration

A person whose taxable supplies reach, or are expected to reach, KES 5 million in twelve months must register for VAT. The standard rate is 16%, with some supplies zero-rated or exempt.

Once registered, you must:

• charge VAT on taxable supplies,
• issue compliant tax invoices,
• file a VAT return monthly, by the 20th of the following month, and
• pay any VAT due.

eTIMS

The electronic Tax Invoice Management System (eTIMS) requires businesses — including those not registered for VAT — to generate invoices through KRA’s system. Expenses not supported by eTIMS invoices may be disallowed when your customers compute their tax, so customers increasingly insist on them.

Turnover tax

Small businesses with turnover below the VAT threshold and within the turnover tax band may pay turnover tax on gross sales instead of income tax.

Thresholds and rates change through Finance Acts — confirm the current position.

This article is general information, not legal advice on your situation.

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