Maina Susan is a Tax & Finance Writer at Quartet Solutions, simplifying tax regulations and financial concepts to help businesses stay compliant.
LinkedIn >>Read time: 3 minutes
Last reviewed – 13 March 2026
Are you running a small business or NGO in Kenya and wondering how VAT works?
VAT in Kenya 2026 can seem complicated for many SMEs and NGOs, but once you understand the basics – such as VAT rates, registration thresholds, and ETIMS requirements – it becomes much easier to manage.
This tax summary will help you understand VAT, how it affects your business, and what you need to do to stay compliant – all in simple language.
| Item | Summary |
|---|---|
|
Standard VAT Rate
|
16% |
|
VAT Registration Threshold
|
KES 5 million per year
|
|
VAT Filing Deadline
|
20th of every month
|
|
System Used
|
iTax
|
|
Electronic Invoicing
|
ETIMS required for Invoicing
|
VAT (Value-Added Tax) is a tax on the extra value your business adds to goods or services.
Here’s how it works for your business:
Tip: You only pay KRA the difference between output VAT and input VAT. This ensures you’re not taxed twice.
Example:
| Type Of Supply | VAT Rate |
|---|---|
|
Standard-rated supplies
|
16% |
|
Zero-rated supplies
|
0%
|
|
Exempt supplies
|
No VAT
|
Tip: Always check the right VAT rate for your products or services. Charging the wrong rate can lead to penalties.
You must register for VAT if:
You can register voluntarily if your sales are below KES 5 million – as it sometimes helps you reclaim input VAT.
Tip: VAT registration for SMEs and NGOs in Kenya can be tricky. Quartet Consulting can make it simple for you and your business.
Example for your business:
If you run a business or NGO in Kenya, here’s what you need to know about VAT in Kenya in 2026
1. Time of Supply (Exports)
Example: You sell handmade crafts to a customer in the US. Even if the items are still in Nairobi, VAT counts once the export documents are issued.
2. Input Tax Apportionment
Previously, businesses that sold both taxable and exempt goods or services had to apply the 90:10 rule when claiming input VAT.
This meant that if 90% or more of your sales were taxable, you could claim all your input VAT. But if more than 10% of your sales were exempt, you had to split the input VAT and only claim part of it.
Good news: This rule has now been removed.
3. Business Transfer Exemption
Example: You’re selling your small café, including all stock, equipment, and customers, to someone else. VAT may not apply, as long as the business continues running.
4. VAT on Insurance Payouts
Some insurance payouts are taxable if they relate to goods, services, or premiums.
Example: If your business is paid by insurance for lost stock, that payout may attract VAT if it covers taxable goods.
5. ETIMS Invoices Are Important
You must issue an ETIMS invoice at the time you supply goods or services, even if the supply is zero-rated or exempt.
Tip for your business: Don’t wait until the end of the month — issue invoices as you make sales to avoid fines.
ETIMS (Electronic Tax Invoice Management System) is KRA’s system for tracking tax invoices. It helps ensure your invoices are accurate, traceable, and compliant.
Here’s why ETIMS matters for your VAT reporting:
Example for your business:
Benefits for your business:
Even if your business doesn’t sell ETIMS-tracked goods, understanding ETIMS is useful for digital tax compliance in Kenya.
1. Who must pay VAT in Kenya in 2026?
If you run a business or NGO supplying taxable goods or services, you may need to pay VAT.
2. How do I calculate VAT in Kenya 2026?
VAT payable = (Taxable value × VAT rate) – Input VAT
Example:
3. How do I register for VAT in Kenya?
You can register easily through the KRA iTax portal.
If this feels confusing, experts like Quartet Consulting can guide you step by step, especially for SMEs and NGOs.
4. What are the VAT rates in Kenya 2026?
Tip for your business: Always check the correct VAT rate to avoid fines.
5. Is VAT charged on insurance payouts?
Yes, but only if the payout relates to taxable goods, services, or premiums.
Example: Your business is compensated for lost stock — VAT may apply if the goods were taxable.
6. What is ETIMS compliance in Kenya?
ETIMS stands for Electronic Tax Invoice Management System. It helps KRA track all invoices for certain goods.
7. How do VAT and ETIMS work together in Kenya?
ETIMS ensures your VAT reporting is correct:
Even if your products aren’t under ETIMS, understanding it prepares your business for future digital VAT rules in Kenya.
If VAT in Kenya in 2026 feels confusing, here’s how we can help your business:
Quartet Consulting specializes in helping SMEs and NGOs across Nairobi and Kenya stay compliant, avoid penalties, and focus on growing your business.
WhatsApp 0736 570 370 to book your free tax consultation today
I’m a Tax & Finance Writer at Quartet Solutions, simplifying tax regulations and financial concepts to help businesses stay compliant.
Your Trusted Tax Consultant in Nairobi for SMEs & NGOs
