September 29, 2025
Maina Susan is a Tax & Finance Writer at Quartet Solutions, simplifying tax regulations and financial concepts to help businesses stay compliant.
LinkedIn >>Table of Contents:
You’ve probably heard people say: “VAT is only for businesses making over 5 million shillings a year.”
Sounds straightforward, right? Well… not exactly. That’s just half the story.
That’s only half the story. In Kenya, VAT rules are a little more nuanced.
And if you’re running a business – whether you’re a small shop, an SME, or even preparing for a government tender – understanding Voluntary VAT registration in Kenya could save you money, penalties, and a lot of stress.
At Quartet Consulting, we’ve put together this simple, easy-to-follow guide to help you understand how voluntary and mandatory VAT registration in Kenya really works — and how to stay on the right side of KRA.
Let’s dive right in!
Stay compliant, avoid penalties, and position your business for growth.
Book Your Free VAT Consultation with Quartet Consulting TodayVAT (Value Added Tax) is a consumption tax levied on most goods and services in Kenya.
It’s an indirect tax meaning that it’s collected by businesses on behalf of KRA and then remitted every month.
Example:
If you buy a TV worth Ksh 50,000, you’ll actually pay Ksh 58,000 after VAT (16%). That extra Ksh 8,000 doesn’t stay with the shop — it goes straight to KRA.
| VAT Rate in Kenya | Applicability |
|---|---|
|
16% (standard rate)
|
– Applies to most Kenyan goods and services.
|
|
0% (zero-rated)
|
– Mainly for exports and certain essential goods.
|
|
Exempt:
|
– Some items (like financial services, health, or education) don’t attract VAT at all.
|
VAT returns are filed monthly on iTax.
The deadline is the 20th of the following month.
Example:
If you collected VAT in September, you must declare and pay it by 20th October.
There are two categories:
| Type of VAT Registration in Kenya | Description |
|---|---|
|
Mandatory Registration:
|
– If your annual turnover is above Ksh 5 million, you must register for VAT. – If you fail to register, KRA Can actually register you for VAT |
|
Voluntary Registration:
|
– If you earn less than 5M, you can still register for VAT voluntarily.
|
You may be wondering — if your business has not yet reached the Ksh 5 million turnover threshold, is there any real benefit to registering for VAT early?
The answer is yes. Voluntary VAT registration can give your business a strategic edge in several ways:
| Benefits of Voluntary VAT Registration in Kenya | Description |
|---|---|
|
1. Eligibility for government projects and tenders
|
– Many government contracts, tenders, and Public–Private Partnerships (PPPs) require VAT compliance. – Without registration, you may miss out on these opportunities. |
|
2. Increased credibility with clients
|
– Large corporations, NGOs, and investors often prefer engaging VAT-registered suppliers.
– By opting for voluntary VAT registration in Kenya, your business can enhance credibility with investors and corporate clients while remaining compliant with KRA.. |
|
3. Tax efficiency
|
– Being VAT registered allows you to claim input VAT on purchases, which reduces your overall tax liability.
|
|
4. Future-proofing your business
|
– Registering for VAT early positions your business for growth and ensures a smoother transition once you cross the Ksh 5 million mark
|
Did you know?
You can apply for voluntary VAT registration on iTax even before reaching the mandatory threshold, provided you are carrying out — or planning to carry out — taxable business activities.
We’ll help you weigh the benefits for tenders, investors, and tax efficiency.
Book Your Free VAT Consultation with Quartet Consulting TodayWhether you’re applying because your turnover has passed the Ksh 5 million threshold or you’re opting for voluntary VAT registration in Kenya, the process is largely the same.
| Step | What To Do | Details / Requirements |
|---|---|---|
|
Step 1: Gather the Right Documents
|
Ensure you have all the necessary documents before applying.
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– Valid KRA PIN (registered on iTax) – Business registration documents (Certificate of Incorporation or Business Name Certificate) – Physical business address and location details – Evidence of taxable supplies (invoices, signed contracts, or proof of upcoming taxable business activities) |
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Step 2: Apply on iTax
|
Submit your VAT registration request.
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– Log into your KRA iTax account – Go to Registration → Amend PIN Details – Add VAT as a tax obligation – Complete the form and submit your application |
|
Step 3: Register for eTIMS
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Comply with KRA’s invoicing requirements.
|
– All VAT-registered businesses must use eTIMS to issue valid invoices – Without eTIMS, your clients cannot claim input VAT – Register and integrate eTIMS into your business operations |
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Step 4: Start Filing VAT Returns
|
Fulfill your VAT obligations after approval.
|
– File monthly VAT returns by the 20th of the following month – Always issue eTIMS-compliant invoices – Keep proper purchase and expense records to claim input VAT |
Tip:
Once VAT is added to your PIN — whether voluntarily or mandatorily — you are fully obligated to comply. Late filing, failure to issue eTIMS invoices, or poor record-keeping can attract penalties.
Let us handle the paperwork, registration, and compliance while you focus on your business.
Book Your Free VAT Consultation with Quartet Consulting TodayNot every business needs to register for VAT in Kenya
It’s a document issued by KRA confirming that a business providing VAT-exempt goods or services (like education, healthcare, insurance, or NGOs) does not need to charge VAT.
Certain businesses, like NGOs or educational institutions, can apply for a VAT exemption certificate in Kenya to confirm they are not required to charge VAT.
Holders cannot claim input VAT since they don’t charge VAT.
Sometimes, VAT registration isn’t your choice.
KRA can register you for VAT automatically if they determine that your turnover has crossed the Ksh 5M threshold — even if you haven’t applied.
This is called involuntary VAT registration, and it often comes with backdated VAT liability. That means you’ll be required to pay VAT for past sales, plus possible penalties and interest.
Examples:
In both cases, KRA can step in, register the business, and demand VAT on past supplies.
Tip: If you’re close to the Ksh 5M threshold, it’s safer to register voluntarily rather than wait for KRA to catch up — the penalties for late or backdated VAT can be steep.
Even with the best intentions, many businesses slip up on VAT. Here are the most common mistakes to watch out for:
Maintaining VAT compliance in Kenya is essential. Missing deadlines, incorrect filings, or non-eTIMS invoices can trigger penalties and audits.”
Avoid costly mistakes with expert VAT compliance support.
Book Your Free First Consultation TodayKRA takes VAT compliance very seriously, and mistakes can get expensive.
Here’s what you need to know:
| Types of VAT Penalties and Compliance Risks in Kenya | |
|---|---|
|
Late Filing |
– If you submit your VAT return after the deadline, you face a penalty of Ksh 10,000 or 5% of the VAT due, whichever is higher.
|
|
Late Payment
|
– Failing to pay on time attracts a 5% penalty plus 2% interest per month on the unpaid tax.
|
|
Incorrect Returns
|
– Mistakes on your VAT returns can result in additional fines and may trigger an audit by KRA.
|
|
Charging VAT without Registration
|
– This is considered tax fraud. You will be required to repay the VAT collected along with substantial penalties.
|
Bottom line:
Filing and paying VAT correctly—and on time—is always far less costly than dealing with penalties or audits later.
KRA maintains a “VAT Special Table”, which acts as a watchlist for high-risk taxpayers. Landing on this list can have serious consequences.
You may be flagged if you:
Impact:
If your business appears on the VAT Special Table, you will be blocked from filing VAT returns until the issue is resolved with KRA.
Being listed on the VAT Special Table usually indicates failure to meet VAT compliance in Kenya requirements.
Staying on top of filings and eTIMS invoicing keeps your business safe.”
Being VAT-registered isn’t permanent. Deregistration allows businesses to remove VAT obligations when they no longer apply.
You can apply for deregistration if:
Deregistration helps you avoid unnecessary compliance obligations when VAT no longer applies to your business.
| Steps | What To Do | Details / Requirements |
|---|---|---|
|
Step 1: Log in to iTax
|
Access your Account |
– Use your KRA PIN and password.
|
|
Step 2: Navigate to Amend PIN
|
Go to VAT deregistration options
|
– Click Registration → Amend PIN Details
|
|
Step 3: Remove VAT Obligation
|
Select VAT Removal
|
– Under Obligations, choose Remove VAT
|
|
Step 4: Provide Reason
|
Explain why you are deregistering
|
– Examples: turnover below 5M, ceased trading, VAT-exempt activities
|
|
Step 5: Upload Supporting Documents
|
Submit required evidence
|
– Could include financial statements, cessation letters, or other documents KRA requests
|
|
Step 6: Submit Application
|
Complete the process
|
– Wait for KRA approval before you stop VAT filing obligations
|
Once approved, VAT will be removed from your obligations — meaning you no longer need to file monthly VAT returns.
Deregistering from VAT doesn’t mean you simply walk away — there are a few final steps to complete:
| Action | Details |
|---|---|
|
File a final VAT return
|
– Submit a return up to the date your VAT registration ends.
|
|
Clear outstanding VAT
|
– Any unpaid VAT must be settled in full.
|
|
Unused input VAT credits
|
– Usually expire; they cannot be carried forward.
|
|
End of VAT obligations
|
– After this, you no longer issue VAT invoices or file monthly VAT returns.
|
Once VAT deregistration in Kenya is approved, you no longer issue VAT invoices or file monthly returns, but all outstanding VAT must be settled.
We’ll guide you through the process and ensure you remain fully compliant with KRA.
Book Your Free First Consultation Today1. Do sole proprietors need to register for VAT in Kenya?
2. Can a company charge VAT if they are not VAT registered?
3. What happens if I don’t register for VAT even though I qualify?
4. Can I claim VAT back if I’m not registered?
5. How do I complete VAT registration in Kenya if my turnover exceeds Ksh 5M?
These are the basics, but the golden rule is simple: if in doubt, register early or talk to a tax consultant like Quartet Consulting.
VAT in Kenya isn’t just about crossing the Ksh 5M turnover threshold.
Voluntary VAT registration in Kenya can:
However, compliance is critical. Missing deadlines, failing to use eTIMS, or charging VAT illegally can erase the benefits and attract heavy penalties.
Whether mandatory or voluntary VAT registration in Kenya is essential to maintain compliance and unlock business opportunities.”
Whether you’re registering voluntarily, mandatorily, or deregistering — we’ll help you stay compliant, credible, and audit-ready.
Book Your Free First Consultation TodayIf you’re unsure whether to register, or need help with compliance, talk to a tax professional like Quartet Consulting.
Getting it right from the start is always cheaper and less stressful than fixing mistakes later.
Contact Quartet Consulting to schedule your free consultation and learn how to conduct VAT registration in Kenya.
This article is for general information only. It does not constitute tax, legal, or financial advice. For guidance specific to your situation, always consult KRA or a qualified tax consultant like Quartet Consulting.
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