VAT registration in Kenya: threshold, rate, returns and penalties

Who must register

You must register once taxable sales reach, or are expected to reach, KES 5 million in a rolling 12 months. Below that, registration is voluntary. The Finance Act 2025 proposed raising the limit to KES 8 million, but it was not brought into effect, and KRA proposed scrapping the limit in March 2026. Confirm the current rule on the KRA website before you decide.

The rate and how it works

The standard rate is 16%, and zero-rated supplies charge 0%. You charge VAT on sales (output VAT) and claim VAT on your purchases (input VAT). You pay the difference to KRA. Work any price out with the VAT calculator.

Returns and payment

File and pay by the 20th of the following month on iTax. Input VAT is claimed only with a valid supplier invoice, and from 2026 that means a proper eTIMS invoice. Since 1 July 2026, an invoice showing VAT may only be issued for a taxable supply.

Penalties

Late filing is commonly quoted as the higher of KES 10,000 or 5% of the tax due. Late payment adds 5% plus interest of 1% a month. Estimate yours with the penalty calculator.

Turnover tax and VAT together

Turnover tax applies to businesses with sales between KES 1 million and KES 25 million, at 1.5% of gross sales. A business can be on both once sales pass KES 5 million. Compare options in the turnover tax calculator, and see withholding tax for related deductions.

General information only, not tax advice. Rates and rules were checked in October 2026 and can change. Confirm with KRA or a qualified professional.

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