The Finance Act 2020 has amended the provisions of claiming of input VAT by including an additional requirement. It states that a person claiming input tax will only be able to do so if the input tax claimed has been declared as output tax by the supplier for VAT purposes. The input-output matching concept of sales and purchases is in force.
This is the implication for VAT registered businesses in Kenya while undertaking Vatable transactions.
As a Seller of Vatable goods or services:
- Capture accurate details of your customers, especially the Pin number
- Issue your customer with a Tax Invoice clearly indicating the Invoice Date, Invoice Number, Your KRA Pin Number, Amount and VAT Charged
- When filing Monthly VAT Return, ensure that you declare Sales to Customers registered for VAT. Avoid lumping up everything under Sales to Customers not registered for VAT.
- Ensure you file your VAT return by the 20th of the following month.
As a Buyer of Vatable goods and services:
- Provide the seller with your KRA Pin Number to enable the seller to declare the sale was made specifically to you
- Get a Tax Invoice from the seller clearly indicating the Invoice Date, Invoice Number, Your KRA Pin Number, Amount, and VAT Charged
- Claim Input Tax by declaring the purchase and capturing the correct details as provided on the Tax Invoice (Input Tax is claimable only on business expenses).
- Note that Input Tax can only be claimed within six (6) months after the invoice date
Inconsistent VAT Returns:
- The iTax System automatically cross-matches Input VAT claimed with Output VAT declared and inconsistencies lead to VAT Auto Assessment (VAA).
- Once VAT Returns inconsistencies are discovered, an email notification is sent, and depending on the inconsistency, the seller or buyer is expected to amend the VAT Return within 15 days
- If the inconsistencies are not resolved within the stipulated time, KRA removes the inconsistent invoices and thus issues an auto assessment on the Input VAT
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