WHO QUALIFIES TO REGISTER FOR VAT

The persons who qualify to be registered for VAT are those

  1. Supplying taxable goods and services or;
  2. Expects to supply taxable goods and services.

The persons must have taxable turnover is Kshs 5 million or more in the past 12 months.

Potential VAT taxpayers

Kenya has a population of over 45 million people and numerous businesses. Among the people and businesses are potential taxpayers. The following are some of the qualifying factors for VAT registration:

  • Has a business or trading as an individual.
  • Has made or expects to make taxable supplies whose taxable value is Kshs 5 million or more in any period of 12 months.
  • About to commence making taxable supplies whose value is expected to exceed Kshs 5 million in any period of 12 months whether in one or several transactions.

Determining registration threshold

Since the registration threshold is taxable turnover of Kshs 5 million for a period of twelve months, some transaction should be excluded. The following are some of the transactions that should be excluded:

  1. a) Sale of capital items

Sale of capital items for example a machine which would result in the value of taxable turnover being Kshs 5 million or more than. Such a person should not register if the value of the other taxable goods is less than Kshs 5 million.

  1. b) Sale of business

Selling whole or part of a person’s business – selling whole or part of a business may increase the taxable turnover in a twelve months period to more than Kshs 5 million.

Since this will be a one-off transaction, the person does not qualify to register if the taxable turnover of the other business transactions is less than Kshs 5 million.

  1. c) Sale of final stock

This turnover is generated when a person permanently ceases to carry on the business. The person sells the final stock which may result in the taxable turnover in the transactions in the twelve months being more than Kshs 5 million. This may be a one off transaction that will inflate the taxable turnover to more than Kshs 5 million.

Who Should Register for VAT?

Having satisfied the registration threshold, who should register? The following are some of the persons who should register for VAT.

  • Individuals trading in own names.
  • Sole proprietors with registered businesses. However, the registration is for the individual business owner.
  • Partnerships which include husband and wife who may or may not be VAT registered as individuals.
  • Limited liability companies both private and public companies.
  •  Any other type of organizations that do not fit in any of the above categories for example religious organizations such as Churches that may be transacting taxable business such as restaurants.

Types of registrations

There are several types of VAT registrations depending on how the taxpayer is registered. The following are some of the registrations.

  1. a) Normal registration

The business owner qualifies to be registered and they apply for registration. They are registered and VAT obligation is added in the PIN certificate.

  1. b) Voluntary registration

The business owner has not qualified for registration but they apply for registration to benefit from being a registered for VAT.

  1. c) Intending trader registration

The business owner expects to deal in taxable supplies whose turnover will be more than Kshs 5 million in twelve months. They apply for registration before they commence transactions.

  1. d) Compulsory registration

The business owner qualifies to be registered but they fail to register. The Commissioner will add the VAT obligation in PIN certificate and a will be notice sent to the person via email.

  1. e) Temporary registration

If any amount of VAT is received from a trader who is not VAT registered, the tax is credited in a specific account.  For example where a person transacts business and 6 per cent VAT is withheld. Such money is sent to KRA.

Requirements for VAT registration

For every VAT registration, there are several documents required. The following are some of the most common documents that may be required for each registration.

Please note that the Commissioner may require other types of documentations to facilitate VAT registration.

Individuals

  • PIN certificate (number) of the individual;
  • National identification card (number);
  • Alien identification card (number);
  • Actual or expected taxable turnover of Kshs 5.0 million or more for 12 months;
  • Email address;
  • Access to i-Tax platform.

Sole proprietorships

  • PIN certificate (number) of the proprietor;
  • Alien identification card;
  • Certificate of business name registration;
  • Actual or expected taxable turnover of Kshs 5.0 million or more for 12 months;
  • Email address;
  • Access to i-Tax platform.

Partnerships

  •  PIN number of the partnership;
  • PIN numbers of the partners;
  • Number of business name registration by Registrar of companies;
  •  Actual or expected taxable turnover of Kshs 5.0 million or more for 12 months;
  • Email address;
  • Access to i-Tax platform.

Limited Company (private and public)

  • PIN number of the company;
  • PIN number of each directors;
  • Number of on the incorporation certificate;
  • Memorandum and Articles of Association;
  • Actual or expected taxable turnover of Kshs 5.0 million or more for 12 months;
  • Email address;
  • Access to i-Tax platform.

Any other potential VAT taxpayer

  • Registration number from registrar of companies;
  • Pin numbers for the organization and directors;
  • Registration documents;
  • Other registrations (for example religious body registration or NGO board registration);
  • Actual or expected taxable turnover of Kshs 5.0 million or more for 12 months;
  • Email Address;
  • Access to i-Tax platform.

Commissioner’s registration decisions

Once the Commissioner has received the VAT registration application, several decisions will be taken. For normal registrations based on actual or expected taxable turnovers, the VAT obligation will be included in PIN certificate.

For compulsory registration, the VAT obligation is included in PIN certificate. For voluntary registration, the application may be declined or accepted.

If the application is accepted, the registration is done and the obligation is included in PIN certificate. If the application is declined, the obligation will not be included in PIN certificate.

Effective date of registration

For normal registrations (actual and intending businesses) and compulsory registrations, the effective date of registration is the beginning of the first tax period after the person was required to register or a date specified in the certificate.

For voluntary registration, the date is specified in the certificate.

Certificate display

The VAT Act requires a VAT registered taxpayer to display the certificate is a conspicuous place. Failure to display is an offense. Currently, a separate VAT certificate is no longer issued.

Therefore, the taxpayer is expected print out the PIN certificate with the VAT obligation. The original certificate should be displayed at the principal place of business in a conspicuous place all the time.

Copies of the certificate should be displayed in any other place that the person carries on business.

Changes of registration details

Sometimes taxpayers change details they provided during registration. The changes must be communicated to the Commissioner within 21 days.

The following are some of the details that may be changes:

  • Business name;
  • Physical address;
  • Email address;
  • Place of business for example building or location;
  • Nature of business (additions or subtractions of goods or services etc.).

Penalty for not registering

Failure to register for VAT when expected to do so attracts penalties. Unless the person has an excuse, they are liable for Kshs 100,000 penalty due for every month or part of month from when the person was due to be registered.

The penalty is up-to the month immediately before submission of registration application or when the person was compulsorily registered by the Commissioner.

However, the maximum penalty should not exceed kshs 1 million.

 

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