The persons who qualify to be registered for VAT are those
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:
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:
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.
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.
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.
Types of registrations
There are several types of VAT registrations depending on how the taxpayer is registered. The following are some of the registrations.
The business owner qualifies to be registered and they apply for registration. They are registered and VAT obligation is added in the PIN certificate.
The business owner has not qualified for registration but they apply for registration to benefit from being a registered for VAT.
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.
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.
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.
Limited Company (private and public)
Any other potential VAT taxpayer
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.
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:
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.