26/03/2026
𝗞𝗥𝗔 𝗽𝗿𝗲𝗽𝗮𝗿𝗲𝘀 𝟭𝟲𝗽𝗰 𝗩𝗔𝗧 𝘀𝗵𝗼𝗰𝗸𝗲𝗿 𝗼𝗻 𝘀𝗺𝗮𝗹𝗹 𝘁𝗿𝗮𝗱𝗲𝗿𝘀
In a bid to meet its revenue collection target, KRA has proposed the removal of the current Ksh 5 million Value Added Tax (VAT) registration threshold.
This marks a significant shift in Kenya’s tax framework and could substantially widen the VAT net.
𝗖𝘂𝗿𝗿𝗲𝗻𝘁 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸
The establishment of this threshold is backed by Section 34 of the VAT Act which highlights the threshold for registration for VAT.
The Section clearly states the value of the sales, the period to get registered, the duration needed for the value of the sales, the types of services included, the taxable supplies viable, and the timeline when the registration is to be held.
𝗣𝗿𝗼𝗽𝗼𝘀𝗮𝗹
This proposal will amend this Section 34 all together. In the meantime, what this proposal implies is that all traders from small businesses to businesses operating large scale will have to register for VAT.
The move aims to boost VAT payers from 230,000 to 800,000. This is set to close the Sh378 billion collection gap and bring them close to the target of over KSh1 trillion in revenue.
𝗜𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀:
The impact of these proposed changes are as follows:
- VAT registration will become compulsory for all traders dealing in vatable goods
- All traders both in formal and informal trade will become VAT agents
- Consultants will also need to incorporate the 16% VAT charges on their fees
- All goods including Fast Moving Consumer Goods will include VAT
- All traders will have to remit tax monthly given the filing of VAT on the 20th
- All businesses would be required to issue compliant eTIMS tax invoices and maintain detailed sales records
Immediate result of this is the price of daily goods will hike as traders will pass the tax burden to consumers.
To businesses, some will be pushed out of operation given the additional administrative cost and working capital strain due to VAT remittances.