Tax rate by region Kenya

Select region

The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

Understanding SaaS Sales Tax in Kenya

Kenya implemented a Value Added Tax (VAT) system in 2013, aligning with the East African Community (EAC) framework. This modernization aimed to enhance revenue generation and align tax practices across the region. As of now, the standard VAT rate in Kenya is 16%, applicable to all taxable supplies, including Software as a Service (SaaS). This means that SaaS businesses operating in Kenya must charge and remit VAT to the Kenya Revenue Authority (KRA).

Mosaic image

Kenya

Kenya implemented a VAT system in 2013 to enhance revenue generation and modernize its tax framework.

Official government link: Kenya Revenue Authority

16.00%

E-products and services VAT/Sales tax rate

0.00%

Reduced tax rate

Reduced tax rate product categories

No digital goods or services with reduced tax rate in Kenya

Exempted product categories

No digital goods or services are exempt in Kenya

Reverse charge mechanism for B2B sales

No

Tax ID validation required

Yes

When do you have to register

Register from first sale

Online registration possible

Yes

Local representative needed

Yes

Registration procedure

Businesses that are subject to VAT in Kenya are required to obtain a Personal Identification Number (PIN), link up with the eTIM system, and submit their service requests online within 30 days of surpassing the registration threshold. Alternatively, they can also accomplish this by making a personal visit to the Kenya Revenue Authority office.

For businesses that are not based in Kenya and do not have a permanent establishment there, it is mandatory to designate a tax representative.

List of digital and electronic services liable for tax

Downloadable digital content (e.g., mobile applications, e-books, films)
Streaming services (e.g., TV shows, films, music, podcasts)
Sale or licensing of data collected about Kenyan users
Digital marketplaces
Subscription-based media (e.g., news, magazines, journals)
Electronic data management (e.g., web hosting, online data warehousing, cloud storage)
Electronic booking or ticketing services
Search engine and automated help desk services
Online distance training (e.g., e-learning, online courses)

Penalties

If the VAT is filed late, a penalty is imposed which is either 5% of the due tax or KES 10,000 (approximately EUR 60), whichever amount is greater. In case of late payment, a penalty of 5% of the due tax is charged along with an additional interest of 1% per month.

Registration threshold

No threshold 

Filing interval

Monthly

Filing deadline

The cut-off date is set for the 20th day of the month that comes after the reporting period.

E-invoicing requirements

Yes

Record keeping

Relevant documents must be kept for at least five years

How-To Guides: Kenya SaaS VAT

Step: 1 Threshold

On June 23, 2022, Kenya enacted the Finance Bill 2022, which among other things, amends the VAT rules applicable to non-resident digital services providers effective July 1, 2022. The Finance Bill 2022 clarifies that the VAT registration threshold of KES 5 million no longer applies to non-resident digital services providers.

 

The Finance Bill 2022 further clarifies that domestic businesses are exempt from applying the reverse charge mechanism on the importation of digital supplies. Consequently, non-resident digital services providers are not only required to register for and collect VAT on B2C supplies of digital services, but also on B2B supplies.

 

Registration is mandatory from the first sale of digital services to a Kenyan customer. There is no de minimis threshold for non-residents.

Step: 2 Business Registration

Non-residents register via the iTax Portal under the “Simplified Tax Registration” framework. Physical presence is not required.

Step: 3 TIN/VAT Number

The authority issues a KRA PIN (Personal Identification Number) which serves as both the VAT and Income Tax identifier.

Step: 1 Standard VAT Rate

The standard VAT rate in Kenya is 16%. Additionally, SEP Tax (Significant Economic Presence) applies at an effective rate of 3% of gross turnover.

Step: 2 VAT Formula

To calculate your tax amounts, consider the following formula: 

  • VAT = Net Price x 16%
  • SEP Tax = Gross Revenue x 3%

 

Step: 3 Reverse Charge (B2B)

Does not apply. Non-resident SaaS providers must register and account for VAT on both B2B and B2C sales.

Step: 1 Selling B2C

Charge 16% VAT. The tax is “hidden” or inclusive in the final price shown to consumers.

Step: 2 Selling B2B

Charge 16% VAT. You must capture the customer’s KRA PIN to allow them to claim input tax deduction.

Step: 3 Invoice Requirements

Invoices must include:

  • Supplier Name/PIN
  • Buyer Name/PIN (for B2B)
  • Date
  • Time
  • Total Gross Amount
  • Tax Rate
  • Total Tax
  • QR Code (if integrated with eTIMS).

Step: 1 Filing Interval

Monthly for both VAT and SEP Tax.

Step: 2 Filing Deadline

On or before the 20th day of the following month (e.g., January’s return is due February 20th).

Step: 3 Determine if you need to register.

Filed online via the iTax Portal. Payments are made in KES (Kenyan Shillings) via authorized banks or M-Pesa.

Step: 4 Record Keeping

All tax documents need to be kept for a minimum of 5 years. Records must be accessible for inspection by the Commissioner.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating Kenya’s VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

Overwhelmed by SaaS sales tax compliance?

Our team of SaaS tax experts is here to help. Contact us today for a free consultation. 

Talk to an Expert
Mosaic image
en_USEnglish
es_ESEspañol pt_PTPortuguês pt_BRPortuguês do Brasil fr_FRFrançais it_ITItaliano de_DEDeutsch nl_NLNederlands pl_PLPolski ro_RORomână ukУкраїнська zh_CN简体中文 ja日本語 ko_KR한국어 en_USEnglish