1. VAT Module 5: Computation of VAT©
Dr. Wakaguyu wa-Kiburi (
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

2. Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi
Scope
Taxable value of a supply
Taxable value of imported goods
Deemed supply
Partial exemption
Debit and credit notes
Deduction of input tax against output tax
Tax paid prior to registration
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

3. Taxable Value of Supply
VAT is based on the taxable value of a supply.
For goods and services including imported services, taxable value is either:
Consideration for the supply or
If supplier and recipient are related, the open market value of the supply.
Note: For mobile cellular services – the value of the service is the value determined for duty imposed under law relating to Excise duty.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

4. Taxable Value of Supply cont’
Consideration of supply includes 3 aspects:
Amount of money paid or payable, directly or indirectly by any person for the supply of, or
Open market value at the time of supply of an amount in kind paid or payable, directly or indirectly by any person for the supply,
Any taxes, duties, levies, fees and charges (other than VAT) paid or payable on or by reason of the supply,
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

5. Taxable Value of Supply cont’
Note: the amount should be reduced by:
Any discounts.
Any rebates.
Anything else.
…allowed (according to the Act) or accounted for at the time of the supply but not later.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

6. Taxable Value of Supply cont’
Amount of consideration includes amount charged for:
Any wrapper, package, box, bottle, other container in which goods are supplied.
Any other goods contained or attached to the wrapper, package, box, bottle, other container e.g. promotion items.
Any liability that the purchaser has to pay to the vendor by reason of or in respect of the supply in addition to the to the amount of price charged (transport).
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

7. Taxable Value of Supply cont’
Amount of consideration includes amount charged for:
Any wrapper, package, box, bottle, other container in which goods are supplied.
Any other goods contained or attached to the wrapper, package, box, bottle, other container e.g. promotion items.
Any liability that the purchaser has to pay to the vendor by reason of or in respect of the supply in addition to the to the amount of price charged (transport).
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

8. Taxable Value of Supply cont’
For services, consideration includes – any incidental costs incurred by the supplier of service in the course of making the supply to the client. Example….
Note: If the Commissioner is satisfied that the supplier has merely made a disbursement to a third party as an agent of his client, such disbursements are excluded from the taxable value. For example:- court fees by lawyers.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

9. Taxable Value of Supply cont’
Note: consideration of a supply does not include:
Financial charge for goods under hire purchase in relation to supply of the credit.
Any interest incurred for late payments of the consideration for the supply.
Tourism levy imposed under the Tourism Act in supply of accommodation and restaurant services.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

10. Taxable Value of Supply cont’
Service charge in lieu of tips. But this only applies where:
Service charge is distributed directly to the employees in accordance with a written agreement between employees and employer.
Service charge does not exceed 10 % of the price of the service excluding such service charge.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

11. Taxable Value of Supply cont’
Relationships – This is a strange section - for purposes of this Act, persons are related if:
Either person participates directly or indirectly in management, control or capital contribution of the business of the other.
A third party participates directly or indirectly in the management, control or the capital contribution of the business of the other (e.g. common investor).
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

12. Taxable Value of Supply cont’
An individual who participates in the management, control or the capital contribution of the business of one is associated by marriage, consanguinity, or affinity to an individual who participates in the management, control or capital contribution of the business of the other.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

13. Taxable Value of Imported Goods
Total amount is:
Value of goods ascertained for custom duty purposes in accordance with EACCM (2004) (and revisions) whether or not any duty of customs is payable.
Cost of insurance and freight incurred in bringing the goods to Kenya.
Cost of services treated as part of the imported goods.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

14. Taxable Value of Imported Goods
d) Amount of duty of customs paid on the goods.
e) Any other expenses attributable to the import.
Note:- Any services supplied that are ancillary or incidental to the importation of goods are treated as part of the importation.
How do you establish this?
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

15. Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi
Deemed Supply
Application of taxable supplies by a registered person for use outside the business is a taxable supply by the person (e.g. furniture, events organizing etc.).
It is deemed to have been made by the person on the date the supply is first used outside the business.
Question - How are samples treated?
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

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Credit Notes
When goods are returned, the registered person must issue a credit note for the amount reduced within 6 months after the invoice date. (Indicate reference invoice +)
VAT amount is reduced from output VAT in the month the credit note is issued.
Receiver of credit note will reduce the deductible input VAT by same amount.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

17. Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi
Debit Notes
After a further charge is raised on an invoice, a debit note is issued and VAT raised.
Reference to the original invoice should be noted plus other details.
Receiver of debit note will deduct the input VAT in the month debit note is issued or subsequent month.
Debit notes must be serially numbered with all the details included.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

18. Deduction of Input Tax Against Output Tax
Month end - input VAT against output VAT
Input tax from local supplies and imports subject to restrictions.
Deducted in the tax period that the supply or importation occurs – not earlier – max 6 months.
Only to the extent that the supply or importation was acquired to make taxable supplies ???
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

19. Deduction of Input Tax Against Output Tax cont’
If the person does not hold documents for the supply or import, deduction is allowed until the first tax period in which the person holds the documents not beyond 6 months.
Some documents that may be missing are:
Original invoices or certified copies
Duly certified customs entries or payment receipts.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

20. Deduction of Input Tax Against Output Tax cont’
Customs receipts and certificates signed stating the amount of VAT paid in case of goods purchased from a customs auction.
Credit notes in case of input VAT deducted.
Debit notes in case of input VAT deducted.
Note: Input VAT is deductible within 6 months after the end of the VAT period when supply of importation is made.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

21. Deduction of Input Tax Against Output Tax cont’
Input VAT not deductible:
Purchase and, repair and maintenance of passenger cars or minibuses unless acquired exclusively for purposes of making taxable supply of that automobile in the ordinary course of a continuous and regular business which is:
selling ii) dealing iii) hiring.
(Must be in the business)
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

22. Deduction of Input Tax Against Output Tax cont’
Entertainment, restaurant and accommodation services unless:
Services are in ordinary course of business and are not to an associate or employee.
Services provided when recipient is away from home for purposes of business of the recipient or recipient employer.
Note: No tax is charged on the supply where no input VAT deduction was allowed on that supply?
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

23. Deduction of Input Tax Against Output Tax cont’
When input tax exceeds output tax, the excess amount shall be carried forward as input tax deductible in the next tax period.
The amount may be refundable if:
Amount is only from zero rate supplies.
Claim for refund is lodged within (12) months from the period the refund became due and payable. (Note: VAT claimed within 6 months in VAT system).
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

24. Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi
Partial Exemption
If a local taxable supply or import relates partly to making taxable supplies and non-taxable supplies (exempt), the input VAT deductible is determined as follows:
Full deduction for the amount attributable to taxable supplies.
No deduction for the amount attributable to exempt supplies.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

25. Partial Exemption cont’
Deduct input tax attributable to taxables in case of taxable and exempt supplies according to the following formula: A x B/C
Where:
A - Total input tax shared by both taxable and exempt supplies.
B - Taxable supplies during the tax period.
C - Value of total supplies during the tax period (taxable and exempt supplies).
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

26. Partial Exemption cont’
Decision: if the fraction is
More than 0.90 – claim all the input tax (A) – > 90% of the input tax is attributable to the taxable supplies.
Less than 0.10 – do not claim the input tax (A) - < 10% of the input tax is attributable to the taxable supplies.
Between 0.10 and 0.9 …claim what is attributable – fraction of input tax (A).
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

27. Tax Paid Prior to Registration
This section……Title should be Claim of Relief
Where:
Change of tax status - On the date exempt supplies by a registered person become taxable and the person had incurred input tax on such supplies.
On registration - a person had incurred input tax on taxable supplies intended for use in making taxable supplies.
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

28. Tax Paid Prior to Registration cont’
Person should within 3 months claim relief from any tax incurred on such supplies.
Claim of relief is only on supplies purchased within a period of 24 months immediately preceding registration or exempt supplies becoming taxable.
Note: If claim is allowed, Commissioner allows for deduction from Output VAT in the next return(s). Claim is made in the prescribed format
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi

29. Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi
Q & A
9/21/2019
Prepared for by Dr. Wakaguyu wa-Kiburi