The act is expected to come into operation on the date the minister may, by notice publish in the gazette. It among other issues discusses design of various tax heads, their purposes and differences and also how they are administered. Vat is a tax on value addition and is accounted for using an inputoutput mechanism. Kenyan tax revenue was raised from sales taxes and importexport duties. Due date for payment being 7 days after the month end section 841 ita 2004 monthly withholding tax certificate to be issued to each withholdee within 30 days of the month end section 85 ita 2004. Since 1993 the main focus of tax reform has centred on trade liberalisation and moving from a sales tax was to system of value added tax vat. Value added tax vat imposition of vat on imported services reverse charge vat the value added tax act, 20 has been amended to extend the reverse charge vat liability to nonvat registered recipients of taxable imported services. Kenya amends valueadded tax act executive summary kenya s valueadded tax vat amendment act 2014 came into effect on 29 may 2014. Property tax base in kenya, the rating act allows local authorities to tax either land or land and improvements e. The target population for this study consisted of the quarterly reports on the state. This report on tax justice in kenya was written by the tax justice network africa tjna and the tax justice network international secretariat tjnis.
Kenya is a member of the east africa community eac member trading bloc, which may affect international vat collection and regulations. Mar 22, 2017 introduction instalment tax is estimated income tax paid to kra periodically, four times a year to cover the total tax payable for the year of income. Valueadded tax act 2014 an overview briefing the commencement date of the vat act 2014 the new act, which received presidential assent on 11 december 2014, is now confirmed as 1 july 2015. Although the first application of rating in mombasa in 1921 was based on land and improvements i. Pwc september 20 june 2010 announcement august 2011 draft vat bill published. In kenya, it is a consumption tax charged on taxable goods and taxable services sold and provided locally or imported into kenya. Income tax act applies, the accounting period of the taxpayer. This bill is therefore intended to amend the value added tax act to. Commissioner may appoint upon failure of the nonresident to do so. A tax, to be known as value added tax, shall be charged in accordance with the provisions of this act on the supply of goods and services in kenya including anything specified by the minister as such a supply and on the importation of goods and services into kenya.
Its objective was to protect low income citizens from the rising prices of basic commodities ensuing from the enactment of the vat act 20. The value added tax regulations, 2017 timely update. This has led to an increase in the cost of production of sugar. The income tax act cap 470 in exercise of the powers conferred by section 188 of the income tax act, the minister for finance makes the following rules the income tax transfer pricing rules, 2006 1. The methodology used was a correlational study design. Valueadded tax vat is an indirect tax levied under the value added tax act 20. Pdf nigerian value added tax system and the concept of. It was previously levied under vat act cap 476 1989. In this act, unless the context otherwise requires. Value added tax 7 issue 1 chapter 476 value added tax act date of assent. There are four types of supplies that attract different vat rates.
Evolvement of value added tax vat in kenya 3 seminar vat act 20 section 1 introduction sales tax vat act, 1990 vat act, 20. In this act, unless the context indicates otherwise appealable decision means an assessment or a. The studys objective was to determine the effect of value added tax on economic growth in kenya. The bill has been assented to by the president of the united republic of tanzania. Attempts to increase tax revenue in kenya have focused on closing the taxation gap and expanding the tax base. In 1937 income tax ordinance had been enacted in kenya followed in 1940 by similar ordinances in uganda, tanganyika and zanzibar, which all joined to form a single income tax department. From the perspective of the buyer, it is a tax on the purchase price. Avoid making reckless, false and misleading statements.
Types of taxes in kenya and rates,vat,custom duty,and. This new enactment aims to repeal and replace the value added tax act, 1997 which came into force in july 1998. In 1952, income tax ordinances were consolidated to form the east african tax management act no 8 of 1952 of east africa high commission. Power to impose taxes and charges kenya law reform. Factors influencing tax compliance among small and medium. Kenyas general vat rate is 16%, with other rates including 0% that can apply to certain transactions. Failure to comply with the above culminates into penalties and interest under sec. A citizens handbook on 6 taxation in kenya executive summary this handbook attempts to break down kenyas complex tax system into a user friendly form for consumption by the average person.
The value added tax act, 2014 arrangement of sections section title part i preliminary provisions 1. This act, which repeals the existing vat act 1997 the 1997 act, will introduce fundamental changes to widen the. Pwcs insights and analysis valueregulations, 2015 added. The current vat act was passed into law on 2 september 20 and its implementation has. An act of parliament to make amendments to taxrelated laws enacted by the parliament of kenya, as follows 1. The value added tax vat bill, 2014 was passed by the parliament in december 2014.
Instalment tax is administered under the income tax act cap 470, laws of kenya. An act of parliament to impose a tax to be known as value added tax on goods delivered in, or imported into kenya. Charge to tax 1 a tax, to be known as value added tax, shall be charged in accordance with the provisions of this act on a a taxable supply made by a registered person in kenya. I certify, in accordance with section 2 1 of the acts authentication act, cap.
Exercising these powers, on 7 april 2017 the cs treasury gazetted the value added tax regulations, 2017 vat regulations. It expanded the list of goods and services that are exempt from vat. Effect of value added tax reforms on revenue collection in. Pwcs insights and analysis preparing for the future. The target population for this study consisted of the quarterly reports on the state of the kenyan economy in relation to productivity. Value added tax act, 20 act 870 arrangement of sections section imposition of tax 1. Types of taxes in kenya and rates,vat,custom duty,and stamp. Introduction instalment tax is estimated income tax paid to kra periodically, four times a year to cover the total tax payable for the year of income. Pdf the most difficult thing to understand may be income tax, this paper explores the concept of value added tax vat with respect to the most. Introduction this chapter considers the application of expenditure or consumptiontype taxes to the financial sector, with special emphasis on the role of the vat. The value added tax, 20 provides for the levying of value added tax on sugarcane transportation, and transporters are required to collect and remit the tax to the kenya revenue authority.
Jun 12, 2015 analyzing the new value added tax act, 2014. Appeals shall be as in the federal inland revenue service act. The valueadded tax vat is administered by the kenya revenue authority. The requirement to account for reverse charge vat does not take into consideration the kes5 million threshold. Part i preliminary provisions short title and commencement 1. Post continues after photo photo by waka business accounts are supposed to be audited by. The enactment of the act was influenced by the need to broaden the tax base and the need for efficient administration of the. Most financial services are exempt from valueadded taxation vat in virtually all the. Pursuant to section 67 of the value added tax act, 20, the cabinet secretary for the national treasury cs, recently published the vat regulations through legal notice 54 of 2017. Value added tax is a tax on the amount of which the value of an article has been increased at each stage of its production or distribution. Part ii imposition of value added tax a imposition and exemptions 3. The finance act has also granted the commissioner power to appoint and revoke any other person as a withholding vat agent. The principle law of the income tax act has 14 parts, 3 sections and schedules, all directing its implementation. Pursuant to section 67 of the value added tax act, 20, the cabinet secretary for the national treasury cs, recently published the vat.
An act to impose a tax on the supply of goods and services in zambia and the. The value added tax act, 20 vat act gives the cabinet secretary for the national treasury cs treasury powers to issue regulations to guide the implementation of the vat act. What is value added tax vat uganda revenue authority. Income tax is governed under the income tax act cap 470, of the laws of kenya. The value added tax act in this act referred to as the principal act is amended as set out in this act. Section 6 1 of the vat act empowers the cabinet secretary cs to alter the vat rate upwards or downwards by an amount not exceeding 25% of the prevailing rate. This act may be cited as the value added tax amendment act, 2007. These rules may be cited as the income tax transfer pricing rules, and shall come into operation on the 1st. Value added tax vat is an indirect tax levied under the value added tax act 20. The value added tax act, 20 has been amended by reducing the standard rate from 16% to 14%.
Taxpayers have been relying on outdated value added tax regulations, 1994. The report is based on research conducted between november 2008 and april 2009 by attiya waris, matti kohonen, alvin mosioma, and jack ranguma. The value added tax regulations, 2017 the regulations have been published by the cabinet secretary for the national treasury more than three years since the enactment of the value added tax act, 20 vat act in september 20. Kenya amends valueadded tax act executive summary kenyas valueadded tax vat amendment act 2014 came into effect on 29 may 2014. Rate of the tax taxable person and taxable activity 4. Factors influencing tax compliance among small and. Value added tax general regulations, 2015 august 2015 in brief following the entry into force on 1 july 2015 of the vat act 2014 the act, the value added tax general regulations 2015 the regulations have recently become publicly available. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage.
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