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Contents
Page No.
1.
2.
3.
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10
5.
Output Tax
12
6.
Input Tax
16
7.
VAT Remission
19
8.
20
9.
23
10.
26
11.
VAT Audit
28
12.
29
Caveat
29
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(b) i) full deduction of all the input tax attributable to taxable goods purchased and sold in the same state; ii) no deduction of any input tax which is directly attributed to exempt outputs; and iii) deduction of the input tax attributable to the remainder of the taxable supplies, calculated as under sub-paragraph (a). Where the value of taxable supplies is more than 95% of the total supplies, all the deductible input tax can be claimed. The restriction using the above formula is not applicable. A person who has restricted the claim for input tax using the above methods is required at the end of each accounting year to perform the above calculation based on: total value of input tax for the year; total value of taxable supplies for the year; and total value of supplies including exempt supplies for the year. The result of the above calculation is the total input tax claimable for the financial year. Where a person has, during the year, claimed an amount in excess of this, the excess must be paid to the Kenya Revenue Authority by adding it to the tax payable for the following month after the end of financial year. If the amount claimed in the monthly returns is less than the annual credit as calculated above, the amount under-claimed can be claimed in the following months return. Where VAT has been claimed with respect to the construction of business premises, and the premises cease to be used wholly for carrying out taxable supplies within five years, the input tax claimed thereon becomes payable. In addition, where the premises are sold or disposed off, the VAT claimed on construction becomes payable. Important Points to Remember on Input VAT Persons who do not usually make exempt supplies may fall under the partial exemption rules because of one-off transactions. It is particularly important that the likely partial exemption position be projected when planning exempt transactions, to ensure that the true cost of carrying them out is brought in with the other commercial considerations.
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In practice, these are made through the taxpayers commercial bank for credit to the above accounts. Payments over Kshs. 1 million have to be made using RTGS. The following mandatory information is required - name of taxpayer, taxpayer registration number, e-slip number and amount of VAT remitted. 9.2. SET OFF The Kenya Revenue Authority Act enables taxable persons to set off refunds in one type of tax or duty against liabilities in other taxes or duties. The set off is applicable to VAT on local supplies of goods and services on application in writing to the Kenya Revenue Authority by the taxpayer. However, before the set off is granted, Kenya Revenue Authority will confirm whether the amount of refund is due and payable.
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Failure to display registration certificate in Default penalty of up to Kshs. 20,000 and a fine of up to a visible place in the business premises. Kshs. 200,000 and/or imprisonment for up to two years.
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Withholding agents That do not comply The higher of Kshs. 10,000 or 10% of the tax withheld. with VAT ACT or persons who act as withholding agents while not recognised. General penalty for offences under the A maximum fine of Kshs. 200,000 and/or up to three years Act for which no specific penalty is imprisonment. prescribed. False VAT refund claims. Double the tax imprisonment claimed plus up to three years
Where an employee or agent commits an offence, the employer shall also be guilty of the offence unless he proves his innocence. Where a company commits an offence, every director and officer of the company concerned with the management of the company shall also be guilty of the offence unless he proves his innocence. The Commissioner is empowered, subject to specified conditions, to compound offences under the Act. The order issued by the Commissioner in such a case can be enforced as if it were a decree or order of the High Court. The taxpayer whose offences have been compounded is not liable to prosecution except with the express consent of the Attorney General.
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CAVEAT
This guide has been prepared by RSM Ashvir Consulting Ltd and incorporates the amendments proposed in the Finance Bill 2009. Whilst every care has been exercised in ensuring the accuracy and the completeness of the information, RSM Ashvir Consulting Ltd, RSM Ashvir and its staff involved in the preparation and review of this guide will not accept any liability for any errors or omissions contained herein whether caused by negligence or otherwise; or for any loss, howsoever caused or sustained by anyone who acts or refrains from acting as a result of placing reliance on the contents of this guide. This guide is for the exclusive use of the clients, business associates and staff of RSM Ashvir Consulting Ltd and RSM Ashvir and no part may be reproduced or published without our prior written consent. The information contained herein is for guidance only and should not be used as a basis of decision-making without appropriate legal and professional advice.
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