In the era of digital transformation, Kenya has taken steps to ensure that businesses operating in the digital marketplace comply with taxation laws. For non-residents, navigating Value-Added Tax (VAT) for digital services might seem daunting. However, with the Kenya Revenue Authority’s (KRA) streamlined iTax system, the process is simpler than you think.
This guide offers a step-by-step breakdown on how non-resident digital service providers can file and pay VAT in Kenya efficiently, ensuring compliance and avoiding penalties.
1. Logging into the iTax System
To start, non-resident taxpayers need to log into the iTax portal using their unique credentials, including their Personal Identification Number (PIN) and password.
2. Selecting the Appropriate Return
Once logged in, navigate to the Returns section and select File Return. From here, select VAT as your tax obligation. This will enable you to proceed with filing a VAT return specific to your digital marketplace supplies.
3. Downloading the VAT Excel Form
The next step involves downloading the VAT Excel form, which is crucial for inputting and validating the relevant transaction details. This form acts as the foundation for submitting your VAT return.
4. Filling the Mandatory Fields in Section A
In Section A of the form, ensure that you fill in the following details accurately:
- Type of Return: Select “Original.”
- Entity Type: Choose “Head Office.”
- Return Period: This refers to the specific calendar month for which the VAT is being filed. For the first return, the start date will be your VAT registration date.
5. Sales Input for B2C Transactions
Enter the total sales made for all Business-to-Consumer (B2C) transactions for the selected month. This is the total value of digital services provided to consumers in Kenya.
6. Validating and Zipping the File
After entering the required details, click on Validate. This step ensures that the data you’ve input is correct and complies with the VAT filing requirements. The file will then be zipped and ready for upload.
7. Uploading the Zipped File
Once the file is zipped, the system will prompt you to upload it. Submit the file to complete the return filing process. Upon successful submission, you will receive an acknowledgment receipt via the email address registered on iTax.
8. Payment Process: Generating an E-slip
To pay the VAT, begin by generating an e-slip through the Payment Registration menu. Select VAT as the tax head, followed by Value Added Tax as the sub-head. The tax period should match the year and month of your return.
Choose Self Assessment as the payment type, and after confirming the details, click Submit. A payment registration number and a payment slip will be sent to your email.
9. Making Payments via SWIFT
For non-resident taxpayers, payment can be made via SWIFT transfer. It’s essential to include both the Payment Registration Number and the Tax Head (i.e., VAT on Digital Marketplace Supply) in the SWIFT details.
Payments should be made in Kenyan Shillings, with the equivalent amount based on the VAT assessed on iTax. The guide also provides a list of KRA agent commercial banks, complete with account numbers and SWIFT codes, ensuring that offshore taxpayers can remit payments seamlessly.
10. Finalizing the Payment
Upon successful payment, the transaction will be updated on the iTax system, completing the VAT filing process.
Filing and paying VAT on digital marketplace supplies may seem complex, but with this guide, non-resident taxpayers can now approach the process confidently. By following these steps, you can ensure compliance with Kenyan tax regulations while maintaining smooth business operations.
This streamlined procedure by KRA simplifies tax administration, providing ease of use through digital platforms. Ensure you stay compliant by adhering to these guidelines and avoid the risks of penalties or legal complications.
