Kenya: VAT Bill 2012December 20, 2012
The VAT Bill 2012 dated 14 June 2012 is currently being debated in Parliament. Details of the VAT Bill 2012 are summarized below.
Where a registered person carries on a business both in and outside Kenya, the part of the business carried on outside Kenya shall be treated as if it were carried out by a person separate from the registered person.
Appointment of a tax representative
The Commissioner has powers to appoint a tax representative for persons who do not have a fixed establishment in Kenya but who qualify for compulsory registration.
Concept of services
Services are deemed to be made in Kenya if the recipient is not a registered person and:
- The services are physically performed in Kenya by a person who is in Kenya at the time of the supply
- The services are directly related to immovable property located in Kenya
- The services are radio or television broadcasting services received in Kenya
- The services are electronic services delivered to a person in Kenya
- The supply is a transfer or assignment of a right to use intellectual property
Taxpayers who import services into Kenya and who are entitled to a credit for the amount of input tax payable are not required to pay the reverse charge VAT.
The VAT rates remains at 16%, zero rating and exempt supplies. The special 12% rate is not applicable under the bill. VAT remissions found under the current VAT Bill are not available.
The Cabinet Secretary has powers to increase or decrease the rate by an amount not exceeding 25% of the current rate.
Many products that are zero rated under the current VAT Act are taxed at 16%. These include sanitary towels, newspapers, journals and periodicals, rice, wheat flour, bread, wheat, computers and processed milk.
Further, services that are currently zero rated will be taxed at 16%, including water drilling services and services to film producers.
Supplies that remain zero rated include:
- Exportation of goods and services
- Supply of goods and services to an export processing zone business
- Supply of coffee and tea for export to coffee or tea auction centers
- Supply of taxable services to international sea or air carriers on international voyages or flights
- Transfer of a business as a going concern by a registered person to another registered person
- Supply of natural water, excluding bottled water, by a national government or county government
- Importation or purchase of taxable supplies by any company which has been granted an oil or gas exploration or oil or gas prospecting license
The VAT Bill provides a transition clause of three years for a number of the medical supplies that are zero rated under the current VAT Act.
The VAT Bill proposes a number of changes affecting supplies that are presently exempt. Some services currently exempt will be taxed at 16%, including postal services.
The bill proposes to exempt the following supplies:
- Live animals
- Animal semen
- Fish eggs and roes
- Fresh eggs
- Meat and edible meat offal
- Fish and crustaceans
- Edible fruits and nuts
- Certain cereals
To provide a transition period, the VAT Bill provides that certain goods remain exempt for a period of three years from the commencement of the Act. These include:
- Petroleum oils
- Motor spirit (gasoline)
- Aviation spirit
- Spirit type jet fuel
- Special boiling point spirit and white spirit
- Other medium petroleum oils and preparations
- Gas oil
- Natural gas in gaseous state
Deduction of input VAT
The time taxpayers have to deduct input VAT is reduced from 12 months to 3 months after the tax period.
The Commissioner has powers to issue private rulings.
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