Kenya TAT Rules HR Service Providers’ Staff Costs Subject to VAT as Incidental Costs

• The Kenya Tax Appeals Tribunal ruled on whether HR outsourcing service provider staff costs are reimbursements or part of the taxable service value.
• The issue arose when Tazico Trading Company did not register for VAT and did not declare certain income in VAT returns.
• TAT examined if the HR services were subject to VAT and if the Commissioner erred in registering the company for VAT.
• TAT concluded that incidental costs, including staff costs, are part of the taxable service value unless the supplier acts as an agent for a third party.
• The services provided were subject to VAT, and the total service cost included staff-related costs and management fees.
• TAT ruled that staff costs are incidental and part of the taxable value, thus subject to VAT.
• Businesses in outsourcing, consultancy, or staffing should evaluate their contracts and cost recovery mechanisms for VAT implications.

Source: vatabout.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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