KRA Outlines Key VAT Changes Under Finance Act 2026

• VAT bad-debt refund claims can now be made only after 3 years, up from 2 years; taxpayers should retain invoices and debt-recovery evidence.
• VAT-registered businesses must charge VAT only on taxable supplies, not automatically on all invoices; they must first determine whether supplies are taxable or exempt.
• If supplies that were taxable become exempt, businesses must reverse input tax on unsold stock in the period of exemption, using the original input tax method; any excess input tax is payable to the Commissioner.
• Standard-rate VAT applies to fees and commissions for specified digital payment services, including payment processing, settlement, merchant acquiring, payment gateway and aggregation services; VAT applies to the service fee, not the underlying payment.
• The VAT-free allowance for returning passengers’ goods increases from USD 300 to USD 2,000, subject to customs eligibility rules; employee-related costs are excluded from the taxable value of outsourcing services, and hire-purchase finance charges may be excluded where the supplier is properly licensed.

Source: nairobileo.co.ke

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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