VAT for Small Businesses in Kenya: 2026 Thresholds Explained

Kenya's VAT system is more straightforward than most assume — but the rules around when to register, what to charge, and how to file trip up thousands of small businesses every year. Here's the 2026 picture, written for SMB owners who don't have an accountant on retainer.

The KSh 5 million threshold

Kenya's Value Added Tax Act (Cap. 476) sets a clear rule: if your taxable turnover exceeds KSh 5 million in any 12-month period, you must register for VAT with the Kenya Revenue Authority (KRA) within 30 days. "Taxable turnover" is your total sales of taxable goods and services — exports and exempt items don't count toward the threshold.

Below the threshold? You can still register voluntarily. Many B2B service businesses do this because their clients want VAT-inclusive invoices to claim input tax. If most of your revenue is from B2C consumers, voluntary registration usually adds admin without a real benefit.

The 16% standard rate (and the exceptions)

Kenya has three VAT categories:

• Standard rate (16%) — most goods and services.
• Zero rate (0%) — exports, certain agricultural inputs, milk, bread, maize flour, supplies to public bodies. You charge 0% but can still claim input VAT on related purchases.
• Exempt — financial services, insurance, education, medical services, residential rent. You don't charge VAT and you can't claim input VAT.

Filing: monthly, by the 20th

KRA requires monthly VAT returns filed via iTax. The deadline is the 20th day of the following month. So your January VAT return is due by 20 February. Returns must be filed even if you have zero VAT-able sales for the month.

Penalties for late filing: KSh 10,000 or 5% of the tax due (whichever is higher), plus 1% per month interest on outstanding tax.

The Tax Invoice format

Once registered, your invoices must be Tax Invoices and include:

• The words "TAX INVOICE" prominently displayed.
• Your registered business name, address, and KRA PIN.
• Sequential invoice number and issue date.
• Customer name and address (and PIN if registered).
• Description of goods/services with quantity and unit price.
• Taxable value, VAT rate, and VAT amount as separate lines.
• Total amount payable.

ereQa generates this format automatically when you enable VAT — your KRA PIN is pre-filled from your business profile, and every invoice gets the correct labels.

How to automate it

Use ereQa's free VAT calculator to quickly check how much VAT to charge or remove from a price. For ongoing invoicing, set your default VAT rate to 16% in your business settings — every new invoice will apply it automatically. Override per-invoice for zero-rated or exempt supplies.

At month-end, export your VAT report from ereQa, file via KRA iTax, and pay via mobile banking. Most of our Kenyan users complete their monthly VAT return in under 20 minutes.

Quick checklist

• ✅ Track your 12-month rolling turnover monthly. Crossing KSh 5M? Register within 30 days.
• ✅ Set your invoice template to "Tax Invoice" format with KRA PIN.
• ✅ Apply 16% VAT on standard-rated items. Use 0% for exports.
• ✅ File the monthly return by the 20th — even if zero VAT to remit.
• ✅ Keep tax invoices and receipts for at least 5 years.

Read more on the Kenya country page for Kenya-specific features, or start free and have your first KRA-compliant tax invoice ready in 10 minutes.