Comments to answers

Hi every one... for those who have experienced KRA Audit...is KRA keen / aggressive on reverse VAT on imported services?

An importer of taxable services in Kenya shall be deemed to have made a taxable supply to himself and VAT shall be charged on such supplies – called reverse VAT.

The burden of tax is on the importer. However where a business's supplies are 100% vatable reverse VAT will not apply

Reverse VAT is VAT payable on importation of services. In the next VAT period the same amount paid is then treated as input tax and recovered in full.

However. If you are not registered for VAT no recovery is possible. This was declared by the importer using a form, VAT-7. Payment through a VAT-28 form would then be used to make payment (receipt of payment).

With itax an e-slip is generated. to claim back the same tax earlier paid. This obviously was a NUISANCE tax to those who made taxable supplies as its effect was NEUTRAL. The catch is the 12 months max (for the repealed cap 476) period for claiming input tax. Once input VAT on imported services expires then the full impact of the reverse VAT is felt.

Imported services by their nature apart from being expensive such as specialised engineering, IT, management consultants etc have an even DARKER side. WITHHOLDING TAX.!!! So by the time penalties & interest is calculated KRA would be smiling.

The VAT Act 2013 came to the rescue of tax payers by scraping reverse VAT filing requirements. For those making at least 90% of sales as Taxable Supplies the filing requirements have been scraped all together.

CPa John: The devil is in the detail.

@ CPA John is KRA smart on this when carrying out checks ? though reverse VAT has an impact on cashflows