If you have ever wondered why businesses talk so much about VAT, here is the simple truth: Value Added Tax (VAT) is a tax on spending. Businesses collect it every time we buy taxable goods or services, then forward it to the government. It is a critical part of Kenya’s tax system and if you’re running a business, knowing whether you should register for VAT is essential.

So… Who Must Register for VAT?

The 6th Schedule of the VAT Act spells out exactly who must register. If you fall into any of the categories below, then VAT registration is not optional it is compulsory.

1. Your Sales Hit Ksh. 5,000,000 in 12 Months

If your business supplies or expects to supply taxable goods, taxable services or a combination of both and the total value hits Ksh 5 million within a year, then the law requires you to register for VAT.

2. You Deal in Specific “Designated Goods”

Some items automatically trigger VAT registration due to their nature. These include:

Jewellery, pre-recorded music, timber products and items from saw millers

3. You Sell Four or More Motor Vehicles in a Year

Motor vehicle dealers, even small-scale sellers must register once they hit this threshold.

4. You Trade in Domestic Electronic Appliances

If your business sells household or domestic electrical or electronic appliances, VAT registration applies to you.

5. If you are in any of the following fields, VAT registration is compulsory regardless of size: If your business is:

• Providing accountancy services supplied by auctioneers, estate agents and values.
• Providing services supplied by auctioneers, estate agents and values.
• Providing legal and arbitration services.
• Offering services of surveyors and assessors.
• Providing security and investigation services
• Providing clearing and forwarding services.
• Offering services supplied by contractors.
• Offering consulting, engineering services.
• Providing advertising services

Voluntary VAT Registration

Maybe your business has not hit the VAT threshold, but you still want to register perhaps to look more credible to clients or to claim VAT input. You can apply for voluntary registration, but it is important to note that approval is entirely at the commissioner’s discretion.

VAT Deregistration

A business can apply for VAT deregistration if the following conditions occur

• If a registered person ceases to make taxable supplies.
• If the value of taxable goods or services being supplied in any period of twelve months falls below sh.5million and it is not expected to increase.
• If a business owner becomes incapacitated
• If a business is declared insolvent.
• In case the taxpayer passes away the business may be deregistered unless it continues under the new management.
• If a business changes its name or legal structure, the old registration may need to be cancelled and a fresh VAT registration done under the new entity

Understanding VAT registration is crucial for compliance and for scaling your business the right way. Whether compulsory or voluntary, VAT status can significantly shape how you operate, invoice, and even compete in the market.

If you’re not sure where you fall, it might be the perfect time to review your business model you could be due for registration without even knowing it.

Thank you for reading this article. Have a fruitful day, won’t you!!!!