the value added tax bill 2013

7/29/2019 The Value Added Tax Bill 2013

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SPECIAL ISSUEKenya Gazette Supplement No.88 (National Assembly Bills No.9)

REPUBLIC OF KENYA

KENYA GAZETTE SUPPLEMENTNATIONAL ASSEMBLY BILLS, 2013

NAIROBI, lEth June, 2013CONTENT

Bilt for Introduction into the National Assembly- . PAGEThe.ValueAddedTaxBill,20l3........'.... ...."'.'........"...'261

PRINTED AND PUBUSHED BY THE GOVERNMENT PR.INTER' NAIROBI


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Clause

26tTHE VALUE ADDED TAX BILL, 2013

ARRANGEMENT OF CLAUSESPART I-PRELIMINARY

l-Short title and commencement.2-Interpretation.

PART II-ADMINISTRATION3-Functions and powers of the Comrnissioner and other officers'4-Authorized officers to have powers of police offtcers.

PART III-CHARGE TO TAXS--{harge to tax.G-Cabinet Secretary may arnend the rate of tax.7-7,ero rating.

PART IV-PLACE AITD TIME OF SUPPLY8-Place of supply of services.9-Appointment of tax representative.I G-Treatment of imported services.I l-Place of supply of goods.l2-Time of supply of goods and services.

PART V-TAXABLE VALUEl3-Taxable value of supply.14--Torable value of imported goods.I 5-Deemed taxable supply.l6-Debit and credit note.

PART VI-DEDUCTION OF INPUT TAX17-Credit for input tax against output tax.l8-Tax paid prior to registration.

PART VII_COLLECTION AND RECOVERY OF TAXl9-When tax is due.


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The Value Added Tax Bill,20132G-Relief because of doubt or diffrcult in recovery of tax.2l-Interest for late payment of tax.22-lmported goods subject to customs control.23-Risk of non-payment of ta


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The Value AddedTa.x Bill,20l3 26347-Commissioner may require security.48-Production of records.49-Power of inspection etc.

PART XIII{}BJECTIONS5O-Objections.

PART XIV-FORFEITURE AND $EIZURE5l-Power to seize goods.

PART XV-SETTLEMENT OF CASES AND RULINGS BY THECOMMISSIOI\ER52-Power of the Commissioner to compound offences by agreement.53-Binding public rulings.54-Making a public ruling.5s-Withdrawal of a public ruling.5G-Binding private ruling.57-Refusing an application for private ruling.58-Making a private ruling.sg-Withdrawal of a private ruling.

PART XVI-MISCELLATIEOUS PROVISIONS60-Effect of imposition or variation of tar.6l-Application of East Africa Community Customs Management Act,2004.62-T ax avoidance schemes.63-Regulations.64-RepeaL of Cap.476, transitional and savings provisions.FIRST SCHEDULE,-EXEMPT SUPPLIESPART I-GOODSPART II-SERVICES I!'SECOND SCHEDULE_ZERO RATINGPART A-ZERO RATED SUPPLIES

PART B-ZERO RATED SUPPLIES TO PUBLTC BODIES,PRIVILEGED PERSONS A}tD INSTITUTIONS


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A Bil foni Ar frf of l$red So revipu and updale fu hrre@E tD r*! added rax; io prwille fon lbtnpm of r*D ffi tex on upplhr nde- -1 h, r tqleffi fulo lfuuye, ad for cmechdIEpcc: I ',SNjI#TED by ee Parliarncnt of Kcuyq as fdluw-IAXT il*PREil.IMIITTARYl. TLio "il*tury bccitpd as thc Value AdHTax Apt,20{3 aod #il oap ina opcraion os sudr * s 6cf*irefi Somy my, by ilotice in t.he Clarffi,r ryifr.e (l) Ia #dr Art, rnlcss th contcxt orhprwirc

*equires-1nircrrff :ircftdcr avql dcscripcion of mtcya*o,fqr totansputbyehof lhnnan beingo u goods;'tcsffndrcanr-{r} a 'tgf;ir*smont ffiurn eubmittcd Bderrecti*m45;(t) .a arssffirart made by ffrc Cosn*rdoncrrrikgion {5; s(c) nnemcadod assessfiicfitunder sqtioa{6;

*Asthrriti- ruaans thc Kenya Revearre Adhority'#*oi$y *c Kenya Revenue Authority Actffioniid,ffitrrtn in rslstiofi to any provisiur of this.tlc*, tsar *y &r appointed uoder section 3 who hasbcrr, 'adisiul ty ftc CorarEissioncr to. pefiorm anyfurciiffi ilecr'c in rcg*t of dret provision;


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The Value Addcd Tax BilI, 20 I 3 265"business" rneans-(a) trade, comnlerce or manufacturc, profession,Yocation or occupation ;(b) any other activity in the natwt of trade,commerci or rnanufacture, profession,vocation or occupatioq(c) any activity carried txr by a perso$continuously or rcguldy, whcthcr or not forgain or profit and which ipvolves, in part or inwhole, the supply of goods or scrviccs forconsideration; or(d) a supply of property by way {lasr, liceuce,or similar arrangement"

but does not inelude -(i) employment;(ii) a hobby or lcisre miviry of NLindividual; or(iii) an activity of e pcrsm, othcr than enindivid,ual, thrt if elriod orl B i&tindividual would ooilrc within su.b-paragraph (il);

tabinet Secretary" rne:rm Ge Cs.hinst Secrcaryresponsible for matters rel*ting tofimnm;"l'ornmissione/' means the Cqnmissiorcr4encr*Iappoifted under the Kenya Revcnue Adbffiity hc.,, w;with respect to povrers or frmctions tl*t have bcen

delegated under that Act to anothcr CorrnisJioner, frddher Commissioner;caq*.w


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Cap.486.

Cap -51 7

The Value Added Ta.r Bill. 2013"company" means a company as defined in theCompanies Act or a corporate body formed under any otherwritten law, including a foreign law, and includes anyassociation, whether incorporated or not, formed


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Tlrc Vuluc Added Ta.r Bill.20l-l 267"input tax" means -

(a) tax paid or payable. on the supply to aregistered person of any goods or services tobe used by him for the purpose of hisbusiness; and(b) tax paid by a registered person on theimportation of goods or services to be usedby him for the purposes of his business;

"money" mgans -(a) any coin or paper currency that is legaltender in Kenya;(b) a bill of exchange, promissory noie, bankdraft, or postal ormoney order;(c) any amount provided by way of paymentusing a debit or credit card;

. "non-resident person" has the meaning assigned to it irsection 9;"official aid funded project" means a project funded bymeans of a grant or concessional loan in accordance withan agreement between the Government and any foreign

government, agency, institution, foundation, organizationor any other aid agency;"output tax" means tax which is due on taxablesupplies;"person" means an individual, company, partnership,association of persons, trust, estate, the Government, aforeign government, or a political subdivision of the

Government or foreign government;


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The Value Added Tat Bill, 20/, 3"registered person" means any person registered undersection 34, but does not include an export processing zone

"regulations" tneans any subsidiary legislation madeunder this Act;"services" means anything that is not goods or money;"service exported out of Kenya" means a serviceprovided for use or consumption outside Kenya;"ship stores" means goods for use in aircraft or vesselsengaged in international transPort for consumption bypassengers and crew and includes goods for sale on boardsuch aircraft or vessels;"supply" meafis a supply of goods or services;"supply of goods" rneans -(a) a sa[e, exchange, or other transfer of the rightto dispose of the gmds as ownet; or

(b) the provision of eleCtrical or thermal energy'. gas or water;"supply of services" means anything done that is not a

supply of goods or money, including -(a) the performance of services for anotherperson;(b) the grant, assignment, or surrender of anyright;(c) the making available of any facility or

advantage; or(d) the toleration of any situation or the refrainin;. : .,f.r.o^r.n th9$piqg,q.+Fy,nf;t;

"supply of imported services" means a supply ofservices that satisfies the following conditions -


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TleVdfue ld*dfbrGlfi"ffill(u\ the tdfplt'i}Eadd.by r plrffi rlo ls mt arcgisltituE'.iiffff b e Pttffi xh is r

registcrud fatm q e por rcgfctcred pcffcofi;(b) thc sr#I *odd hacc hctr r texeHc sndyif it h*dtecn mltc in lCaryrr;ad(e) thc rqf*atd-Ptrson *crld na haie boqrcrtitled to a crc#t fsr thc full sromt of il@tex pryffe 6 thc scrviecs fted bcstr acSftA

by mo.ry*irlBSlc ruPP[5'ntax' ntctffi thc +gHe ffi tax et*rgea&te u#dtr

this Act;"tax coruprtcriee# +y*atll 'fiIetrsl lry ldtwere ehardware for usc'in *oring ruricvillg, poces*ing: ordisscrninating irtrormtim relating to lax;

*tax periof ,frclts dm ca}cildtr mdffih or euch otrIerperiod as may bd p;cjtfbod in the rcEilla(;isrc;"'tax registrctigl ec*ifioWe" maffi$ a tfrYi regi*rariertcertificate isitred by the Contrniesio'Der urtder gg*iom3Ei';"lfrx ]Gprclefifrixe* firctn$ . 'lxf, rc'Ptrscfriltivc

appointcd trndcr rcgion 9;"taxable strpflf ,rlc.rs a $Pply, cher than ulcxer,lpl supply, rmdc in Kcmya bg r pcrrn in the GffirlIC (rfu*herance. of t br*ircsc erriricd u W tftc persffi,inelrding i supdy "iti*lc in sffiIFetioo *ith thcomnpllcemcnt or termination if abusirp$s'"a*tble valuc' 'mcans thc vdue dcternriried inaecordgrtwe with scfiion l!'and l4t,*vehicl' ineluder'every .de*ctfpion of corlveyaficefat ttetransport by lrrd of'hufian beirgr ot goods;'tfrrp;ttad* ouprpg" meers h spdy liste$ in theSecond Schedulc.


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Funciions elrd powcrsof thc Comdrisslonerand othcr offlccrs.

The Value Added Tatc Bill, 2013(2) For the purposes of this Act, goods shall beclassified by rcference to the tariff numhrs set out inAnnex I to the Protocol on the Establishment of the EastAfrican Community Customs Union and in interpretingthat Annex, the general rules . of interpretation Jet ouitherein shall, with the necessary modifications, apply.

PART II -ADMINISTRATION3. (l) The Commissioner shall be responsible for thecontrol and collection of, and accounting for, tax and shall,

subject to the direction and control of the CabinetSecretary, have the superintendence of all matters relatingthereto.(2) The Commissioner shall appoint such officers asmay be necessary for carrying out the purposes of this Act.((3) The Commissioner may authorise any officerappointed under this section to perform any of thefunctions of the Commissioner under this Att or thereiulations, other than the functions of the Commissionerunder this section.(4) Every authorised officerappointed under thissection shall enforce, and ensure due compliance with, theprovisions of this Act and the regulations, and shall makeall due inquiries in relation thereto.(5) Every authorised officer appointed under thissection shall, on demand, produce such documentsestablishing his identity as may be approved by theCommissioner.(O Every authorised officer shall, in carrying out theprovisions of this Act, regard and deal with all documentsand information relating to tax and all confidentialinstructions in respect of the administration of this Actyhich may come into his possession or to his knowledgein the course of his duties as secret.


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The Value Added Tax Bill, 2013 27t(7) Any decision made and any notice . orcommunication issued or signed by any authorised officermay bb withdrawn-or amended by the Commissioner or bythe authorised officer concerned, and shall be for th!purposes of this Act, until it has been so withdrawn, bedeemed to have been made, issued or signed by theCommissioner.4. For the purposes of carrying out the provisions ofthis- Act, every authorised officer shall, in the performanceof his duties, have all the powers, rights, privileges and

protection of a police officer.PART III-CHARGE TO TAX

5. (l) A tax, to be known as value added tax, shall beCharged in accordance withthe provisions of this Act on -(a) a taxable supply made by a registeredperson in Kenya;(b) the importation of taxable goods; and(c) h supply of imported taxable services.

(2) The rate of ax shall be -(a) in the case of a zero-rated supply, zeropercent; or

(b) in any other case, sixteen percent of thetaxable value of the taxable supply, thevalue of imported taxable goods or thevalue of a supply of imported taxableservices.(3) Tax on a taxable supply shall be a liabiliry of theregistered person making the supply and, subjeci to theprovisions of this Act relating to accounting and payment,shall become due at the time of the supply.

Authoriscd olliccrs tohavc powers of policcofficcrs.

Chargc to-tax.


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272 The Value Added TarBill, 2013(4) The amount of tax payable on a taxable supply, ifany, shall be recoverable by the registered person from the

receiver of the supply, in addition to the consideration.(5) Tax on the importation of taxable goods shall be

charged as if it were duty of customs and shall become dueand payable by the importer at the time of importation.(6) Tax on the supply of imported taxable services shallbe a liability of the registered person receiving the supplyand, subject to the provisions of this Act relating toaccounting and payment, shall become due at the time of thesupply

Cab,netsccretary 6. (l)The Cabinet Secretary may, by order publishedmav amcnd thc ratc of . .il:""-"" in the Gazefte, amend the rate of tax by increasing ordecreasing any of the rates of tax by .an amount not'exceeding twenty-five percent of the rate specified insection 5(2)(b).

Zero ranng

(2) Every order made under subsection (l) shall be laidbefore the National Assembly without unreasonable delay,and shall cease to have effect if a resolution of the NationalAssernbly disapproving the order is passed within twentydays of the day on which the National Assembly next sitsafter the order is laid, but without prejudice to anythingpreviously done thereunder.7. (l)Where a registered person supplies goods orservices and the supply is zefo rated, no tax shall becharged on the supply,'but it shall, in all other respects, betreated as a taxable supply.

(2) A supply or importation of goods or services shallbe zero-rated under this section if the goods or services are ofthe description for the time being specified in the SecondSchedule.PART IV-PLACE AND TIME OF SUPPLYPlaceorsupplvor 8. (l) A supply of services is made in Kenya if theserv iccs. place of business of the supplier from which the servicesare supplied is in Kenya.


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The Value Added Ta.r Bill,20l3(2) .lt the place of business of rhe supplier is not inKenya, the supply of services shall be cleem#to be rnade inKenya if the recipient of the suppry is'not a registered person. and-(a) the serviceg are physically performed in Kenyaby a person who is in Kenya at the time tfsupply;(b) the services are directly related to immovableproperty in Kenya;(c) the services are radio or terevision broadcastinsservices received at an addres in f{.nyu;---"""'b(d) the services are electronic services delivered to aperson in Kelrya at the. time of supply; or(e) th_e supply is a transfer or assignment of, or grantof a right to use, a copyright, patent, traderiark,or similar right in Kenya.

(3) In this secrion -

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"electronic services,' means anyservices, when provided or deliveredtelecommunications network -of the followingon or through a

(a) websites, web-hosting, or remote maintenance ofprograms and equipment;software and the updating of software:images, text, and information;access to databases;

(b)(c)(d)


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The Value Added Tar Bill. 201 3self-education packages;music, films, and games, including games ofchance; or

(g) political, cultural, artistic, sporting, scientific andother broadcasts and events including broadcasttelevision.9.(l) A person who is required to apply forregistration under seclion 34 but who does not have a fixedplace of business in Kenya shall-

(a) appoint, in writing, a tax representative inKenya; and(b) if required to do so by th'e Commissioner, lodge

a security with the Comrnissioner in accordance. with section 27.(2) lf a non-resident person to whom this sectionapplies fails to appoint a tax representative within theperiod prescribed under section 34, the Commissioner mayippoint a tax representative for the person.(3) The tax representative of a non-resident person shall

(a) be a person normally residing in Kenya;(b) have the responsibility for doing all thingsrequired of the non-resident under this Act; and(c) with the non-.resident person ,be jointly andseverally liable for the Payment of all taxes,fines, penalties, and interest imposed under this

Act.(4) The registration of the tax representative shall be in

the name of the non-resident person being represented.

(e)

(0

Appointrncnt of axrrprcscntativc


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The Value Added Tar Bill, 201 3(5) A person may be a tax representative for more thanone non-resident person, in which case the person shall have

a'separate registration for each rion-resident person.rc) The Commissioner may prescribe the mode,manner, and requirements for appointment of a taxrepresentati ve andthe respon si bi I iti es of the representative.10. (l) If a supply of imported taxable services is rrcatmcntormade to a registered person, the registered person shall be importedserviccs.deemed to have made a taxable supply to himself.(2) lt a registered person referred to in subsection (l)is entitled to -(a) a credit for part of the amount of input taxpaye.ble, the value of the taxable supplyunder subsection (l) shall be reduced by anamount equal to the supply that is entitled

for the input tax credit; or(b) a full input tax credit payable on theimported taxable services under subsection(l), the value of the taxable services shallbe reduced to zero.

(3) The output tax in respect of a deemed taxablesupply under subsection (l) shall be payable by theregistered person at the time of the supply.

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(4) For the purposes of this sectign, if a registeredperson carries on a business, both in ani outside Kenya,the part of the business carried on outside Kenya shall betreated as if it were carried out by a person separate fromthe registered person.11. A supply of goods occurs in Kenya if -

(a) the goods are delivered or made available inKenya by the supplier;Place of supply ofgoods.


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The Value Aclded Tau Bill, 201 3

Time of supply ofgoods and scrvrccs.

(b) the supply of the goods involves theirinstallation or assembly at a placb in Kenya;and(c) the goods are delivered outside Kenya, thegoods were in Kenya when theirtransportati on commenced.

12. (l) Subject to subsection (3), the time of supply,including a supply of imported services, shall be the earlierof- (a) the date on which the goods aredelivered or services performed;(b) the date on which the invoice for thesupply is issued; or(c) the date on which payment for the supplyis received, in whole or in part.

(2) The time of supply of goods by means of avending machine, meter, or other device operated by useof a coin, note, or token shall be on the date the coin, note,or token is taken from the maching, meter, or dther deviceby or on behalf of the supplier.(3) If -

(a) goods are supplied under a rentalagreement; or(b) goods or services are made by meteredsupplies, or under an agreement or lawthat provides for periodic payments,

the goods or services shall be treated as successivelysupplied for successive parts of the period of the lease oragreement, or as determined by law, and the time of eachsuccessive supply shall be the earlier of the date on whichpayment for the successive supply is due or received.


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The Value Added Tax Bill, 2013 277(4) The time of supply of imported goods shall be -

(a) in the case of goods cleared for homeuse directly at the port of importation, orgoods elttered for removal to an inlandstation and there cleared for home use, atthe time of customs clearance;(b) in the case of goods removed to alicensed warehouse subsequent toimportation, at the time of final clearancefrom the warehouse for home use;(c) in the case of goods removed from anexport processing zone, at the time ofremoval for home use;(d) in any other case, at the time the goodsare brought into Kenya.PART V-TAXABLE VALUE

13.(l) Subject to this Act, the taxable value of a raxablevalueofsupply, iriitraing a supply of imported services, shall be- supprv'(a) the consideration for the supply; or(b) if the supplier and recipient are related, theopen market value of the supply.

(2) The taxable value of a supply of mobile cellularservices shall be the value of the services as determined forthe purposes of the duty imposed under the law relating toexcise.(3) Subject to subsections (4) to (6), the consideratiortfor a supply, including a supply of imported services, shallbe the total of -


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278 The Value Added Tax Bill.2013(a) the amount in money paid or payable,directly or indirectly, by any person, for the

supply;(b) the open market value at the time of thesupply of an amount in kind paid or payable,directly or indirectly, by any person, for thesupply; and(c) any taxes, duties, levies, fees, and charges

(other than value added tax) paid or payableon, or by reason of the supply,reduced by any discounts or rebates allowed andaccounted for at the time of the supply.

(a) The consideration for a supply shall include theamount charged for -(a) any wrapper, package, box, bottle, or other. container in which goods are supplied;(b) any other goods contained in or attached tothe wrapper, package, box, bottle or othercontainer referred to in paragraph (a);or(c) any liability that the purchaser has to pay to

the vendor by leason of or in respect of thesupply in addition to the amount charged asprice.(5) In calculating the value of any services for thepurposes of subsection (l), there shall be included anyincidental costs incurred by the supplier of the services inthe course of making the supply to the client:Provided that, if the Commissioner is satisfied that thesupplier has merely made a disbursement to a third partyas an agdnt of his client, then such disbursement shall beexcluded from the taxable value.


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The Value Added Tar Bill,20l3 279(6) The consideration for a supply shall rryt include -

(a) in the case of a supply of goods under a hirepurdhase agreement, any financial chargepayable in relation to a supply of credit underthe agreement; or(b) any interest incurred for the late payment ofthe consideration for the suPPlY'

(7) The consideration for a supply of accommodation No.28or20t1.o, ,.riuurunt services shall not include the Tourism Levyimposed on the supply under the Tourism Act; or(8) For the purposes of this Act, a person is related toanother person if-

(a) either person participates, directly orindirectly, in the management, control orthe capital of the business of the other;

(b) a third person participates, directly orindirectly, in the managefnent, control orcapital of the business of both; or(c) an individual who participates in themanagement, control or capital of the

businiss of one, is associated by marriage,consanguinity or affinity to an individualwho participates ih the management,contro[ or capital of the business of theother.14.(l) The taxable value of imported goods shallbe the sum of-

(a) the value of the goods ascertained for thepurpose of customs duty; in accordancewith the East African Community CustomsManagement Act, 2004, whether or notany dlty of customs is payable on thegoods;

Taxablc valuc ofimponcd goods.


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280 The Value Added Tax Bill, 2013

Dcemcd taxablcsupply.

Dcbit and crcdit notc.

(b)J to the extent not included underparagraph (a) _(i) the cost of insurance and freightincurred in bringing the goods"toKenya; and(ii) the cost of services treated as partof the imported goods under thissection; and

(c) the .amount of duty of customs, if any,paid on those goods.(2) Unless the context otherwise requires, a supply ofservices that is ancillary or incidental tg ihe importation ofgoods shall be treated as part of the importaiion.15. (l) An application of taxable supplies by aregistered person for use outside his business shall be a.taxable supply made by the person.(2) A taxable supply under subsection (l) shall bedeemed to have been made by the person on the date thesupply is first used outside the business. )16. (1) Where goods are returned to the registered

person or, for good and valid ieason the regist.r"dprrrondecides for business reasons, to reduce the valui of asupply after the issue of a tax invoice, a credit note shall beissued for the amount of the reduction:Provided that a credit note may be issued only withinsix months after the issue of the relevant tax invoiie.

(2). A registered person who issues a credit note underthis section shall reduce the amount of his output tax in thetax period in which the credit note was iisued by anamount that bears the same proportion to the tax originallycharged as the amount credited bears to the total irrountoriginally charged and the amount of tax so credited shallbe specified on the credit note.ii

ll


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The Vulue Added Tar Bill,20l3 281(3) A registered person who receives a credit note for

the supply in respect of which'he has claimed deductibleinput tax, shall reduce the amount of deductible input taxin the month in which the credit note is received, by theamount of tax credited.(4) Where a registered person has issued a tax invoicein respect of a taxable supply and subsequently makes afurther charge in respect of that supply, or any transactionassociated with that supply, the person shall, in respect ofthe further charge being made, issue a debit note, and shallshow on it the details of the tax invoice issued at the timeof the original supply.(5) A registered person who receives a debit noteissued in compliance with subsectiorl (4) may, if thesupply is eligible therefor'and in so far as it has notpriviousty bJen claimed, claim as deciuctible input tax

such further amount of tax that is being charged, in themonth in which the further charge was made, or in the nextsubsequent month.(6) A credit or debit note issued under this sectionshall be serially numbered and shall include details of thename, address and personal identification number of theperson to whom it is issued and sufficient details toidentify the tax invoice on which the supply was made andthe tax that was originally charged.

PART VI_DEDUCTION OF INPUT TAX17. (l) Subject to the provisions of this section andthe regulations, input tax on a taxable supply to, orimportaton made by, a registered person may, at the endof the tax period in which the supply or importation

occurred, be deducted by the registered person, subject tothe excoptions provided under this section, from the taxpayable by the person on supplie$ by him in that taxperiod, but only to the extent that the supply or importationwas acquired to make taxable supplies.

Crcdit for inPut taxagainst outPut tax'


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282 i The Value Added Tax Bill. 2013(2) lf, at the time when a deduction for input taxwould otherwise be allowable under subsection (-l), theperson does not hold the documentation referred to insubsection (3), the deduction for input tax shall not beallowed until the first tax period in which the person holdssuch documentation.Provided that the input tax shall be.allowable for adeduction within three months after the end of the taxperiod in which the supply or importation occurred.(3) The documentation for the purposes of subsection(2) shall be -

(a) an original tax invoica issued for the supplyor a certified copy;(b) a customs entry duly certified by the propeofTicer and a receipt for the payment of tax;(c) a.customs receipt and a certificate signed bythe proper officer stating the amount of taxpaid, in the case of goods purchased from a' customs auction;(d) a credit note in the case of input taxdeducted under section 16(2);or(e) a debit note in the case of input tax deductedunder section l6(5).

(4) A registered person shall not deduct input taxunder this Act if the tax relates to the acquisition of-(a) passenger cars or mini buses, and therepair and maintenance thereof includingspare parts, unless the passenger cars ormini buses are acquired by the registeredperson exclusively for the purpose ofmaking a taxable supply of thatautomobile in the ordinary course of acontinuous and regular business ofselling or dealing in - . or hiring ofpassenger cars or mini buses; or


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The Value Added Tax Biil' 2al 3 283(b) entertainment, restaurant andaccommodation services unless -

(i) the services are provided in theordinary course of the businesscarried on by the Person toprovide the services and theservices are not 'supplied to anassociate or emPloYee; or(ii) the services are provided while

the recipient is awaY from homefor the purposes of the business ofthe recipient or the reciPient'semployer.Provided that no tax shall be charged on the supplywhere no input tax deduction was allowed on that supplyuirder this subsection:(5) Where the amount of input tax that may bededucted by a registered person under subsectioh (l) inrespect of a tax period exceeds the amount of outpu-t taxdue'for the period, the amount of the excess shall becarried fsrward ps input tax deductible in the next taxperiod:Provided that any such excess shall be paid to the

registered person' by the Commissioner where theCommissioner is satisfied that such excess arises frommaking zero-rated suPPlies.(6) Subject to this Act, if a laxable luPply to, or ataxable import by, a registered person during a tax periodrelates partly to- making taxable supplies and partly foranother use, the input tax deductible by the person foracquisitions made during the tax period shall be

determined as follows -


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284 The Value Added Ta.r Bill. 20lj(a) full deduction of all the inpur tax attributableto taxable supplies;(b) no deduction of any input tax which isdirectly attributable to other use; and(c) deduction of input tax attributable to bothtaxable supplies and other uses calculatedaccording to the following formula:

xBC,

Tax paid prior torcgistration.

where -A is the rotal. amount of input rax payable by theperson during the tax period on acquisitioni thatrelate _partly to making taxable supplies andpartly for another use;B is the value of all taxable supplies made by theregistered person during the period; andC is the v.alue of all supplies made by theregistered person during the period in Kenya.(7) lt the fraction of the formula in subsection (6) for atax period -

(a) is more than 0.90, the registered personshall be allowed an input tix credit ior allof the input tax comprising component Aof the formula; or(b) is less than 0.10, the registered personshall not be allowed any input tax creditfor the-input tax comprising -component Aof the formula.

18. (l) Where-(a) on the date.exempt supplies made bya registered person become taxable,and the person had incurred input taxon such supplies; or


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The Value Added Tax Bill,2013 285(b) on the date he is registered, a personhas incurred tax on taxable supplieswhich are intended for use in making

taxable supplies,the person may, within three months from that date, claimrelief from any tax shown to have been'incurred on suchsupplies:

Provided that this subsection shall apply where suchsupplies are purchased, within the period of twenty-four*6ntt t immediately preceding registration or the exemptsuppl ies becomin g' taxable.

(2) Where the Commissioner is satisfied that theclaim for relief is justified, he shall authorise the registeredperson to make an appropriate deduction of the reliefflaimed under subsection (l) from the tax payable on hisnext return.(3) The claim for relief from tax under subsection (l)

shall be made in the prescribed form.PART VII . COLLECTION AND RECOVERY OFTAX19. (1) Tax shall be due and payable at the time of whcntaxisduc.supply.

(2) Notwithstanding the provision of subsection (1), aregisteied person may defer payme-nt of tax due to a datenoi luttt than the twentieth day of the month succeedingthat in which the tax became due.20. (1) Notwithstanding the provisions of this Act,the Commissioner may, with the prior approval of theCabinet Secretary, in ahy case where he is of the opinionthat there is-

(a) impossibility, or undue difficulty orexPense, of recoverY of tax; or(b) hardshiP or inequitY, :refrain from assessing or recovering the tax in questionand thereupon liabilifi to the tax shall be deemed to beextinguished or the tax shall be deemed to be abandonedor remitted, as the case maY be.

Relicf bccausc ofdoubt or difficulty inrccovcry of tax.


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286 The Value Added Ta.r Bilt. 20 t 3

Intcrcst for latcpaymcnt of tax.

. (2) In any case which has been referred to him andwhere he conside.rs it applopriare, the Cabinet S;;;rarymay, in writing, direct the Commissioner _(a) to take such action as the CabinetSecretary may deem fit; or(b) to obtain the directions of the court uponthe case.

_ 21. (l) Where any amount of tax remains unpaidafter the date on which it becomes payable under r..iion1.9, an- interest equal to two percent per month or partthereof of the unpaid amount itrarl rorihwith be aue 'anopayable.. (2) Any int_erest charged under subsection (l) shall, forthe purpose of this Act relating to the coitection 'anOrecovery of tax, be deemed to be tax and any interest whichremains unpaid after becoming due hnd payable undirsubseetion (l) shall attract further interest .quut to two fercent per mOnth or part thereof:

Provided that the interest chargeable under thissubsection shall not exceed one hundred percent of the taxoriginally due.(3) The Commissioner may, upon application by a

person from whom any interest is due under'subsection (l)9r (2),_grant remission of the whore or part of the interistdue, if satisfied that such remission is justified, and shallmake quarrerly reports to the cabinei Secretary on tlieremission granted under this subsection:Provided that where the amount of interest exceedsone million five hundred thousand shillings, remissionshall be subject to the prior written approval irtne cabinit

Secretary.


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The Value Added Tax Bill,20l3 287(4) Upon receipt of an application under subsection(3), the Commissioner shall, where the applicant has paidthe principal tax in full, suspend the -charging of- theinterest pending the determination of the application.(5) Where the remission under subsection (3) is notgranted or is granted in respect of only part of the interest,the balance of the interest shall become due and payablewithin ninety days of the determination,of the appliiation.(6) If the balance of the interest payable undersubsection (5) remains unpaid after the -eipiry of theprescribed period, a surcharge at the rate of two percentper month or part thereof,-shall forthwith be due andpayable.(7) The Commissioner shall maintain a public rpcordof each remission together with the reasons thereof whichshall be reported to the Auditor General on a quartirlybasis.

^ . 22.(l ) A person shall not be entitled to obtain deliveryof imported taxable goods from the control of the customsunless the person has paid, in full, the correct amount oftax Uue.(2) Notwithstanding itre provisions of any otherwritten law, any taxable goods which are imported by air,land or water shall be produced by the import-er to a properofficer of customs at the customs station at or nearesf to the

-place of entry, and any importer who fails to prbduce anysuch _goods commits an offence and the goods in respect ofwhich the offence was co.mmitted shall be liable toforfeiture.

Importcd Boodssubjcct to customscontro[.


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288 The Vatue Added Tar Bill,20l3

Risk of non-peyrncnrof tix,I

(3) The Commissioner of Customs -(a) shall collect tax payable under this Acton imported goods at the time ofimportation and shall, at that time, obtainsuch information as may be prescribed inrcspect of the importation; and

(b) may make arrangements for suchfunctions to be performed on his behalfin respect of imported goods through thepostal service.(4) For the purposes of this section, the Commissioner.of Customs may exercise any power conferred upon himby the East African Community Customs ManagementAct, 2004 as if the reference to import duty in that Actincludes a reference to tax payable on imported goodsunder this Act.23. (l) Notwithstanding any other provision of

this Act, where the Commissioner has reason to believethat any tax payable by any person is at risk of non-payment -(a) due to the imminen0departure of the personfrom Kenya;(b) where the person, being a company, is

about to be liquidated or otherwise woundup or to cease business; or(c) for any other suffrcient cause,

the Commissioner may, whether or not the due date for thepayment of that tax has reached, by notice in writing, issuean assessment of the tax owing, requiring that person topay the tax within the time specified in the notice.(2) Any person who fails to pay'tax when required todo so under subsection (l) commits an offence.


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The Value AddedTax Bill,201324. (l) Where any amount of tax is due and payableby a person, the Commissioner may, ifistead of suing forthe tax, recover it by distress, and for that purpose may, by

order under his hand, empower an.authorised officer tolevy distress on the goods and chattels of.the person fromwhom the tax is recoverable and the officer may, at thecost of that person, employ such servants or agents as hemay think necessary to assist him in the levying thedistress:Provided that where the full amount of tax due andpayable -(a) is not recovered by distress, theCommissioner may recover the outstandingamount in any other manner provided by thisAct; or

(b) has been paid after the issue of an orderunder this section and before the levying ofdistress, any costs and expenses incurred bythe Commissioner before payment of the taxshall be deemed to be a debt due and payableto the Government by the pcrson in respect ofwhom the order was issued and may berecovered by the Commissioner as tax underthis Act.

(2) For the purpose of levying distress under thissection, the authorised officer may, in addition toemploying such servants or agents as he may considernecessary, require a police officer to be present whiledistress is being levied, and any police officer so requiredshall comply with the requiremenL(3) Any property distrained under this scction shall'bckept for ten days, either at the premises at which distress

was lbvied or at such other place as the authorised ofFrcermay consider appropriate, at the cost sf the person fronrwhom the tax is recoverable:

Collcctim of tu bydiscrinr


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290 The Value Added Tax Bill,20l3

Porver to collcct taxfrom person orvrngmoncy to thcrcgistcrcd pcrson.

Provided that where goods are of a perishable nature,the Commissioner may direct that the goods shall be soldforthwith, either by public auction or by private treaty, andthat the proceeds of sale shall be retained and dealt with asif they were the goods.

(4) If the person from whom tax is recoverable bydistress does not pay the tax together with the costs of thedistress within the period of ten days referred to insubsection (3), the goods or chattels disffained upon shallbe sold by public auction for payment of the tax and costsand the proceeds of the sale shall be applied first towardsthe cost of taking, keeping and selling the goods andchattels distrained upon and then towards the tax, and anyremaining proceeds shall be paid to the person from whomthe goods were distrained.25. (l) Where any sum by way of tax is due andpayable by a registered person, the Commissioner may, bynotice in writing, require -

(a) any person from whom any money is due oraccruing or may become due to theregistered person;(b) any person who holds or may subsequentlyhold money for or on account of theregistered person;(c) any person who holds or may subsequentlyhold money on account of some other personfor payment to the registered person; or(d) any person having authority from some otherperson to pay money to the registeredperson,

to pay to the Commissioner that money or such sum as issufficient to pay the tax that is due and payable.


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The Value Added Tar Bill, 2013 29t(2) Where a person required. under subsection (l) to

pay money to the Commissioner claims to be or to havebecome unable to do so by reason of lack of moneys heldby, or due from him, he shall within seven working daysnotify the Commissioner accordingly, in writing, statingthe reasons for his inibility to do so.(3) Unless the Commissioner is satisfied with thereasons given under subsection (2) -

(a) sufficient moneys for the payment of the taxspecified in the notice shall be presumed tobe held by such person for, or due from himto, the registered person in respect of whomthe notice is given under subsection (l); and(b) in any proceedings for the collection orrecovery of that tax, such person shall be

gtopped from asserting the lack of thosemoneys.(4) The Commissioner may, by notice in writing, atany time require any person to furnish him wit[in areasonable time, not being less than thirty days from thedate of service of the notice, with a return showing anymoneys which may be held by that person for, or due byhim to, the registered person from whom tax is due.(5) All payments made in accordance with a noticeunder this section shall be deemed to be made on behalf ofthe registered person and of all other persons concerned,and shall constitute a good and sufficient discharge of theliability of such person to the registered person, or anyother person.(6) Any person who, without lawful authority orexcuse -

(a) fails to comply with the requirement of anynotice given to him under subsection (l) or(4); or(b) discharges any liability to a registered personin disregard ofsuch notice,


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292 The Value Added Tax Bill, 20t 3commits ari offence and is liable on conviction to a finenot exceeding one hundred thousand shillings, or toimprisonment for a term not exceeding six moriths, or toboth, and shall also be personally liable to pay to theCommissioner the amount of any liibility so dischirged.

hcscrvation or runds' *rr31; [1l.rYH; "tJ;rs"]mi ssioner has reasonable

(a) has made taxable supplies on which tax hasnot been charged; or(b) has collected tax which has not beenaccounted for; and(c) is likely to frustrate the recovery of tax ifinformation on the Commissioner'sr suspicion under .this subsection, is disclosedi to him,

the Commissioner may make an ex-parte application to the.High Court, in this section referred to as .ethe Court", andth9 Court may issue an order to any person or institutionholding fu1$s beloriging to the pLrion, prohibiting thetransfer, withdrawal or disposal of, pr any other dea-lingsinvolving such funds.(2) An order under subsection (l) shall be valid forthirty days and may be exterded by the Court onapplication by the CommiSsioner.

. (3) A person whose funds are the subject of an orderunder this section may, within fifteen daysbf being servedwith the order, Bpply to the Court to disiharge or iary theorder or dismiss the application under subsection (2). '(4) Where the Court has issued an order under thissection, the Commissioner shall, within thirty days of theorder, determine the tax due and payable, issle a notice ofassessment to that person and commence recovery of suchtax in accordance with the provisions of this Act.(5) Upon issuance of a notice of assessment undersubsection (4), the order shall automaticaily expire unlessextended. by the Cgurt upon applicition by theCbmmissioner under subsection (2).


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The Value Addcd Tar Biil,2Al3 *t(6) A person served with an order under this section

who, in any way, interferes with thg funds to which theorder relates commits an offence.(7) A person who preserves funds or any accountpursuant to a Court order issued under this section, shallfor all purposes, be deemed to have acted within thcauthority thereof and such person and all other personsconcerned shall be indemnified in respect of the actionstaken in connection therewith, against all proceedings,i civil or criminal and all pr@ess, judicial or extrajudicial,notwithstanding any provisions to the contrary in anywritten law, contract or agreement.27. (l) Where a person being the owner of land orbuildings on land situated in Kenya fails to Pay a tax dueand payable under this Act, the Commissioner may bynotice in writing inform that person of his intention toapply to the Chief Land Registrar for the land or buildingsto be the subject of security for tax of an amount specifiedinthe notice.(2) lt a person on whom a notice has been servedunder this section fails to pay the whole of the amountspecified in the notice within thirty days of the date ofsirvice of the notice, the Cornmissioner may, ry notiee inwriting, direct the Chief Land Registrar that the land and

buildings, to the extent of the interest therein, be thesubject of security for the fax of a specified arnount andthe Registrar shall, without fee, register the direction as ifit were an instrument of mortgage overr or charge on, asthe case may be, the land and buildings and thereupon, thatregistration shall, subject to any prior mortgage or acharge, operate while it subsists in all respects as a legalmortgage over or charge on the land or buildings to securethe amount of the tax.(3) The Commissioner shall, upon the paymnt of thewhole of the amount of tax secured under subseetion (2),by notice in writing to the Chicf l*and Registrar, cancel thedirection made under that subrcction and the Registrarshall, without fee, record the cancellation thgreupon andthe direction shall cease to subsist.

Sccurity on ProPGrtYfor unpeid trx.


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The Value Added Tax Bill,20l3raxpaveblctothc 28 (1) Any tax payable under this Act shall be paidcommissioncr' to the commissioner.

29+

Tax to bc rccovercdas civil dcbt.

Refund of tax paid incror.

Rcfund of tax on baddcbs.

(2) Any person who fails to pay tax due from him onor before the ilay upon which ia ii payable commits anoffence.(3) The amount of any tax payable under this Act shallnot be abated by reason only of the conviction of theperson liable for the payment theieof for an offence under

subsection (2).29. Without prejudice to any other remedy, any taxdue and payable under this Act may be recovered by theCommissioner as a civil debt due to the Government, and,where the amount of the tax does not exceed one hundredthousand shillings, the debt shall be recoverablgsummarily.PART VIII-REFUND OF TAX30. Where, in respect of any supply, tax has beenpaid in error, the Commissioner stiall, eicept as otherwiseprovided by the regdlations, refund such tax:

Provided that no refund shall be made under thissection unless a claim in respect thereof is lodged withinthree months from the date the tax became due andpayable under section 19.

31. (l) Where a registered'person has made a supplyand has accounted for and paid tax on that supply but hasnot received any payment from the person liable to pay thetax, he may, after a period of three years from the date ofthat supply or where that person has become legallyinsolvent, apply to the Commissioner for a refund of tnbtax involved and subject to the regulations, theCommissioner may refund the tax:

lII


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The Value Added Tax Bill.20l3 295Provided that no application for a refund shall bemade under this section ifter ttre expiry of five years from

the date of the suPPlY.(2) Where the tax refunded under subsection (l) issubsequently recovered from the recip.ient of the supply'it " rlgiste?ed person shall refund' the tax to theCommiisioner within thirty days of the date of therecovery.(3) tf payment is not made within the time specified

under'subs.ftion (2), an interest of two per cent per.month; p;ri ihereof of tire tax refunded shall forthwith be dueand payable:Provided that the interest payable shall not exceed onehundred per cent of the refunded amount'32.(l) Where any tax has been refunded in error' theDerson io'whom the refund has been erroneously made

'rhull, on demand by the Commissioner, pay the amounterroneously refunded.(2) Where a demand has been made for any amountoftax under subseqtion (l), that amount shall be deemed to bedue from the person liable to, pay the tax on the date upon*t,ict the Cemand is served upon him and if payment is not,uO" *itfrin thirty days of the date of service^, an,interest oftwo percent per month or part. thereof of such unpaidamount shall forthwith be due and payable:Provided that the interest chargeable under thissubsection shall not exceed one hundred percent of the taxoriginally due.(3) The Commissioner may' upon.application by ap.rron from *hom any interest ii due under subsection (2),

grant remlsston of the whole or part of the interest due' ifIatisfied that such remission is lustified, and sh_all -makequarterly reports to the Cabinit Secretary of all theremissions gianted under this subsection:

Erroncous rcfund oftax


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The Value Added Tar Bill, 201 3Provided that where the amount of interest exceedsone million five hundred thousand shillings, remissionshall be subject to the prior written approval of the Cabinet

Secretary.(4) Upon receipt of an application under subsection(3), the Commissioner shall, where the applicant has paidthe principal tax in full, suspend the charging of the interestpending the determination of the application.(5) Where remission under subsection (3) is notgranted, or is granted in respect of only part of the interest,the balance of the interest shall become due and payablewithin ninety days of the determination of the application.(6) Where the balance of the interest payable undersubsection (5) remains unpaid after the expiry of thespecified period, a surcharge at the rate of two percent permonth or part thereof shall forthwith be due and payable,

L,i;.,'il.,?1,::r:"r. ^ 33. ^Any person wh9 fraudulently makes a claim for arefund of tax shall be liable to pay a penalty of an amountequal to two tintes the amount of the claim.PART IX_REGISTRATION ANDDEREGISTRATION

34. ( I ) A person who in the course of a business -(a) has made taxable supplies or expects tomake taxable supplies, the value of whichis five million shillings or more in anyperiod of twelve inonths; or(b) is about to commence making taxablesupplies the value of which is reasonablyexpected to exceed five million shillings inany period of twelve months,

shall be liable for registration under this Act and shall,,within thirty days of becoming so liable, apply to theCommissioner for registration in the prescribedlbrm.

Application forrcgistration.


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The Value Added Tal Bill,2013 291

I

II

iII

II

i,IItIt

i

(2) In determining whether a person exceds theregistration threshold for a period, the value of thefollowing taxable supplies shall be excluded-(a) a taxable supply of a capital asset of theperson; and(b) a taxable supply made solely as aconsequence of the person selling thewhole or a part of the person's business orpermanently ceasing to carry on theperson's business.

(3) Notwithstanding subsection (l), a person whomakes or intends to make taxable supplies may apply, inthe prescribed form, to the Commissioner for voluntaryregistration.(4) The Commissioner shall register a person whohas applieC for voluntary registration under subsection (3)

if satisfied that -(a) the person is making, or shall maketaxable supplies;(b) the person has a fixed place fromwhich the person's business isconducted;(c) if the person has commenced carryingon a business, the person-

(i) has kept proper records of itsbusiness; and(ii) has complied with itsobligations under otherrevenue laws; and

(d) there are reasonable grounds to believethat the person shall keep properrecords and file regular and reliabletax returns.


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The Value Added Tar Bill,201-l

Rcgistcrcd pcrson todisplay ccrtificatp.

(5) The Commissioner shall issue a registered personwith a tax registration certificate in the prescribed form.(6) If the Commissioner is satisfied that a personeligible to apply for registration has not done so within thetime limit specified in subsection (l), the Commissionershall register the person.(7) The registration of a person under subsection (l)or (6) shall take effect from the beginning of the first taxperiod after the person is required to apply for registration,or such later period as may be specified in the person's tax

regi stration certificate.(8) The registration of a person under subsection (4)shall take effect from the date specified in the person's tax

regi strati on certifi cate.(9) The Cabinet Secretary may, in regulations,

provide for the registration of a group of companies asone registered person for the purposes of the Act.35.(l) A registered person shall display in aconspicuous place -

(a) the tax registration certificate at theprincipal place at which the personcarries on business; and(b) a copy of the certificate at every otherplace at which the person carries onbusiness.

(2) A registered person shall notify theCommissioner, in writing, of any change in the name(including the business name), address, place of business,or nature of the business of the person within twenty-onedays of the change.

;

iI

lIII

I


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The Value Added Tax Bill,201 3 29936. (l) A registered person who ceases to maketaxable supplies shall apply ' in writing to t!'

Commissioner, for the cancellation of the person'sregistration, within seven days of the date on which theperson ceases to make taxable supplies.(2) A registered person who continues to maketaxable suppliei whose lnnual value does not exceed theregistration threshold may apply in writing to th-eCJmmissioner, for cancellation of the person'sregistration.(3) The Commissioner shall, by notice in writing,cancel the registration of a person if -

(a) the person has applied for cancellationundei subsectiort (l) and the Commissioneris satisfied that the person has ceased tomake taxable suPPlies; or(b) the person has not applied for cancellationbut ihe Commissioner is satisfied that theperson has ceased to make taxable suppliesind is not otherwise required to beregistered'

(4) Where a person applies for cancellation ofregistration under subsLction (2) and the Commissioner issalisfied that the person is not required to be registered -(a) the Commissioner shall, if the person hasbeen registered for a period of more thantwelve months, by notice in writing, cancelthe registration; or(b) the Commissioner may, if the person has

been registered for a period of twelvemonths or less, by notice in writing, cancelthe registration.

Canccllation ofrcgistration.


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The Value Addcd Tax Bill.20l3(5) The Cornmissioner may, by notice in writing,cancel the rcgistration of a person who is no longer

required to be registered, if the commissioner is satisfledthat the person has not-(a) kept proper tax records;(b) furnished regular and reliable returns; or(c) complied with obligations under otherrevenue laws, and there are reasonablegrounds to believe that the person will notkeep proper records or furnish regular andreliable returns.

(6) The cancellation of a person's registration shalltake effect from the date specified in the notice ofcancellation.(7).Where a person's registration is cancelled underthis section, the person shall-

(a) immediately cease to hold out that theperson is a registered person, includingon any documentation used by theperson;ii tUl submit a final return and pay all tax due,including the tax due under subsection(9),within fifteen days after the date ofcancellation of the person,s registration.

(8) Notwithstanding the cancellation of registration ofa person under this section, the person shall be liable forany act done or omitted to be done while registered.(9) A person whose registration is cancelled shall bedeemed to tlave made a taxable supply of any trading stockron hand at the time the registration is cincelled if the.person was allowed an input tax credit for the acquisition'or import of the stock, or in respect of the acquisition orimport of goods that have been subsumed into that stock.


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The Value Added Tax Bill, 2013 301(10) The taxable supply under subsection (l) shall bedeemed to have been made by the person'immediately

before the person's registration is cancelled and the personshall be liable for an amount of output tax in respect of thesupply equal to the amount of the input tax credit allowedto the person on acquisition or import of the stock.37. A person who -

(a) fails to apply for registration as requiredunder this Act;(b) applies for cancellation of registrationwhen still required to be registered;

(c) fails to apply for cancellation ofregistration as required under this Act; or(d) fai{s to comply with section 35 or 36(7Xa),

commits an offence and shall be liable on conviction to afine not exceeding two hundred thousand shillings or toimprisonment for a term not exceeding two years, or toboth.PART X-APPLICATION OF INFORMATIONTECHNOLOGY

38. (l) Subject to subsection (2), and in accordancewith- the regulations, the following tax formalities andprocedures shall be carried out by use of informationtechnology-(a) an application for registration;(b) a return or statement required to befurnished under this Act;(c) any payment or repayment;(d) any notice or other document required tobe issued by the Commissioner; or

Offcnccs relating toregistration.

Application ofinformationtcchr,ology.


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The Vultrc Acltled'l'u.r Ilill, 20 1 .1(e) any act or thing which requires to be doneunder this Act.

(2) 1'he Cornmissioncr may cxempt-(a) any person orcarrying outprocedure; or(b) procedures orcarried out

class of persons fromtax formalities and

Elcctronic rcturns andnotices.

formalities from beingby use of information technology.

39.( l)'l'he Comrnissioner may establish and operatc aprocedure for electronic filing of tax retunls or othcrdocuments by registered persons and el'ectronic servicc ol'notices and other documents by the Commissioner and, lbrthis purpose, the Commissioner may provicle writtclrconditions for -(a) the registration ol' persons to participatc in theelectronic notice system ;

(b) the issuing and cancellatiolr of authenticarioncodes to registered users;(c) the tax returns and other ckrcurncnts that rnaybe transmitted through the electronic rroticcsystem, including the forrn and rnaltner inwhich they are to be transrnittecl;(d) the correction ol- errors in or alne ndrnents toelectronic returns


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The Value Added Ta.r Bill, 2013 303(0 the use, in any electronic transmission, ofsymbols, codes, abbreviations or other

notations to represent any particulars orinformation required under a tax law; and(g) any other matters for the better provision ofthe electronic notice system.

(2) A registered user may, in accordance with theconditions set by the Commissioner under subsection (l),file a tax return or other document to the computeraccount of the Commissioner.

(3) 'l'he Commissioner may, in accordance with theconditions set under subsection ( l), serve a notice or otherdocument to the computer account of a registered user.(4) If a tax return or other document of aregistered user has been transmitted to the computeraccount of ihe Commissioner using the authenticationcocle assignecl to the registered user -

(a)

(b)

either with or without thethe registered user; andbefore the registered userto the Commissioner forof the authentication code,

authority ofhas appliedcancellation

thc return or other docurnent shall, tor the purposes oftlris Act, be presumed to have been filed by the registereduser unlcss the registered user proves the contrary.(5) For the purposes of this Act, an electronic taxretunl, notice, or other doculnent, or a copy thereof, shallnot be ruled inadrnissible in evidence merely on the basisthat it was filed or served without the filing or delivery ofany ecluivalent docurnent or counterpart in paper form.((r) The contents of any electronic tax return, noticeor other clocumcnt aclrnissible under subsection (5) shall,rrrrlcss the contrary is proved, be deemed to have beenirccurately trunsrnitted.


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Unauthorizcd acccssto or improper use oftax conrputcrizcdsystcm.

The Value Added Tar Bill, 2013i (7) A person furnishing an electronic tax return ori other document on behalf of another person shall notdivulge or disclose the contents of the return ordocument, or a copy thereof to any other person, withoutthe prior written consent of the Commissioner.

(8) A person who contravenes any of the provisionsof this section commits an offence.40. (l) A person who -

(a) knowingly and without lawful authority, byany means, gains access to or attempts togain access to any tax computerisedsystem;(b) having lawful access to any taxcomputerized system, knowingly uses ordiscloses information obtained from suchsystem for a purpose that is not authorised;or(c) knowing that he is not authorized to do so,receives information obtained from any taxcomputerlzed system, and uses, discloses,publishes, or otherwise disseminates suchinformation,

commits an offence.(2) A person convicted of an offence under subsection(l) shall be liable-

(a) in the case of an individual, toimprisonment for a term not exceeding twoyears,, or to a fine not exceeding fourhundred thousand shillings, or to both; or

(b) in the case of a body corporate, to a fine notexceeding one million shillings.I


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The Value Added Tax Bill,201341. (l)Apersonwhoknowinsly- ::l;f:HfiX[,:i,,

(a) falsifies any record or information stored inany tax comPuterised sYstem;(b) damages or impairs any tax computerisedsystem; or(c) damages or impairs any duplicate tape or discor other medium on which any information

obtained from a tax computerised system isheld or stored otherwise than with thepermission of the Commissioner,commits an offence.

(2) A person convicted of an offence under subsection(l) shall be liable, to imprisonment for a term notexceeding three years, or to a fine not exceeding eighthundred thciusand shillings, or to both.PART XI_INVOICES, RECORDS, RETURNS ANDASSESSMENTS

42. (l) Subject to subsection (2), a registered person raxinvoicc.who makes a taxable supply shall, at the time of the supplyfurnish the purchaser with the tax invoice containing theprescribed details for the supply.

(2) No invoice showing an amount which purports tobe tax shall be issued on any supply-(a) which is not a taxable supply; or(b) by a person who is not registered.

(3) Any person who issues an invoice in contraventionof this subsection commits an offence and any tax shownthereon shall become due and payable to the Commissionerwithin seven days of the date of the invoice.


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306 'l'ha Vulue ALldcd 'litr llill. 20 I -]

Kccprng of nccords

(4) A registered person shall issue only one originaltax invoice for a taxable supply. or one original credit noteor debit note, but a copy clearly marked as such may beprovided to a registered person who claims to have lost theoriginal.

43.(l) Every registered person shall, for the purposesof this Act, keep in the course of his business, a full and truewritten record, whether in electronic form or otherwise, inEnglish or Kiswahili of every transaction he makes and therecord shall be kept in Kenya for a period of five years fromthe date of the last entry made therein.(2) The records to be kept under subsection (l) shallrnclude -

(a) copies of all tax invoices and simplified taxinvoices issued in serial number order;(b) copies of all credit and debit notes issued, inchronological order;(c) purchase invoices, copies of customs entries,receips for the payment of customs duty ortax, and credit and debit notes received, to befiled chronologically either by date of receiptor under each supplier's name;(d) details of the amounts of tax charged on eachsupply made or received and in relation to allservices to which section l0 applies,sufficient written evidence to identify thesupplier and the recipient, and to show thenature and quantity of services supplied, thetime of supply, the place of supply, theconsideration for the supply, and the extentto which the supply has been used by therecipient for a particular purpose;


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T'he Value Addetl Ta.u Bill, 201 3 307(e) tax account showing the totals of the outputtax and the input tax in each period and a net

total of the tax payable or the excess taxcarried forward, as the case may be, at the endof each period;(f,) copies of st


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The Value Added Ta.r Bill.20l3(4) The Commissioner may, upon satisfaction thathere is reasonable cause, grant an application undersubsection (2) and shall serve notice of the decision on thtapplicant.(5) A person who fails to submit a return as requiredunder this section shall pe liable to a penalty of tenthousand shillings or five percent of the amount of taxpayable under the return, whichever is higher.

Asscssmcnt or tax' 45. ( I ) For the purposes of this Act, a registered personwho has submitted a return shall be treated as having madean assessment of the amount of tax payable for the taxperiod to which the return relates, being the amount set outin the return.(2) lf a registered person fails to -

(a) submit a return;(b) keep proper books of accounts, records ordocuments; or(c) apply for registration as a registered person,

as required under this Act, the Commissioner may, basedon such evidence as may be available, make an assessmentof the tax payable (including interest and any penaltywhere applicable) by the registgred person.(3) An assessment under subsection (2) shall not alterthe due date for the payment of the tax as determined underthe Act.(4) The Commissioner shall cause a notice of theassessment under subsection (2\ to be served on the person

assessed, and the notice shall state the amount of tax payableand shall inform the person assessed of his rights under thisAct.


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The Value Added Tax Bill,2013 309(5) Subject to subsection (6), an assessment made undersubsection (2) shall not be made after five years immediatelyfollowing the last date of the tax period in which the liabilityto pay tax arose.(6) The time limit under subsection (5) shall not applyin the case of gross or wilful neglect, evasion or fraud.46.(l) Subject to this section, the Commissioner mayamend an assessment by making such alterations oradditions to the assessment as he considers necessary to

ensure that a registered person is liable for the correctamount of tax in respect of the tax period to which theassessment relates and shall serve notice of the amendmenton the registered person.(2) A registered person who has made a self-assessment pursuant to sectibn 45 may apply to theCommissbner, within the period specified in subsection(4Xb), to make an amendment to the assessment.(3) If an application has been made under subsection(2), the Commissioner may -

(a) amend the self-assessment; or(b) refuse the application,

and the Commissioner shall serve the registered personwith a notice of the decision on the application withinthirty days of the receipt of application.(4) The amendment of an assessment undersubsection (l) may be made -

(a) in the case of gross or wilful neglect, evasionor fraud by or on behalf of the registeredperson, at any time; or

Amcndmcnt ofasscssmcnt.


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3t0 The Value Atlded To.r Bill. 201 -]

Lolnnussioncr mayrcquirc sccurity.

(b) in any other case, within five years of-(i) a self-assessment, the date that theregistered person submitted the return;or(ii) any other assessment, the date theCommissioner served notice of the

ASSCSSMENT,

and the Commissioner shall serve the registeredperson with a notice of an amended assessmentwithin thirty days.(5) Subject to subsection (6), if an assessment hasbeen amended under subsection (l), the Commissionermay further amend the original assessment within the laterof-

(a) five years after the Commissioner servednotice of the original assessment on theregistered person or, in the case of a selfassessment, five years after the registeredperson submitted the return treated as theoriginal assessment; or(b) one year after the Commissioner servednotice of the amended assessment on theregistered person.

(6) In any case to which subsection (5Xb) applies, theCommissioner shall be limited to amending the alterationsor additions made in the dmended assessment to theoriginal assessment(7) In this Part, "assessment" includes a selfassessment under section 45.PART XII-ENFORCEMENT47. (l) The Commissioner may, in order tosecure the payment by any person of any tax, or other sumpayable under this Act, require the person concerned tofurnish security thereof in such manner as may beprescribed and for such amount as the Commissionerconsiders reasonable having regard to the circumstances. I


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The Value Added Tax Bill,2013 3l I(2) Any person who, without reasonable excuse, fails

to comply with a requirement of the Commissioner underthis section within such reasonable time as theCommissioner may allow commits an offence.48. (l) For the purposes of obtaining full information, hoductionorrccordwhether on a data storage devise or otherwise, in respect ofthe tax liability of any person or class of persons, or ior anyother purposes, the Commissioner or an authorised officermay require any person, by notice in writing, to- \(a) produce for examination, at such time andplace as may be specified in the notice, anyrecords, books of account, statements of assetsand liabilitieS or other documents'that are.inthe person's custody or under the person,scontrol relating' .to the tax liability of anyperson;

(b) firrnish such information relating to the taxliability of any person in the manner specifiedin the notice;(c) attend, at such time and place as may bespecified in the notice, fof the purpose ofgiving evidence in respect of any matter or

transaction appearing to be relevant to taxliability of any pgrson:Provided that where the person required to produceany records, books of account, statements of assets andliabilities or other documents for examination under thissection is a bank or financial institution -(i) the records, books of account, statements ofassets and liabilities or other documents shallnot, in the course of the examination, beremoved from the premises of the bank orfinancial institution or other premises at whichthey are produced;


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Thc Value Added Tatt Eitl,20l3

II

II3t2 II (ii) the Commissioner or an authorised officer

carrying out the examination may make copiesof such records, books of account, statements ofassets and liabilities or other documents forpurposes of any 'report relating to theexamination; and(iii) all information obtained in the colrse of theexamination shall be treated as confidential andshall be used solely for the purposes of the Act.(2) A person who, without reasonable excuse, fails tocomply with any requirement made under subsection (l)commits an offence and shall be liable, on conviction, to afine not exceeding one hundred thousand shillings, or toimprisonment for a term not exceeding three years, or toboth.(3) The Commissioner may require that theinformation or evidenee referred to in subsection (l) be-

(a) given on oath, verbally or in writing, and,for that purpose, the Commissioner mayadminister the oath; or(b) verified by statutory declaration or inany other manner.

(4),This section shall have effect notwithstanding-(a) any law rclating to privilege or the pubticintercst with respect to the giving ofinformation or the production of anyaccounts, documents, or records(including in electronic format); or(b) any contractual duty of confidentiality.


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Thc Valae Adfud Tax Bitl, 201 3 31349. (l)The CommisSiOner or sn authorised OffiCer Powcrofinspcction

may, at ail reasonable times enter, without wartant, &Dy' ctc'premises upon which any person carries,on business' or inwhich he his reasonable grounds to believe that a person iscarrying on business, in order to ascertain whether this Actis Uiinf complied with, whether on the part of the occupierof the premises or any other person, and on entry he may -(a) require the production of, and may examine,

make and tike copies of, any record, book,account or other document, whether on a datastorage device or otherwise, kept on thepftmises;(b) take possession of and remove any record,book, account or other document, whether ona data storage device or otherwise (including

the data), which he has reasonable grounds tosuspect to be, or to contain, evidence of thecommission of any offence under this Act;(c) require the occupier of the premises or.any

Person employed therein to answer questionsielating to any record, book, account or otherdocumint, whether on a data storage deviceor otherwise, or to any entry therein, and torender such explanation and give anyinformation relating to the businessconcerned that the authorised officer mayrequire for the exercise of his functions underthis Act;

(d) require any safe, container, envelopeother receptacle in the establishment toopened;(e) at the risk and expense of the occupier of the

- premises, oPen and examine any packageiound therein;

otbe


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I3t4 The Value Acldecl Tax Bill. 2013(f) take and retain without payment such

reasonable samples of any goods as he maythink necessary for the exercise of hisfunctions under this Act.(2) Where an authorised officer enters any premises inexercise of the powers conferred by subsection (l), he maytake with him such persons as'he considers necessary forthe carrying out of his functions under this Act(3) An authorised officer shall not been titled to enteror remain on any premises or place if, upon request by theowner or lawful occupier, the officer is unable to producethe Commissioner's written authorisation permitting theofficer to exercise the powers conferred by subsection ( I ).(4) The owner or lawful occupier of the premises to

which an exercise of power under subsection (l) relatesshall provide all reasonable facilities and assistance to theCommissioner or authorised officer in the exercise of thepower.(5) A person whose accounts, documents, or recordshave been seized under subsection (l) may examine themand make copies, at the person's expense, during office

hours.(6) A person whose data storage device has beenseized under subsection (l) may ha've access to the deviceduring office hours on such terms and conditions as theCommissioner or authorized officer may specify.(7) The Commissioner or authorised officer shall sign

for all accouilts, documents, records or data storagedevices removed and retained under this section and returnthem to the owner within fourteen days of the conclusionof the examination to which they relate and all relatedproceedings:


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The Value Added Tax Bill, 2013 3r5Provided that the Commissioner shall not retain theaccounts, documents, records or data storage devices for aperiod longer than six months unless the accounts,

Cocuments, records or data storage devices are required for:he purposes of any proceedings undei this Act or any:ther written law.(8) This section shall have effect despite-

(a) any law relating to privilege or the publicinterest with respect to access topremises, or the production of 4nyproperty, accounts, documents, or records(including in electronic format); or

(b) any contractual duty of confidentiality.(9) Any person who -

(a) resists, hinders or obstructs, orattempts to resist, hinder or obstruct,an authorised ofTicer acting underthis section, or fails to comply withsubsection (4); orfails to comply fully with anyrequirement made under this section;or

(c) makes any statement in response toany'such requirement; knowing it tobe false or incomplete in anymaterial particular, or not havingreason to believe that it is true orcomplete in,all material respects; or(d) procures or attempts to procure, byany means, any other person to actas aforesaid,

(b)


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Objectionq

The Value AddtdTar Bill,2013commits an offence.(10) The Commissioner shall allow the registered

person or his authorised representative access todocuments or equipment during the audit or examinationand the Commissioner shall return the documents orequipment after completing such audit or examination.PART XIII-OBJECTIONS

50. (l) A person who disputes an assessment madeby the Commissioner under section 45or 46 may, by noticein writing to the Commissioner, object to the assessment.

(2) A notice given under subsection (l) shall not be avalid notice of objection unless -(a) it states precisely the grounds ofobjection to the assessment; and(b) it is received by the Commissioner withinthirty days after the date of service of thenotice of assessment:

Provided that if the Commissioner is satisfied thatowing to absence from Kenya, sickness or other reasonablecause, the person objecting to the assessment wasprevented from giving the notice withir that period andthere has been no unreasonable delay on his part, theCommissioner may, upon application by the personobjecting, admit the notice after the expiry of that periodand the admitted notice shall be a valid notice of objection.(3) Where notice of an objection has been rcceivedunder this sectibn, the Commissioner shall, within thirtydays-


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the Volue ,Mdcd Tax Bill, 2013 317(a) amend the assessrncnt in accordance with theobjection;(b) amend the assessment in the light of theobjection according to the best of his judgrnent;or(c) refuse to amend the assessment.

(4) Where the Commissioner, in respect of anobjection under this sEction, either-(a) agrees to amend the assessment inaccordance with the objection; or(b) proposes to amend the assessment in thelight of the objectibn and the personobjecting agrees with the Commissioner onthe proposed amendment"

the assessment shall be amended accordingly and theCommissioner shall, within fifteen days, cAuse a noticesefiing out the amendment and the arnount of tax payableto be served on that person.(5) Where the Commissioner, upon consideration ofan objection under this section -

(a) proposes to amend. the assessment in thelight of the objection and the personobjecting does not agree with theCommissioner as to the proposedamendment, the assessment shall beamended as proposed by the Commissionerwho shall, within fifteen days, cause anotice setting out the amendment and theamount of the tax payable to be served onthat person; or


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318 The Value acldecl Tul Bill. 201-l(b) refuses to amend the assessrnent, he shall.within fifteen days, cause a noticeconfirming the assessment to be served on

that person.(6) A person's objection to an amended assesstnentunder this section shall be limited to the alterations ,radditions made in it.(7) Where the Commissioner fails to communiczrte thedecision on a person's objection within sixry days of thereceipt of the objection, the commissioner srritt u6 deemed

to have agreed to amend the assessment in accordance withthe objection.PART XV_FORFEITURE AND SEIZURE

I)orvcrroscizcg.ods. 51. (l) Any taxable supplies found to have been solclby a registered person without payment of tax shail beliable to forfeiture:Provided that the Commissioner may permit the goodsliable to forfeiture to be delivered to the perron makin'g theclaim after the tax due on the goods is paid.(2) The Commissioner may seize any goods liable toforfeiture if he has reasonable grounds to bilieve that thetax due and payabre in respect of the suppry .r importationof the goods has not been, or is likely noi be, paid.

(3) Goods seized under subsection (2) shail be stored ina place approved by the Commissioner.(4) Immediately after the seizure of the goods, awritten statement shall be obtained from the owner of thegoods or the person who has custody or control stating thequantity and quality of the goods.(5) Where goods have been seized under s.ubsection(2), the Commissioner shall, within ten days after theseizure, serve on the owner of flre goods or the person whohad custody or control of the goods immediaiery beforeseizure, a notice in writing-


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The Value Added Tar Bill,20l3 3r9(a) identifying the goods;(b) stating that the goods have been seized underthis section and the reason for seizure; and(c) setting out the terms for the release or disposalof the goods.

(6) The Commissioner shall not be required to serve anotico under subsection (5) if, after making reasonableenquiries, the Commissioner does not have sufficientinformation to identify the person on whom the noticeshould be served.(7) Where subsection (6) applies, the Commissionermay serve a notice under subsection (5) on a personclaiming the goods:

Provided a notice under this subsection shall only begiven in favour of a person where that person has givensufficient information to enable the notice to be served.

(8) The Commissioner may authorise any goodsseized under subsection (2) to be delivered to the personon whom a notice under subsection (5) has been servedwhere that person has paid, or has given security for the, payment of, the tax due and payable or that will becomedue and payable in respect of the goods.(9) Where subsection (8) does not ap.ply, theCommissioner shall detain the goods seized undersubsection (l) -

(a) in the c4se of perishable goods, for a periodthat the Commissioner considers reasonablehaving regard to the condition of the goods; or


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320 The Value Add"d Tax Biil,2013

Porvcr of thcCommissioncr tocompound offcncesby agrccment.

(b) in any other case -(i) twenty days after the seizure of thegoods; or(ii) twenty days after the due date forpayment of the tax,

whichever is earlier.(10) Where the detention period under subsection (9)

has expired, the Commissioner may sell the goods in themanner specified in section 24(4) and apply the proceedsof sale as set out in that section.PART XV-SETTLEMENT OF CASES ANDRULINGS BY THE COMMISSIONER52. (l) The Commissioner may, where he issatisfied that a person has committed an offence under thisAct in respect of which a penalty of a fine is provided, or inrespect of which anything is liable to forfeiture, compoundthe offence and may order that person to pay such sum ofmoney, not exceeding the amount of the fine to which hewould have been liable' if he had been prosecuted andconvicted for the offence, as he may think fit and he mayorder anything liable to forfeiture in connection therewithto be condemned:Provided that the Commissioner shall not exercise hispowers under this section unless the person admits inwriting that he has committed the offence and requests theCommissioner to deal with the offence under this section.(2) For the purposes of subsection (l), theCommissioner shall constitute a committee of not less than

three officers to consider applications for compounding ofoffences.


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The Vulue Adtled 'tq.r Bill. 2013 32t(3) The order referred to in subsection ( l) shall-

(a) be in writing under the hand of theComrnissionef and the offender, andwitnessed by an officer;

(b) specify the name of the offender, the offencecommitted, the sum of money ordered by theCommissioner to be paid, and the date ordates on which payment is to be made;(c) have a copy of the written admission referredto in subsection (2) attached;(d) be served on the offender;(e) be final and not be subject to appeal; and(f) on production in any court. be treated as proofof the conviction of the offender for the

offence specified,arid may be enforced in the same manner as a decree of acourt for the payment of the amount stated therein. '

(4) If the Commissioner compounds an offence underthis section, the offender shall not be liable for prosecutionor penalty in respect of same act or omission, the subjectof the compounded offence except vqith express consent ofthe Attorney General.

53.( I ) The CoEnmissioner may make a public ruling inaccordance with stiction 54 setting out the Commissioner'sinterpretation on the application of this Act.(2) A public ruling made in hccordance with section54 shall be binding on the Commissioner until withdrawnbut shall not be binding on the tax payer.

Binding publicrulings.


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Makrng arulurg.

Wrthdrarvul ol'apublic rulrng.

The Value Added Ta.r BiU, 20 I 354. ( l) A public ruling by the Commissioner undersection 7O shall be by notice in at least two dailynewspapers of national ci rculation.(2) A public ruling shall bear a heading specifying thesubject matter of the ruling and an identification number.(3) A public ruling shall have effect from the datespecified in the ruling or where no date is specified, fromthe date of its publication.55. (l) The Commissioner may withdraw a publicruling, in whole or part, by publishing notice of thewithdrawal in at least two daily newspapers of nationalcirculation.(2) lf, subsequent to a public ruling, legislation ispassed, or the Commissioner makes a another publicruling that is inconsistent with an existing public ruling, the

existing public ruling shall be treated as withdr

the value added tax bill 2013

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