The Kenya Revenue Authority (KRA) is proposing a significant shift in the country’s Value Added Tax (VAT) framework that would bring small-scale traders into the formal tax net by eliminating the current registration threshold, in news first reported by Business Daily.
- •Under existing rules, only businesses with annual taxable turnover of at least KSh 5 million are required to register for VAT.
- •The proposed amendment effectively requires all businesses to remit VAT at the standard rate.
- •All businesses would be required to issue compliant tax invoices, maintain detailed sales records, and file monthly returns.
The proposal forms part of a broader effort to expand the tax base and improve revenue mobilization. KRA estimates that the current VAT system captures only a fraction of potential taxpayers, with about 230,000 registered VAT entities against a significantly larger eligible base.
By removing the threshold, the authority aims to address gaps in compliance and increase VAT collections from roughly KSh 653 billion to over 1 trillion.
