VAT MODULE 2: VAT Registration and De-Registration ©Dr. Wakaguyu wa-Kiburi 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Scope Application for VAT registration. Display of VAT registration certificate. Cancellation of VAT registration certificate. AVT registration offences. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Taxpayers Registration Part IX - Sections 34 – 37 Putting into the list persons who should comply with the provisions of the VAT Act (2013). Involves identification of taxpayers: a) Supplying taxable goods and services – annual taxable turnover kshs 5 million or more. b) Expects to supply taxable goods and services - annual taxable turnover Kshs 5million or more, VAT is charged, collected and remitted by VAT registered persons only. Under the VAT law, it is an offence to charge VAT if one is not registered for VAT. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Taxpayer Registration cont’ Registered persons to charge VAT as per effective date of registration indicated on the certificate issued. Failure to charge VAT after registration is an offence. Charging VAT before registration is also an offence. Law also provides for voluntary registration. Registration is done through i-Tax platform. Q – is kshs 5million a fair threshold? 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Potential VAT Taxpayers Has a business (age limit, legality of business?) Has made or expects to make taxable supplies the value is Kshs 5m or more in any period of 12 months. About to commence making taxable supplies – value expected to exceed Kshs 5m in any period of 12 months (whether 1 or several transactions. Apply for registration within 30 days. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Determining Registration Threshold Excludes value of: Sale of any capital item of the person (e.g. a machine). Supply made as a consequence of the person: Selling whole or part of the person business, Permanently ceasing to carry on the business (e.g. selling of final stock). 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Who Should Register for VAT? Individuals trading in own names. Sole proprietors (registered businesses) – registration is for individual business owner. Partnerships (including husband and wife who may or may not be VAT registered). Limited liability (Private and Public) companies, partnerships. Any other type of businesses that do not fit in any of the above category e.g. Churches. Note: Any person transacting taxable business. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Types of Registrations 1) Normal registration: The business owner qualifies to be registered, applies for registration, is dully registered and VAT obligation added to the PIN certificate. 2) Voluntary registration: The business owner does not qualify to be registered but applies for registration to benefit from being a registered person. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Types of Registrations Cont’ 3) Intending trader registration: The business owner expects to deal in taxable supplies and will apply for registration before the any transactions commence. 4) Compulsory registration: The business owner qualifies to be registered but fails to register. The Commissioner adds the VAT obligation in the PIN certificate and an email notice is sent. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Types of Registrations Cont’ 5. Temporary registration: If tax is received from a trader who is not VAT registered, what happens? Where is that tax credited? These are KRA internal transactions. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Requirements for VAT Registration Individuals PIN certificate (number) of the individual. National identification card (number), or Alien identification card (number). Actual or expected taxable turnover amount kshs 5.0 million or more for 12 months. Email address and physical location. Access to i-Tax platform. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Requirements for VAT Registration cont’ Sole proprietorships PIN certificate (number) of the proprietor. Sole proprietor identification card. Alien identification card (for foreigners). Certificate of business name registration. Actual or expected taxable turnover amount kshs 5.0 million or more for 12 months. Email address and physical location. Access to i-Tax platform. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Requirements for VAT Registration cont’ Partnerships PIN certificate of the partnership. PIN numbers of the partners. Copy of the business name registration – from the Registrar of companies. Actual or expected taxable turnover kshs 5.0 million or more for 12 months. Email address and physical location. Access to i-Tax platform. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Documents Required for VAT Registration cont’ Limited Company (private and public) PIN number of the company. PIN number of every director (local and foreign). Copy of incorporation certificate. Memorandum and Articles of Association. Actual or expected taxable turnover kshs 5.0 million or more for 12 months. Email address and physical location. Access to i-Tax platform. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Documents Required for VAT Registration cont’ Any other potential VAT taxpayer Pin numbers (organization’s and directors). Copies of registration documents. Other registrations (e.g. from NGO board). Actual or expected taxable turnover kshs 5.0 million or more for 12 months. Email address and physical location. Access to i-Tax platform. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Commissioner’s Registration Decision Normal registration (actual and expected) – obligation is included in the PIN certificate. Compulsory registration – obligation is included in the PIN certificate. Voluntary registration: Yes – registration done and obligation included in the PIN certificate. No – registration declined and obligation not included in PIN certificate. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Commissioner’s Registration Decision cont’ Accepted voluntary registration qualifications: Person making or shall make taxable supplies. Fixed place of business operation (???). If business in operation: Proper business records are maintained. Person has complied with obligations of other tax revenue laws (e.g. income tax). There are reasonable grounds to believe the person will maintain proper records, and file regular and reliable tax returns. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Effective Tax Date of Registration Normal registrations (actual and intending business) and compulsory registrations: beginning of the first tax period after the person was required to register or a date specified in the certificate. Voluntary registration – date specified in the certificate. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Group Registration Note: 34 (9) - the CS Treasury may provide registration for a group of companies as one registered person. Registration can also be initiated by the CS or the taxpayer. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Certificate Display (35) PIN certificate with VAT obligation. Original - at the principal place or in a conspicuous place all the time. Copies - any other place the person carries on business. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Changes in Registration Details Changes such as: Name registered. Address (physical and email). Place of business (building or location). Nature ( additions or subtractions, goods, services etc.) Must be communicated to the Commissioner within 21days. Failure?? 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Cancellation of Registration (36) Taxpayer – applies for cancelation. Commissioner cancels the obligation. Application by taxpayer Application is done in writing to the Commissioner (with all details). Person ceases to make taxable supplies – application within 30 days from the date the person ceases to make taxable supplies. Person makes taxable supplies but turnover lower than threshold – no date limit. low will write to KRA seeking to be deregistered; The taxpayer will continue to meet their tax obligations until advised to stop; Taxpayer can be deregistered or put in dormancy status; The tax payer will be required to return the VAT certificate. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Cancellation of Registration cont’ Cessation of business Closure of business. Sale of business. Death of trade. Death of owner or owners. Legal incapacitation of business. Insolvency of the business. Change of status e.g. from partnership to limited company. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Cancellation of Registration cont’ Commissioner’s decisions Decline the application – certificate not cancelled, decision in writing. Accept the application - certificate cancelled. Commissioner is satisfied. Decision must be in writing. Deregistration is irrespective of whether a person was registered for less or more than 12 months. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Cancellation of Registration cont’ Commissioner initiative to cancel certificate Decision/notice in writing. Commissioner is satisfied that the person does not: Keep proper records. Furnish regular and reliable tax returns. Comply with obligations under other tax revenue laws (e.g. income tax, excise duty). There are reasonable grounds that the person will not keep proper records or furnish regular and reliable tax returns. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Effective Tax Certificate Cancellation Date Note – failure to remit VAT money is not listed as a ground for certificate cancellation. On cancelled VAT certificate: Date specified in the cancelation notice. Information sent on email. Person still liable for acts committed or omitted while registered. Q – What happens if the taxpayer does not get the notice? 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Way Forward for VAT Deregistered Taxpayer Cease to hold out as VAT registered – remove all indications in– invoices, delivery notes, letterheads, tender documents etc., Submit a final VAT return and pay all due VAT within 15 days (Is this negotiable?). Pay VAT within 15 days on any trading stocks at hand at the time of cancellation if input tax had been claimed (local and import supplies) – considered a sale - other earlier. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Registration Offences Failure to apply for registration as required under VAT Act. Apply for cancelation of VAT registration when still required to be registered. Failure to apply for cancellation of registration as required under the Act. Failure to comply with Section 35 or 36 (7)(a) Fine < kshs 200,000 or jail not exceeding 2 years or both. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Conclusions Registration - by taxpayer or Commissioner. No separate certificate - VAT obligation included in PIN certificate. Registration and deregistration done online. Cancelation of certificate - initiated by taxpayer or by Commissioner a) failure to make returns, maintain records etc. Liability - registration, as registered, on deregistration. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Q & A 1. 2. 3. 4. 5. 7/17/19 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi