VAT MODULE 1 (a) Interpretation of VAT Terms ©Dr. Wakaguyu wa-Kiburi (www.taxkenya.com) 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Title Value Added Tax Act (2013) 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Important? Why? Proper application of VAT law. Tax assessments are based on interpretations. Enables in-depth understanding of VAT law. Tax liability by extension. Determine tax exposure. ???? 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Important? cont’ In the words of R. J. in Cape Brandy Syndicate V Inland Revenue (1921) K.B. 64 …. In a taxing Act one has to look merely at what is clearly said. There is no reason for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Important cont’ Nothing is to be implied. One can only look fairly on the language used. And… Tax laws cannot be applied arbitrarily. Tax laws are not applied retrospectively. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Aircraft Transport by air. Of human and cargo. Within and out of Kenya. Includes air chartering, commercial crafts etc. Either single, twin engines and helicopters. Excludes those used for training, used by government e.g. By police, military. Does not cover Water crafts 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Assessments Self-assessment returns. Assessment made by Commissioner. Amended assessments (by taxpayer or Commissioner). Done by some one else? Payment without a tax return? 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Authority Authority – Kenya Revenue Authority. Established under KRA Act CAP 469. Plus all the amendments over the years. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Authorized Officer KRA Officer - Employee of KRA - Working in a particular section. Has KRA identification documents. Is authorized to do what they are claiming to do. Is an appointed officer. An officer seconded to KRA From the National Treasury. Police. EACC. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Business Activities carried out by a person: Continuously or regularly For gains or profits – Activities include: Supply of services or goods for a consideration e.g. entertainment, event organization etc. Supply of property – lease, license etc. Trade, commerce or manufacture, profession, vocation or occupation and any other related activities. Not Business – employment, hobby & leisure. What about Illegal business? 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Cabinet Secretary The person in charge of the National Treasury. Appointed or in Acting Capacity. Why? Revenue management is under the National Treasury Authority by appointment and/or gazette notice. Decisions can be challenged based on the capacity of the CS. Make decisions such as tax waivers, changing tax rates etc. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Commissioner Commissioner general appointed under KRA Act Cap 469. Can be confirmed or in acting capacity. Has all powers regarding tax implementation in Kenya. Delegates powers to officers. Delegation of powers must be in writing. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Company Either: Registered under the Company’s Act. An association whether incorporated or not. Any corporate body formed under any other written law including foreign laws - foreign companies must be incorporated locally. Entity declared by the Commissioner as such. Important for determining tax decisions. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Duty Free Shops Bonded warehouses licensed by the Commissioner of Customs to sell dutiable goods. No duty is levied in the shops – goods sold duty free. Goods for sale to passengers departing from Kenya. Can a returning Kenyan buy goods at the duty free shop? 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Duty of Customs Enforced under law relating to Customs or Excise. Examples: import duty, excise duty, export duty etc. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Exempt Supplies Supplies specified in the 1st Schedule. Supplies exempted at the National Treasury. Supplies exempted and Gazetted by the National Treasury. No VAT is levied. Determines VAT input claimable in case of taxable and exempt sales. A source of differences between turnover based on VAT and Income tax. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Export To Take or Cause to be taken from Kenya to a: Foreign country e.g. Uganda, Tanzania, UK. Special economic zones (SEZs ACT (No. 16 of 2015). Export processing zones (EPZs ACT – CAP. 517). 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Goods Tangible and movable items – e.g. shoes. Tangible and immovable properties – e.g. houses. Also includes: Electrical or thermal energy, Gas, Water Not Money 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Hotel Broad definition. Includes: Service flats. Service apartments. 3) Beach cottages. 4) Holiday cottages. 5) Game lodges. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Hotel cont’ 6) Safari camps. 7) Bandas. 8) Holiday villas. 9) Premises and establishments used for similar purposes. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Hotel cont’ Does not include: Supply under a lease or license of not less than one month unless there is a termination agreement without penalties. Premises operated by education or training institution that are: a) Approved by the Education CS. b) For use by staff and students of the institution. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Hotel cont’ Premises operated by a medical institution that are: Approved by health CS for: For use by staff and students of that institution. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Information Technology Any equipment or software for use in: Storing information. Retrieving information. Processing information. Disseminating information. Information technology is about the hardware and software used in VAT. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Import To Bring or Cause to bring into Kenya from A foreign country e.g. Uganda, Tanzania, UK. Special economic zones (SEZs ACT (No. 16 of 2015). Export processing zones (EPZs ACT – CAP. 517). 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Importer (Goods) A person who: Owns goods. Is in possession of or a beneficially interested in the goods at the time of importation. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Input Tax Also referred to as Input VAT. Tax paid or payable on local supply to a registered person of any goods or services to be used for purposes of business. Tax paid by a registered person on the importation of goods or services to be used in the business. Q - Is there input tax without without sales? 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi

Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi Money Coins or paper currency that is legal tender in Kenya. A bill of exchange, promissory note, bank drafts, postal or money order. Any amount provided by way of payment using debit or credit cards or electronic system. Barter trade? 8/15/2019 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. 8/15/2019 Prepared for www.taxkenya.com by Dr. Wakaguyu wa-Kiburi