VAT ACT 2013

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SPECIAL ISSUE

Kenya Gazette Supplement No. 119 (Acts No. 35)

REPUBLIC OF KENYA

KENYA GAZETTE SUPPLEMENT

ACTS, 2013

NAIROBI, 16th August, 2013

CONTENT

Act

PAGE

The Value Added Tax Act, 2013 ....................................................................963

PRINTED AND PUBLISHED BY THE GOVERNMENT PRINTER, NAIROBI

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2013 Value Added Tax

963

No. 35

THE VALUE ADDED TAX ACT, 2013

No. 35 of 2013

Date of Assent: 14th August, 2013

Date of Commencement: By Notice

ARRANGEMENT OF SECTIONS

Section

PART IPRELIMINARY

1Short title and commencement.

2Interpretation.

PART IIADMINISTRATION

3Functions and powers of the Commissioner and other officers.

4Authorized officers to have powers of police officers.

PART IIICHARGE TO TAX

5Charge to tax.

6Cabinet Secretary may amend the rate of tax.

7Zero rating.

PART IVPLACE AND TIME OF SUPPLY

8Place of supply of services.

9Appointment of tax representative.

10Treatment of imported services.

11Place of supply of goods.

12Time of supply of goods and services.

PART VTAXABLE VALUE

13Taxable value of supply.

14Taxable value of imported goods.

15Deemed taxable supply.

16Debit and credit note.

PART VIDEDUCTION OF INPUT TAX

17Credit for input tax against output tax.

18Tax paid prior to registration.

PART VIICOLLECTION AND RECOVERY OF TAX

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19When tax is due.

20Relief because of doubt or difficult in recovery of tax.

21Interest for late payment of tax.

22Imported goods subject to customs control.

23Risk of non-payment of tax.

24Collection of tax by distraint.

25Power to collect tax from person owing money to the registeredperson.

26Preservation of funds.

27Security on property for unpaid tax.

28Tax payable to the Commissioner.

29Tax to be recovered as civil debt.

PART VIIIREFUND OF TAX

30Refund of tax paid in error.

31Refund of tax on bad debts.

32Erroneous refund of tax.

33Fraud in relation to claims for tax refund.

PART IXREGISTRATION AND DEREGISTRATION

34Application for registration.

35Registered person to display certificate.

36Cancellation of registration.

37Offences relating to registration.

PART XAPPLICATION OF INFORMATION TECHNOLOGY

38Application of information technology.

39Electronic returns and notices.40Unauthorized access to or improper use of tax computerized system.

41Interference with tax computerized system.

PART XIINVOICES, RECORDS AND RETURNS

42Tax invoice.

43Keeping of records.

44Submissions of returns.

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45Assessment of tax.

46Amendment of assessment.

PART XIIENFORCEMENT

47Commissioner may require security.

48Production of records.

49Power of inspection etc.

PART XIIIOBJECTIONS

50Objections.

PART XIVFORFEITURE AND SEIZURE

51Power to seize goods.

PART XVSETTLEMENT OF CASES AND RULINGS BY THE

COMMISSIONER

52Power of the Commissioner to compound offences by agreement.

53Binding public rulings.

54Making a public ruling.

55Withdrawal of a public ruling.

56Binding private ruling.

57Refusing an application for private ruling.

58Making a private ruling.

59Withdrawal of a private ruling.

PART XVIOFFENCES AND PENALTIES

60Offences by members and staff of the Authority.

61Liability of employers and officers of companies.62Burden of proof.

63General penalty.

PART XVIMISCELLANEOUS PROVISIONS

64Effect of imposition or variation of tax.

65Application of East Africa Community Customs Management Act,2004.

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66Tax avoidance schemes.

67Regulations.

68Repeal of Cap.476, transitional and savings provisions.

FIRST SCHEDULEEXEMPT SUPPLIES

PART IGOODS

PART IISERVICES

SECOND SCHEDULEZERO RATING

PART AZERO RATED SUPPLIES

PART BZERO RATED SUPPLIES TO PUBLIC BODIES,

PRIVILEGED PERSONS AND INSTITUTIONS

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THE VALUE ADDED TAX ACT, 2013

An Act of Parliament to review and update the lawrelating to value added tax; to provide for theimposition of value added tax on supplies madein, or imported into Kenya, and for connectedpurposes

ENACTED by the Parliament of Kenya, as follows

PART IPRELIMINARY

1. This Act may be cited as the Value Added Tax Act,2013 and shall come into operation on such date as theCabinet Secretary may, by notice in the Gazette, appointwhich date shall not be later than one month from the dateof publication of this Act in the Gazette.

Short title and

commencement.

2. (1) In this Act, unless the context otherwiserequires

aircraft includes every description of conveyancefor the transport by air of human beings or goods;

Interpretation.

assessment means

(a) a self-assessment return submitted undersection 45;

(b) an assessment made by the Commissionerunder section 45; or

(c) an amended assessment under section 46;

Authority means the Kenya Revenue Authorityestablished by the Kenya Revenue Authority Act;

Cap.469

authorised officer, in relation to any provision of thisAct, means any officer appointed under section 3 who hasbeen authorised by the Commissioner to perform anyfunctions under or in respect of that provision;

business means-

(a) trade, commerce or manufacture, profession,vocation or occupation;

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(b) any other activity in the nature of trade,commerce or manufacture, profession,vocation or occupation;

(c) any activity carried on by a personcontinuously or regularly, whether or not forgain or profit and which involves, in part or inwhole, the supply of goods or services forconsideration; or

(d) a supply of property by way of lease, licence,or similar arrangement,

but does not include

(i) employment;(ii) a hobby or leisure activity of an

individual; or

(iii) an activity of a person, other than anindividual, that if carried on by anindividual would come within sub-paragraph (ii);

Cabinet Secretary means the Cabinet Secretaryresponsible for matters relating to finance;

Commissioner means the Commissioner-Generalappointed under the Kenya Revenue Authority Act, or,with respect to powers or functions that have beendelegated under that Act to another Commissioner, thatother Commissioner;

Cap.469

company means a company as defined in theCompanies Act or a corporate body formed under any other

written law, including a foreign law, and includes anyassociation, whether incorporated or not, formed outsideKenya which the Cabinet Secretary may, by order, declareto be a company for the purposes of this Act;

Cap.486.

duty of customs means import duty, excise duty,export duty, countervailing duty, levy, cess, tax or surtaxcharged under any law for the time being in force relatingto customs or excise;

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electronic notice system has the meaning assigned

to it in section 39;

exempt supplies means supplies specified in theFirst Schedule which are not subject to tax;

export means to take or cause to be taken fromKenya to a foreign country or to an export processingzone;

export processing zone means an exportprocessing zone designated under the Export ProcessingZones Act;

Cap.517.

goods means tangible movable and immovableproperty and includes electrical or thermal energy, gasand water, but does not include money;

information technology means any equipment orsoftware for use in storing, retrieving, processing ordisseminating information;

importation means to bring or cause to be broughtinto Kenya from a foreign country or from an exportprocessing zone;

importer, in relation to goods, means the personwho owns the goods, or any other person who is, for thetime being, in possession of or beneficially interested inthe goods at the time of importation;

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 means

(a) any coin or paper currency that is legaltender in Kenya;

(b) a bill of exchange, promissory note, bankdraft, or postal or money order;

(c) any amount provided by way of paymentusing a debit or credit card;

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non-resident person has the meaning assigned to it i

section 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 foreigngovernment, 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 theGovernment or foreign government;

registered person means any person registered undersection 34, but does not include an export processing zoneenterprise;

regulations means 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 means a supply of goods or services;

supply of goods means

(a) a sale, exchange, or other transfer of the rightto dispose of the goods as owner; or

(b) the provision of electrical or thermal energy,gas or water;

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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 oradvantage; or

(d) the toleration of any situation or the refrainingfrom the doing of any act;

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

(a) the supply is made by a person who is not aregistered person to a person who is aregistered person or a non registered person;

(b) the supply would have been a taxable supplyif it had been made in Kenya; and

(c) the registered person would not have beenentitled to a credit for the full amount of inputtax payable if the services had been acquiredby the person in a taxable supply;

tax means the value added tax chargeable underthis Act;

tax computerized system means any software orhardware for use in storing, retrieving, processing ordisseminating information relating to tax;

tax period means one calendar month or such otherperiod as may be prescribed in the regulations;

tax registration certificate means a tax registrationcertificate issued by the Commissioner under section 34;

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tax representative means a tax representative

appointed under section 9;

taxable supply means a supply, other than anexempt supply, made in Kenya by a person in the course orfurtherance of a business carried on by the person,including a supply made in connection with thecommencement or termination of a business

taxable value means the value determined inaccordance with section 13 and 14;

vehicle includes every description of conveyancefor the transport by land of human beings or goods;

zero-rated supply means a supply listed in theSecond Schedule.

(2) For the purposes of this Act, goods shall beclassified by reference to the tariff numbers set out inAnnex 1 to the Protocol on the Establishment of the EastAfrican Community Customs Union and in interpretingthat Annex, the general rules of interpretation set outtherein shall, with the necessary modifications, apply.

PART IIADMINISTRATION

3.(1) 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.

Functions andpowers of the

Commissionerand other officers.

(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 Act or theregulations, other than the functions of the Commissionerunder this section.

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(4) Every authorised officer appointed under this

section 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.

(6) Every authorised officer shall, in carrying out theprovisions of this Act, regard and deal with all documents

and information relating to tax and all confidentialinstructions in respect of the administration of this Actwhich may come into his possession or to his knowledgein the course of his duties as secret.

(7) Any decision made and any notice orcommunication issued or signed by any authorised officermay be withdrawn or amended by the Commissioner or bythe authorised officer concerned, and shall be for thepurposes 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 andprotection of a police officer.

Authorised

officers to havepowers of police

officers.

PART IIICHARGE TO TAX

5. (1) A tax, to be known as value added tax, shall becharged in accordance with the provisions of this Act on

(a) a taxable supply made by a registeredperson in Kenya;

Charge to tax.

(b) the importation of taxable goods; and(c) a supply of imported taxable services.

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(2) The rate of tax 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 liability of the

registered person making the supply and, subject to theprovisions of this Act relating to accounting and payment,shall become due at the time of the supply.

(4) The amount of tax payable on a taxable supply, ifany, shall be recoverable by the registered person from thereceiver of the supply, in addition to the consideration.

(5) Tax on the importation of taxable goods shall becharged 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.

6.(1)The Cabinet Secretary may, by order publishedin the Gazette, amend the rate of tax by increasing ordecreasing any of the rates of tax by an amount notexceeding twenty-five percent of the rate specified insection 5(2)(b).

Cabinet Secretary

may amend therate of tax.

(2) Every order made under subsection (1) shall be laidbefore the National Assembly without unreasonable delay,and shall cease to have effect if a resolution of the NationalAssembly 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.

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7.(1)Where a registered person supplies goods orservices and the supply is zero rated, no tax shall becharged on the supply, but it shall, in all other respects, betreated as a taxable supply.

Zero rating.

(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 IVPLACE AND TIME OF SUPPLY

8.(1) A supply of services is made in Kenya if theplace of business of the supplier from which the servicesare supplied is in Kenya.

Place of supply ofservices.

(2) If the place of business of the supplier is not inKenya, the supply of services shall be deemed to be made inKenya if the recipient of the supply is not a registered personand-

(a) the services are physically performed in Kenyaby a person who is in Kenya at the time ofsupply;

(b) the services are directly related to immovableproperty in Kenya;

(c) the services are radio or television broadcastingservices received at an address in Kenya;

(d) the services are electronic services delivered to aperson in Kenya at the time of supply; or

(e) the supply is a transfer or assignment of, or grantof a right to use, a copyright, patent, trademark,or similar right in Kenya.

(3) In this section

electronic services means any of the followingservices, when provided or delivered on or through atelecommunications network

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(a) websites, web-hosting, or remote maintenance ofprograms and equipment;

(b) software and the updating of software;(c) images, text, and information;(d) access to databases;(e) self-education packages;(f) music, films, and games, including games of

chance; or

(g) political, cultural, artistic, sporting, scientific andother broadcasts and events including broadcasttelevision.

9.(1) A person who is required to apply forregistration under section 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 the Commissioner, lodgea security with the Commissioner in accordancewith section 27.

Appointment of

tax representative

(2) If a non-resident person to whom this sectionapplies fails to appoint a tax representative within theperiod prescribed under section 34, the Commissioner mayappoint a tax representative for the person.

(3) The tax representative of a non-resident person shall

(a) be a person normally residing in Kenya;

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(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 underthis Act.

(4) The registration of the tax representative shall be inthe name of the non-resident person being represented.

(5) A person may be a tax representative for more thanone non-resident person, in which case the person shall havea separate registration for each non-resident person.

(6) The Commissioner may prescribe the mode,manner, and requirements for appointment of a taxrepresentative and the responsibilities of the representative.

10. (1) If a supply of imported taxable services ismade to a registered person, the registered person shall bedeemed to have made a taxable supply to himself.

Treatment ofimported services.

(2) If a registered person referred to in subsection (1)is entitled to

(a) a credit for part of the amount of input taxpayable, the value of the taxable supply

under subsection (1) shall be reduced by anamount equal to the supply that is entitledfor the input tax credit; or

(b) a full input tax credit payable on theimported taxable services under subsection(1), the value of the taxable services shallbe reduced to zero.

(3) The output tax in respect of a deemed taxablesupply under subsection (1) shall be payable by the

registered person at the time of the supply.

(4) For the purposes of this section, if a registeredperson carries on a business, both in and 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.

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11. A supply of goods occurs in Kenya if (a) the goods are delivered or made available in

Kenya by the supplier;

Place of supply of

goods.

(b) the supply of the goods involves theirinstallation or assembly at a place in Kenya;and

(c) the goods are delivered outside Kenya, thegoods were in Kenya when theirtransportation commenced.

12. (1) 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 are deliveredor services performed;

(b) the date a certificate is issued by anarchitect, surveyor or any other personacting as a consultant in a supervisorycapacity;

Time of supply of

goods andservices.

(c) the date on which the invoice for thesupply is issued; or

(d) 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 machine, meter, or other deviceby or on behalf of the supplier.

(3) If (a) goods are supplied under a rental

agreement; or

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

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the goods or services shall be treated as successively

supplied 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.

(4) The time of supply of imported goods shall be

(a) in the case of goods cleared for home usedirectly at the port of importation, orgoods entered for removal to an inlandstation and there cleared for home use, at

the 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 VTAXABLE VALUE13.(1) Subject to this Act, the taxable value of a

supply, including a supply of imported services, shall be-

(a) the consideration for the supply; or(b)if the supplier and recipient are related, the

open market value of the supply.

Taxable value of

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 considerationfor a supply, including a supply of imported services, shallbe the total of

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(a) the amount in money paid or payable,directly or indirectly, by any person, for thesupply; or

(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 and

accounted for at the time of the supply.

(4) The consideration for a supply shall include theamount charged for

(a) any wrapper, package, box, bottle, or othercontainer 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 tothe vendor by reason 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 (1), 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 agent of his client, then such disbursement shall be

excluded from the taxable value.(6) The consideration for a supply shall not include

(a) in the case of a supply of goods under a hirepurchase agreement, any financial chargepayable in relation to a supply of credit underthe agreement; or

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(b) any interest incurred for the late payment ofthe consideration for the supply.

(7) The consideration for a supply of accommodationor restaurant services shall not include the Tourism Levyimposed on the supply under the Tourism Act; or No. 28 of 2011.

(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 management, control orcapital of the business of both; or

(c) an individual who participates in themanagement, control or capital of thebusiness of one, is associated by marriage,consanguinity or affinity to an individualwho participates in the management,control or capital of the business of theother.

14.(1) The taxable value of imported goods shallbe the sum of

Taxable value ofimported goods.

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

(b) 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 to the importation ofgoods shall be treated as part of the importation.

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15. (1) An application of taxable supplies by aregistered person for use outside his business shall be ataxable supply made by the person.

Deemed taxable

supply.

(2) A taxable supply under subsection (1) 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 registeredperson or, for good and valid reason the registered persondecides for business reasons, to reduce the value of asupply after the issue of a tax invoice, a credit note shall beissued for the amount of the reduction:

Debit and credit

note.

Provided that a credit note may be issued only withinsix months after the issue of the relevant tax invoice.

(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 issued by anamount that bears the same proportion to the tax originallycharged as the amount credited bears to the total amountoriginally charged and the amount of tax so credited shallbe specified on the credit note.

(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 subsection (4) may, if thesupply is eligible therefor and in so far as it has notpreviously been claimed, claim as deductible input taxsuch further amount of tax that is being charged, in themonth in which the further charge was made, or in the nextsubsequent month.

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(6) A credit or debit note issued under this section

shall 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 VIDEDUCTION OF INPUT TAX

17. (1) Subject to the provisions of this section andthe regulations, input tax on a taxable supply to, orimportation made by, a registered person may, at the end

of the tax period in which the supply or importationoccurred, be deducted by the registered person, subject tothe exceptions provided under this section, from the taxpayable by the person on supplies by him in that taxperiod, but only to the extent that the supply or importationwas acquired to make taxable supplies.

Credit for inputtax against output

tax.

(2) If, at the time when a deduction for input taxwould otherwise be allowable under subsection (1), 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 six months after the end of the tax periodin which the supply or importation occurred.

(3) The documentation for the purposes of subsection(2) shall be -

(a) an original tax invoice issued for the supplyor a certified copy;

(b) a customs entry duly certified by the propeofficer 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 acustoms auction;

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(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 16(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 registered

person 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

(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 therecipient is away from home forthe purposes of the business of therecipient or the recipientsemployer.

Provided that no tax shall be charged on the supplywhere no input tax deduction was allowed on that supplyunder this subsection:

(5) Where the amount of input tax that may bededucted by a registered person under subsection (1) inrespect of a tax period exceeds the amount of output taxdue for the period, the amount of the excess shall becarried forward as input tax deductible in the next taxperiod:

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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 taxable supply 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 bedetermined as follows

(a)full deduction of all the input 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:

A x BC,

where

A is the total amount of input tax payable by theperson during the tax period on acquisitions 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; and

C is the value of all supplies made by theregistered person during the period in Kenya.

(7) If the fraction of the formula in subsection (6) for atax period

(a) is more than 0.90, the registered personshall be allowed an input tax credit for allof the input tax comprising component Aof the formula; or

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(b) is less than 0.10, the registered person

shall not be allowed any input tax creditfor the input tax comprising component Aof the formula.

18. (1) Where(a) on the date exempt supplies made by

a registered person become taxable,and the person had incurred input taxon such supplies; or

Tax paid prior toregistration.

(b) on the date he is registered, a personhas incurred tax on taxable supplieswhich are intended for use in makingtaxable 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-fourmonths immediately preceding registration or the exemptsupplies becoming 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 reliefclaimed under subsection (1) from the tax payable on hisnext return.

(3) The claim for relief from tax under subsection (1)shall be made in the prescribed form.

PART VII - COLLECTION AND RECOVERY OF

TAX19.(1) Tax shall be due and payable at the time ofsupply.

(2) Notwithstanding the provision of subsection (1), aregistered person may defer payment of tax due to a datenot later than the twentieth day of the month succeedingthat in which the tax became due.

When tax is due.

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20. (1) Notwithstanding the provisions of this Act,the Commissioner may, with the prior approval of theCabinet Secretary, in any 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 question and

thereupon liability to the tax shall be deemed to be extinguished

or the tax shall be deemed to be abandoned or remitted, as thecase may be.

Relief because of

doubt or difficultyin recovery of tax.

(2) In any case which has been referred to him andwhere he considers it appropriate, the Cabinet Secretarymay, 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. (1) Where any amount of tax remains unpaidafter the date on which it becomes payable under section19, an interest equal to two percent per month or partthereof of the unpaid amount shall forthwith be due andpayable.

Interest for late

payment of tax.

(2) Any interest charged under subsection (1) shall, forthe purpose of this Act relating to the collection andrecovery of tax, be deemed to be tax and any interest whichremains unpaid after becoming due and payable under

subsection (1) shall attract further interest equal to two percent per month or part thereof:

Provided that the interest chargeable under thissubsection shall not exceed one hundred percent of the taxoriginally due.

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(3) The Commissioner may, upon application by a

person from whom any interest is due under subsection (1)or (2), grant remission of the whole or part of the interestdue, if satisfied that such remission is justified, and shallmake quarterly reports to the Cabinet Secretary on theremission 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 of the CabinetSecretary.

(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 application.

(6) If the balance of the interest payable undersubsection (5) remains unpaid after the expiry of theprescribed period, a surcharge at the rate of two percentper month or part thereof, shall forthwith be due and

payable.

(7) The Commissioner shall maintain a public recordof each remission together with the reasons thereof whichshall be reported to the Auditor General on a quarterlybasis.

22.(1) 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 due.

Imported goodssubject to customs

control.

(2) Notwithstanding the provisions of any other

written law, any taxable goods which are imported by air,land or water shall be produced by the importer to a properofficer of customs at the customs station at or nearest to theplace of entry, and any importer who fails to produce anysuch goods commits an offence and the goods in respect ofwhich the offence was committed shall be liable toforfeiture.

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(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 inrespect 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 Commissionerof 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. (1) Notwithstanding any other provision ofthis Act, where the Commissioner has reason to believethat any tax payable by any person is at risk of non-payment -

Risk of non-

payment of tax.

(a) due to the imminent departure of the personfrom Kenya;

(b) where the person, being a company, isabout to be liquidated or otherwise woundup or to cease business; or

(c) for any other sufficient cause,the Commissioner may, whether or not the due date for the

payment 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 (1) commits an offence.

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24. (1) Where any amount of tax is due and payableby a person, the Commissioner may, instead of suing forthe tax, recover it by distress, and for that purpose may, byorder 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:

Collection of tax

by distraint.

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 person in respect ofwhom the order was issued and may be

recovered 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 requirement.

(3) Any property distrained under this section shall bekept for ten days, either at the premises at which distress

was levied or at such other place as the authorised officermay consider appropriate, at the cost of the person fromwhom the tax is recoverable:

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.

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(4) If the person from whom tax is recoverable by

distress 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 distrained 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. (1) 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;

Power to collecttax from person

owing money tothe registered

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.

(2) Where a person required under subsection (1) topay 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, stating

the reasons for his inability 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 to beheld by such person for, or due from him to,the registered person in respect of whom thenotice is given under subsection (1); and

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the Commissioner may make an ex-parte application to the

High Court, in this section referred to as the Court, andthe Court may issue an order to any person or institutionholding funds belonging to the person, prohibiting thetransfer, withdrawal or disposal of, or any other dealingsinvolving such funds.

(2) An order under subsection (1) shall be valid forthirty days and may be extended by the Court onapplication by the Commissioner.

(3) A person whose funds are the subject of an orderunder this section may, within fifteen days of being served

with the order, apply to the Court to discharge or vary 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, issue 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 automatically expire unlessextended by the Court upon application by theCommissioner under subsection (2).

(6) A person served with an order under this sectionwho, in any way, interferes with the 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 theauthority thereof and such person and all other personsconcerned shall be indemnified in respect of the actionstaken in connection therewith, against all proceedings,civil or criminal and all process, judicial or extrajudicial,notwithstanding any provisions to the contrary in any

written law, contract or agreement.

27. (1) 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 specifiedin the notice.

Security onproperty for

unpaid tax.

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(2) If a person on whom a notice has been served

under this section fails to pay the whole of the amountspecified in the notice within thirty days of the date ofservice of the notice, the Commissioner may, by notice inwriting, direct the Chief Land Registrar that the land andbuildings, to the extent of the interest therein, be thesubject of security for the tax of a specified amount and theRegistrar shall, without fee, register the direction as if itwere an instrument of mortgage over, or charge on, as thecase 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 legal

mortgage over or charge on the land or buildings to securethe amount of the tax.

(3) The Commissioner shall, upon the payment of thewhole of the amount of tax secured under subsection (2),by notice in writing to the Chief Land Registrar, cancel thedirection made under that subsection and the Registrarshall, without fee, record the cancellation thereupon andthe direction shall cease to subsist.

28. (1) Any tax payable under this Act shall be paidto the Commissioner.

(2) Any person who fails to pay tax due from him on

or before the day upon which it is 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 thereof for an offence undersubsection (2).

Tax payable to

theCommissioner.

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 recoverable

summarily.

Tax to be

recovered as civildebt.

PART VIIIREFUND OF TAX30. Where, in respect of any supply, tax has been

paid in error, the Commissioner shall, except as otherwiseprovided by the regulations, refund such tax:

Refund of taxpaid in error.

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

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31. (1) 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 thetax involved and subject to the regulations, theCommissioner may refund the tax:

Refund of tax on

bad debts.

Provided that no application for a refund shall bemade under this section after the expiry of five years from

the date of the supply.(2) Where the tax refunded under subsection (1) is

subsequently recovered from the recipient of the supply,the registered person shall refund the tax to theCommissioner within thirty days of the date of therecovery.

(3) If payment is not made within the time specifiedunder subsection (2), an interest of two per cent per monthor part thereof of the tax refunded shall forthwith be dueand payable:

Provided that the interest payable shall not exceed onehundred per cent of the refunded amount.

32.(1) Where any tax has been refunded in error, theperson to whom the refund has been erroneously madeshall, on demand by the Commissioner, pay the amounterroneously refunded.

Erroneous refundof tax.

(2) Where a demand has been made for any amount oftax under subsection (1), that amount shall be deemed to bedue from the person liable to pay the tax on the date uponwhich the demand is served upon him and if payment is not

made within 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.

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(3) The Commissioner may, upon application by a

person from whom any interest is due under subsection (2),grant remission of the whole or part of the interest due, ifsatisfied that such remission is justified, and shall makequarterly reports to the Cabinet Secretary of all theremissions 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 of the CabinetSecretary.

(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.

33. Any person who fraudulently makes a claim for arefund of tax shall be liable to pay a penalty of an amountequal to two times the amount of the claim.

Fraud in relation

to claims for taxrefund.

PART IXREGISTRATION ANDDEREGISTRATION

34. (1) A person who in the course of a business (a) has made taxable supplies or expects to

make taxable supplies, the value of whichis five million shillings or more in anyperiod of twelve months; or

(b) is about to commence making taxablesupplies the value of which is reasonablyexpected to exceed five million shillings inany period of twelve months,

Application for

registration.

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shall be liable for registration under this Act and shall,

within thirty days of becoming so liable, apply to theCommissioner for registration in the prescribed form.

(2) In determining whether a person exceeds 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 persons business orpermanently ceasing to carry on thepersons business.

(3) Notwithstanding subsection (1), 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 applied 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 persons 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

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

(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 (1), the Commissionershall register the person.

(7) The registration of a person under subsection (1)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 persons taxregistration certificate.

(8) The registration of a person under subsection (4)shall take effect from the date specified in the persons taxregistration certificate.

(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.(1) A registered person shall display in aconspicuous place

(a) the tax registration certificate at theprincipal place at which the personcarries on business; and

Registered personto display

certificate.

(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.

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36. (1) A registered person who ceases to maketaxable supplies shall apply in writing to theCommissioner, for the cancellation of the personsregistration, within thirty days of the date on which theperson ceases to make taxable supplies.

Cancellation of

registration.

(2) A registered person who continues to maketaxable supplies whose annual value does not exceed theregistration threshold may apply in writing to theCommissioner, for cancellation of the persons registration.

(3) The Commissioner shall, by notice in writing,

cancel the registration of a person if

(a) the person has applied for cancellationunder subsection (1) and the Commissioneris satisfied that the person has ceased tomake taxable supplies; or

(b)the person has not applied for cancellationbut the Commissioner is satisfied that theperson has ceased to make taxable suppliesand is not otherwise required to beregistered.

(4) Where a person applies for cancellation ofregistration under subsection (2) and the Commissioner issatisfied 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 hasbeen registered for a period of twelvemonths or less, by notice in writing, cancelthe registration.

(5) The Commissioner may, by notice in writing,cancel the registration of a person who is no longerrequired to be registered, if the Commissioner is satisfiedthat the person has not

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(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 persons registration shalltake effect from the date specified in the notice ofcancellation.

(7) Where a persons 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;

(b) submit a final return and pay all tax due,including the tax due under subsection(9),within fifteen days after the date of

cancellation of the persons 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 have made a taxable supply of any trading stockon hand at the time the registration is cancelled if theperson was allowed an input tax credit for the acquisitionor import of the stock, or in respect of the acquisition orimport of goods that have been subsumed into that stock.

(10) The taxable supply under subsection (1) shall bedeemed to have been made by the person immediatelybefore the persons 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.

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37. A person who (a) fails to apply for registration as required

under this Act;

Offences relating

to registration.

(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) fails to comply with section 35 or 36(7)(a),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 XAPPLICATION OF INFORMATIONTECHNOLOGY

38. (1) 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 be

furnished under this Act;

(c) any payment or repayment;(d) any notice or other document required to

be issued by the Commissioner; or

Application ofinformation

technology.

(e) any act or thing which requires to be doneunder this Act.

(2) The Commissioner may exempt-(a) any person or class of persons from

carrying out tax formalities andprocedure; or

(b) procedures or formalities from beingcarried out

by use of information technology.

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39.(1) The Commissioner may establish and operate aprocedure for electronic filing of tax returns or otherdocuments by registered persons and electronic service ofnotices and other documents by the Commissioner and, forthis purpose, the Commissioner may provide writtenconditions for

Electronic returns

and notices.

(a) the registration of persons to participate in theelectronic notice system;

(b) the issuing and cancellation of authenticationcodes to registered users;

(c) the tax returns and other documents that maybe transmitted through the electronic noticesystem, including the form and manner inwhich they are to be transmitted;

(d) the correction of errors in or amendments toelectronic returns or other documents;

(e) the use of the electronic notice system,including the procedure applicable if there is abreakdown or interruption in the system;

(f) the use, in any electronic transmission, ofsymbols, codes, abbreviations or othernotations 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 (1),file a tax return or other document to the computer accountof the Commissioner.

(3) The Commissioner may, in accordance with theconditions set under subsection (1), serve a notice or otherdocument to the computer account of a registered user.

(4) If a tax return or other document of a registereduser has been transmitted to the computer account of theCommissioner using the authentication code assigned tothe registered user

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(a) either with or without the authority ofthe registered user; and

(b) before the registered user has appliedto the Commissioner for cancellationof the authentication code,

the return or other document shall, for the purposes ofthis Act, be presumed to have been filed by the registereduser unless the registered user proves the contrary.

(5) For the purposes of this Act, an electronic tax

return, notice, or other document, or a copy thereof, shallnot be ruled inadmissible in evidence merely on the basisthat it was filed or served without the filing or delivery ofany equivalent document or counterpart in paper form.

(6) The contents of any electronic tax return, noticeor other document admissible under subsection (5) shall,unless the contrary is proved, be deemed to have beenaccurately transmitted.

(7) A person furnishing an electronic tax return orother 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. (1) A person who (a) knowingly and without lawful authority, by

any means, gains access to or attempts to

gain access to any tax computerisedsystem;

Unauthorized

access to orimproper use of

tax computerizedsystem.

(b) having lawful access to any taxcomputerized system, knowingly uses ordiscloses information obtained from suchsystem for a purpose that is not authorised;or

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(c) knowing that he is not authorized to do so,receives information obtained from any taxcomputerized system, and uses, discloses,publishes, or otherwise disseminates suchinformation,

commits an offence.

(2) A person convicted of an offence under subsection(1) 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.

41. (1) A person who knowingly (a) falsifies any record or information stored in

any tax computerised system;

(b) damages or impairs any tax computerisedsystem; or

Interference with

tax computerizedsystem.

(c) damages or impairs any duplicate tape or discor other medium on which any informationobtained 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(1) shall be liable, to imprisonment for a term notexceeding three years, or to a fine not exceeding eighthundred thousand shillings, or to both.

PART XIINVOICES, RECORDS, RETURNS ANDASSESSMENTS

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

Tax invoice.

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(2) No invoice showing an amount which purports to

be 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.

(4) A registered person shall issue only one originaltax invoice for a taxable supply, or one original credit note

or debit note, but a copy clearly marked as such may beprovided to a registered person who claims to have lost theoriginal.

43.(1) Every registered person shall, for the purposes ofthis 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 (1) shallnclude -

Keeping of

records.

(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,receipts 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 10 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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(e) tax account showing the totals of the outputtax and the input tax in each period and a nettotal of the tax payable or the excess taxcarried forward, as the case may be, at the endof each period;

(f) copies of stock records kept periodically asthe Commissioner may determine;

(g) details of each supply of goods and servicesfrom the business premises, unless suchdetails are available at the time of supply on

invoices issued at, or before, that time; and

(h) such other accounts or records as may bespecified, in writing, by the Commissioner.

(3) Every person required under subsection(1) to keeprecords shall, at all reasonable times, avail the records to anauthorised officer for inspection and shall give the officerevery facility necessary to inspect the records.

(4) For the purposes of this section, the Commissionermay, in accordance with the regulations, require any personto use an electronic tax register, of such type and descriptionas may be prescribed, for the purpose of accessinginformation regarding any matter or transaction which mayaffect the tax liability of the person.

(6) A person who contravenes any of the provisions ofthis section commits an offence.

44.(1) Every registered person shall submit a return, inthe prescribed form and manner, in respect of each taxperiod not later than the twentieth day after the end of that

period.

Submission of

returns.

(2) A registered person may, in writing, apply to theCommissioner for an extension of time to submit a return.

(3) An application under subsection (2) shall be madebefore the due date for submission of the return.

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(4) The Commissioner may, upon satisfaction tha

there is reasonable cause, grant an application undesubsection (2) and shall serve notice of the decision on thapplicant.

(5) A person who fails to submit a return as requiredunder this section shall be liable to a penalty of tenthousand shillings or five percent of the amount of taxpayable under the return, whichever is higher.

45.(1) For the purposes of this Act, a registered personwho has submitted a return shall be treated as having made

an assessment of the amount of tax payable for the taxperiod to which the return relates, being the amount set outin the return.

Assessment of tax.

(2) If a registered person fails to -

(a) submit a return;(b) keep proper books of accounts, records or

documents; 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 registered 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 the

assessment under subsection (2) to be served on the personassessed, and the notice shall state the amount of tax payableand shall inform the person assessed of his rights under thisAct.

(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.

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(6) The time limit under subsection (5) shall not apply

in the case of gross or wilful neglect, evasion or fraud.

46.(1) Subject to this section, the Commissioner mayamend an assessment by making such alterations oradditions to the assessment as he considers necessary toensure 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.

Amendment of

assessment.

(2) A registered person who has made a self-assessment pursuant to section 45 may apply to the

Commissioner, within the period specified in subsection(4)(b), 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 under subsection(1) 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

(b)in any other case, within five years of(i) a self-assessment, the date that the

registered person submitted the return;or

(ii) any other assessment, the date theCommissioner served notice of theassessment,

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 (1), the Commissionermay further amend the original assessment within the laterof

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(a) five years after the Commissioner served

notice 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 (5)(b) applies, theCommissioner shall be limited to amending the alterationsor additions made in the amended assessment to the

original assessment.(7) In this Part, assessment includes a self

assessment under section 45.

PART XIIENFORCEMENT

47. (1) 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.

Commissioner

may requiresecurity.

(2) Any person who, without reasonable excuse, failsto comply with a requirement of the Commissioner underthis section within such reasonable time as theCommissioner may allow commits an offence.

48.(1) For the purposes of obtaining full information,whether on a data storage devise or otherwise, in respect ofthe tax liability of any person or class of persons, or for anyother purposes, the Commissioner or an authorised officermay require any person, by notice in writing, to-

Production of

records.

(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 persons custody or under the personscontrol relating to the tax liability of anyperson;

(b) furnish such information relating to the taxliability of any person in the manner specifiedin the notice;

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(c) attend, at such time and place as may bespecified in the notice, for the purpose ofgiving evidence in respect of any matter ortransaction appearing to be relevant to taxliability of any person:

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;

(ii) the Commissioner or an authorised officercarrying 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 course 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 (1)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 thenformation or evidence referred to in subsection (1) be

(a) given on oath, verbally or in writing, and,for that purpose, the Commissioner mayadminister the oath; or

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(b) verified by statutory declaration or in

any other manner.

(4) This section shall have effect notwithstanding

(a) any law relating to privilege or the publicinterest 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.

49. (1)The Commissioner or an authorised officermay, at all reasonable times enter, with warrant, anypremises upon which any person carries on business, or inwhich he has reasonable grounds to believe that a person iscarrying on business, in order to ascertain whether this Actis being 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 take copies of, any record, book,account or other document, whether on a data

storage device or otherwise, kept on thepremises;

Power of

inspection etc.

(b)take possession of and remove any record,book, account or other document, whether ona data storage device or otherwise (includingthe 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 anyperson employed therein to answer questionsrelating to any record, book, account or otherdocument, 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;

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(d) require any safe, container, envelope orother receptacle in the establishment to beopened;

(e) at the risk and expense of the occupier of thepremises, open and examine any packagefound therein;

(f) take and retain without payment suchreasonable samples of any goods as he maythink necessary for the exercise of hisfunctions under this Act.

(2) Notwithstanding subsection (1), the Commissioneror an authorized officer may, prior to obtaining a warrant,secure the premises for purpose of ascertaining whetherthis Act is being complied with.

(3) Where an authorised officer enters any premises inexercise of the powers conferred by subsection (1), he maytake with him such persons as he considers necessary forthe carrying out of his functions under this Act

(4) An authorised officer shall not been titled to enter

or remain on any premises or place if, upon request by theowner or lawful occupier, the officer is unable to producethe Commissioners written authorisation permitting theofficer to exercise the powers conferred by subsection (1).

(5) The owner or lawful occupier of the premises towhich an exercise of power under subsection (1) relatesshall provide all reasonable facilities and assistance to theCommissioner or authorised officer in the exercise of thepower.

(6) A person whose accounts, documents, or recordshave been seized under subsection (1) may examine themand make copies, at the persons expense, during officehours.

(7) A person whose data storage device has beenseized under subsection (1) may have access to the deviceduring office hours on such terms and conditions as theCommissioner or authorized officer may specify.

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(8) The Commissioner or authorised officer shall sign

for all accounts, 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:

Provided that the Commissioner shall not retain theaccounts, documents, records or data storage devices for aperiod longer than six months unless the accounts,documents, records or data storage devices are required forthe purposes of any proceedings under this Act or anyother written law.

(9) This section shall have effect despite

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

(b) any contractual duty of confidentiality.

(10) Any person who -

(a) resists, hinders or obstructs, or attempts toresist, hinder or obstruct, an authorisedofficer acting under this section, or failsto comply with subsection (5); or

(b) fails to comply fully with anyrequirement made under this section; or

(c) makes any statement in response to anysuch requirement, knowing it to be falseor incomplete in any material particular,or not having reason to believe that it istrue or complete in all material respects;or

(d) procures or attempts to procure, by anymeans, any other person to act asaforesaid,

commits an offence.

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(11) 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.

(12) Any audit or examination of the records of aregistered person pursuant to this section shall be finalizedwithin six months from the date it commences.

(13) In the event that the audit or examination is notcompleted within six months as contemplated insubsection (12), an authorized officer may request theCommissioner to extend the period for conducting theaudit or examination and, if such extension is granted, theauthorised person shall inform the registered personaccordingly.

(14) Where an audit or examination is not concludedupon expiry of six months from the date of commencementof the audit or examination, a registered person or his orher authorised representative shall, upon request, be issuedwith an interim certificate indicating the progress madeduring the audit or examination.

PART XIIIOBJECTIONS

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

Objections.

(2) A notice given under subsection (1) shall not be avalid notice of objection unless -

(a) it states precisely the grounds of objection to theassessment; and

(b) it is received by the Commissioner within thirtydays after the date of service of the notice ofassessment:

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 within 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.

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(3) Where notice of an objection has been received

under this section, the Commissioner shall, within thirtydays

(a) amend the assessment in accordance with theobjection;

(b)amend the assessment in the light of theobjection according to the best of his judgment;or

(c) refuse to amend the assessment.(4) Where the Commissioner, in respect of an

objection 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 objection and the personobjecting agrees with the Commissioner onthe proposed amendment,

the assessment shall be amended accordingly and theCommissioner shall, within fifteen days, cause a noticesetting out the amendment and the amount of tax payable tobe 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 person

objecting 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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(b) refuses to amend the assessment, he shall,within fifteen days, cause a noticeconfirming the assessment to be served onthat person.

(6) A persons objection to an amended assessmentunder this section shall be limited to the alterations oradditions made in it.

(7) Where the Commissioner fails to communicate thedecision on a persons objection within sixty days of thereceipt of the objection, the Commissioner shall be deemed

to have agreed to amend the assessment in accordance withthe objection.

PART XIVFORFEITURE AND SEIZURE

51. (1) Any taxable supplies found to have been soldby a registered person without payment of tax shall beliable to forfeiture:

Power to seizegoods.

Provided that the Commissioner may permit the goodsliable to forfeiture to be delivered to the person making 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 believe that thetax due and payable in respect of the supply or importationof the goods has not been, or is likely not be, paid.

(3) Goods seized under subsection (2) shall be stored ina place approved by the Commissioner.

(4) Immediately after the seizure of the goods, awritten st

Documents

VAT ACT 2013