Updated 12 November 2026
Withholding VAT in Kenya means an appointed customer keeps back 2% of the taxable value on your invoice when it pays you, and sends that amount straight to the Kenya Revenue Authority (KRA). Section 42A of the Tax Procedures Act (Cap. 469B) lets the Commissioner appoint these withholding VAT agents. KRA’s taxpayer guidelines on WHVAT agents (dated May 2025, checked 12 November 2026) say the agent must remit the 2% within five working days of deducting it.
Updated November 2026. Sources: KRA’s WHVAT appointment and revocation guidelines (May 2025), KRA’s VAT FAQ on digital services, and the KRA eCitizen “VAT Withholding Tax Agent Checker”. Examples use the standard 16% VAT rate and are illustrations, not tax advice.
On this page
In this guide
How withholding VAT works: a KSh example
KRA’s guideline says the agent withholds 2% of the taxable value shown on the tax invoice when paying a registered supplier, in the supplier’s name and PIN. If a VAT-registered supplier’s invoice does not show the VAT amount, the supply is treated as VAT-inclusive (VAT Regulations 2017, paragraph 5).
| Line | Amount (KSh) |
|---|---|
| Taxable value of the supply | 100,000 |
| VAT at 16% | 16,000 |
| Invoice total | 116,000 |
| Withholding VAT at 2% of taxable value | 2,000 |
| Paid to the supplier | 114,000 |
| Remitted by the agent to KRA | 2,000 |
The KSh 2,000 is not an extra tax on the supplier. It is part of the KSh 16,000 VAT the supplier charged. The supplier still files its normal VAT return and claims the withheld amount as a credit using the withholding VAT certificate the agent issues on iTax. Suppliers who sell mostly to agents should keep a running list of certificates and match them to invoices every month; a missing certificate means a missing credit.
If you also suffer income withholding tax on the same invoice (for example on professional fees), that is a separate deduction; estimate it with our withholding tax calculator.
Who withholding VAT does not apply to
The May 2025 guideline lists four cases where withholding VAT does not apply on payments for taxable supplies:
- Official aid-funded projects.
- The taxable value of zero-rated supplies.
- Registered manufacturers whose value of investment on 31 December 2024 was at least KSh 2 billion. They must apply to the Commissioner for Domestic Taxes for an exemption certificate (letter) and show it to the agent.
- Non-VAT registered persons.
If an agent wrongly withholds, or issues a certificate to the wrong person, in error, or before a credit note cut the invoice value, the agent can apply on iTax to cancel the certificate. iTax then generates a Withholding Adjustment Voucher, which the agent can use against future withholding VAT payments.
How to check if a customer is a withholding VAT agent
KRA runs a free “VAT Withholding Tax Agent Checker” on its eCitizen portal (ecitizen.kra.go.ke, under Checkers), and its VAT FAQ also points taxpayers to the iTax PIN checker for confirming whether a customer is an appointed agent. Enter the customer’s PIN and the result shows whether the PIN is appointed.
Why check? Only appointed agents may withhold. KRA’s FAQ on digital services is explicit: consumers withhold only if they are appointed withholding VAT agents, the rate is 2%, and final consumers do not withhold. If a customer that is not appointed short-pays your invoice by 2%, ask for the full amount.
Government buyers are among the most common agents. If you supply ministries, counties or parastatals, also read our guide on eTIMS and IFMIS for government suppliers, and make sure every invoice is a valid one (see how to generate an eTIMS invoice).
Rules and penalties for withholding VAT agents
- Remit on time. The guideline says tax withheld must reach the Commissioner within five working days after the deduction, citing section 42A(4B).
- 10% penalty. Under section 42A(4C), as quoted in the guideline, an agent that without reasonable cause fails to withhold the full amount, or fails to remit it on time, is liable to a penalty of 10% of the amount not withheld or remitted.
- Treated as the agent’s own tax. Under section 39A, tax an agent fails to deduct and remit can be collected from the agent as if it were the agent’s own tax due, with penalties and interest.
- Withhold in the supplier’s name and PIN. A certificate in the wrong name cannot be claimed by the supplier.
Firms that find the process heavy often hire help; a licensed tax agent in Kenya can file and reconcile on your behalf.
How an agent can get its withholding VAT appointment revoked
Section 42A(2) lets the Commissioner revoke an appointment at any time. The guideline lists three groups who may apply, in writing to their Tax Service Office with evidence:
- Agents that have ceased business and attach a deregistration certificate.
- Agents already withholding and remitting whose purchases and sales reached 100% TIMS or eTIMS compliance for six consecutive months.
- Public bodies, privileged persons and institutions in Part B of the Second Schedule to the VAT Act, 2013, if they are not carrying on business.
Until KRA replies, the agent must keep withholding. If approved, a Withholding VAT Agent Cancellation Notice is sent to the agent’s iTax email and takes effect on its notification date; a rejection is also sent in writing. KRA can re-appoint an agent if it finds information that contradicts the grounds given.
Frequently asked questions
What is the withholding VAT rate in Kenya?
2% of the taxable value on the tax invoice, according to KRA’s guidelines under section 42A of the Tax Procedures Act.
Who pays withholding VAT?
The appointed agent (the customer) deducts it from the payment and remits it to KRA. It comes out of the VAT the supplier charged, and the supplier claims it back as a credit with the withholding certificate.
Does withholding VAT apply if I am not VAT registered?
No. KRA’s May 2025 guideline says withholding VAT does not apply to payments to non-VAT registered persons.
How do I know if a company is a withholding VAT agent?
Use KRA’s VAT Withholding Tax Agent Checker on ecitizen.kra.go.ke, or the iTax PIN checker, with the company’s PIN.
Prefer WhatsApp? Follow Business Radar on WhatsApp
We will email you a weekly money and business brief. We store your email (and your name, if you give one) for that purpose, under the Kenya Data Protection Act, 2019. You can unsubscribe at any time. Privacy policy.
