Selling software to Kenyan customers: Kenyan VAT
Whether a South African or Nigerian software company selling into Kenya must register for Kenyan VAT, and what its Achekam invoices can show today.
By Achekam · · 4 min read · For Software (SaaS) businesses in South Africa, Nigeria
Selling software into Kenya can start with a single referral. A South African or Nigerian company signs an order form with a Nairobi business, the product is delivered over the internet, and nobody in the company has an office, a desk or a bank account in Kenya.
Then the question arrives, often from the Kenyan customer's finance team: are you registered for VAT in Kenya? Many founders assume that a company with no office, staff or bank account in Kenya cannot owe Kenyan VAT. Kenyan law takes a different view of digital suppliers. This article sets out the rule as it stands at the time of writing, what your Achekam invoices can and cannot do about it, and what to settle with a Kenyan tax adviser before the first sale.
Kenya's rule for non-resident digital suppliers, at the time of writing
Kenya's VAT Act requires a business in Kenya to apply for VAT registration within 30 days once its taxable supplies reach KES 5 million in 12 months. For a non-resident digital supplier, there is no threshold at all. A foreign company supplying digital services into Kenya can therefore have a Kenyan VAT obligation from its first sale, not from some later level of turnover.
The consolidated text of the VAT Act, 2013 on Kenya Law sets out registration, the standard and zero rates, tax invoices, input tax and returns. Whether your particular sales fall within the digital supplier rule, and whether it matters that your customers are businesses rather than consumers, depends on the facts of your contracts. That is the question to put to a Kenyan tax adviser.
The standard rate and the monthly return date
At the time of writing, Kenya's standard VAT rate is 16%, and a Kenyan VAT return is due by the 20th day after the end of each month. A supplier registered in Kenya therefore has a monthly cycle of returns and payments to keep, separate from anything it files at home.
Rates and procedures change, so confirm both with KRA or your adviser before your first return, and put the monthly date in the finance calendar from the start.
Your workspace charges your own country's VAT
Each Achekam business workspace belongs to the country it chose at sign-up. The standard VAT rate on an invoice is taken from the approved rule in force on the document's date in the issuing workspace's country. Achekam refuses rather than assumes a rate when no approved rule applies.
The practical consequence is simple. A South African workspace's invoices carry South African VAT treatment; a Nigerian workspace's invoices carry Nigerian treatment. Neither will put Kenyan VAT at 16% on an invoice line. If you owe Kenyan VAT, it is accounted for and paid to KRA outside your Achekam invoices.
What you choose on the line depends on your own country:
- South Africa. Each invoice line takes 15% or 0%. Whether a supply of software to a Kenyan customer qualifies for 0% under South African rules is for your accountant to confirm in writing.
- Nigeria. Each line takes a tax code: standard, zero-rated, exempt, out of scope or reverse charge, and only standard lines carry VAT. Nigeria zero-rates exported services, among other items, so your adviser may point you to the zero-rated code. Use the invoice form under Accounting for this: the New invoice form under Billing & Finance offers only 15% or 0% and shows rand, so it does not follow Nigerian VAT.
Invoicing in your own currency today
At the time of writing, neither invoice form lets a business invoice in another currency. A South African company invoices a Kenyan customer in rand, and a Nigerian company in naira. Some Kenyan customers accept that; others will want shillings or dollars on the document. Agree the currency in the contract, and if the customer pays in a different currency, agree who bears the exchange difference.
How a customer abroad pays, and which gateway takes which currency, is covered in billing overseas customers.
Getting Kenyan tax advice before the first sale
Take these questions to a Kenyan tax adviser before you sign the first Kenyan order form:
- Do our sales fall under the rule for non-resident digital suppliers?
- If so, how and when do we register, and what does the monthly return involve?
- Does it matter that our customers are VAT-registered businesses?
- What should our invoices and contracts say about Kenyan VAT?
- How is our home-country VAT treated on the same sale?
Ask for the answers in writing and keep them with your Kenyan contracts. If Kenyan sales grow to the point where you open a Kenyan company, its own workspace would be registered as Kenyan, and the Kenyan rate rules and their approval would then apply to it, as charging VAT while rates await approval explains.
Keeping Kenyan sales visible in your books
Whatever the answer, you will need to know exactly what you sold into Kenya, month by month. Keep Kenyan customers clearly identified, by name and with their KRA PIN recorded as their tax number, and run a monthly list of invoices to them.
Keep a simple register of Kenyan invoices, with the date, number, customer and amount, updated as each invoice is issued. Each month, check it against each Kenyan customer's statement of account, which the server produces as a PDF you can also e-mail to the customer. That register is the starting point for any Kenyan return your adviser prepares. If you account for Kenyan VAT on a sale, record what you owe KRA in a separate liability account, so it never mixes with your home VAT.
Before the next Kenyan deal
Send the five questions to a Kenyan adviser now, while the pipeline is still small. Settling the position at the start is far simpler than unpicking a year of Kenyan sales afterwards.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
