Guide — Input VAT

Input VAT Deduction Kenya Guide 2026

Input VAT deduction is how VAT-registered businesses recover the VAT they pay on business purchases. Get it right and you reduce your monthly VAT bill. Get it wrong and you lose the deduction entirely — or face penalties. This guide covers everything from eligibility to the 6-month deadline.

What Is Input VAT?

Input VAT is the 16% VAT you pay when your business buys goods or services from a VAT-registered supplier. When you file your monthly VAT return, you can deduct this input VAT from the output VAT you collected on your sales. Only the net difference is paid to KRA.

Example

Your sales for the month: KES 1,000,000 + VAT KES 160,000 (output VAT collected)

Your purchases for the month: KES 500,000 + VAT KES 80,000 (input VAT paid)

Net VAT payable to KRA: KES 160,000 - KES 80,000 = KES 80,000

Without input VAT deduction, you would pay the full KES 160,000 to KRA and bear the KES 80,000 as a cost. With proper deduction, you only remit the net amount.

7 Conditions for Claiming Input VAT

You must satisfy all of these conditions for KRA to allow your input VAT claim:

You must be VAT-registered

Only businesses with active VAT registration can claim input VAT. If you are not registered, the VAT you pay on purchases is a cost, not a reclaimable tax.

The purchase must be for business use

Personal purchases and non-business expenses do not qualify. If you use an item partly for business and partly personally, only the business-use portion is claimable.

The purchase must be used for taxable supplies

If you make only exempt supplies (e.g., basic food items, medical services), you cannot claim input VAT. For mixed supplies (both taxable and exempt), you need apportionment.

You must have a valid eTIMS invoice

The invoice must be generated through eTIMS, contain your KRA PIN, and have been transmitted to KRA by the supplier. Manual invoices, receipts, or supplier statements are not acceptable.

Your KRA PIN must appear on the invoice

If the supplier captured your PIN incorrectly or omitted it, the invoice will not appear in your auto-populated purchases CSV. You cannot claim input VAT on that invoice.

The supplier must have declared the sale

The supplier must have included the invoice in their own VAT return. If they did not file or omitted your invoice, KRA will not allow your input VAT claim.

Claim within 6 months

The deduction must be claimed within 6 months after the end of the tax period of the supply or importation. After that, the claim window closes permanently.

Prohibited Input VAT Claims

KRA specifically prohibits input VAT deduction on these categories:

Passenger vehicles

Input VAT on passenger cars (saloon cars, SUVs, station wagons) is not deductible unless you are in the business of selling or hiring vehicles. Utility vehicles like pick-ups and delivery vans used solely for business may qualify.

Entertainment expenses

Meals, refreshments, event tickets, and similar entertainment costs are not eligible for input VAT deduction, unless providing entertainment is your ordinary business.

Exempt supplies

If you purchase goods or services that are used to make exempt supplies, the related input VAT cannot be claimed. For mixed businesses, an apportionment formula is required.

Non-business purchases

Any purchase that is not wholly and exclusively for business purposes. Hobby expenses, personal items, and family purchases do not qualify.

Purchases from non-VAT suppliers

If your supplier is not VAT-registered, they do not charge VAT, and there is no input VAT to claim. You cannot create an input VAT claim on a non-VAT invoice.

Apportionment for Mixed Supplies

If your business makes both taxable supplies (subject to VAT at 16% or 0%) and exempt supplies (no VAT), you cannot claim all your input VAT. You must apportion it using a fair method. The standard approach is the turnover-based formula:

Apportionment Formula

Allowable input VAT = Total input VAT × (Taxable turnover ÷ Total turnover)

Where taxable turnover includes 16% rated and 0% rated supplies, but not exempt supplies.

Example

Total turnover: KES 1,000,000 (KES 800,000 taxable + KES 200,000 exempt)

Total input VAT paid: KES 50,000

Allowable input VAT: 50,000 × (800,000 ÷ 1,000,000) = KES 40,000

Disallowed input VAT: KES 50,000 - KES 40,000 = KES 10,000

The 90:10 rule was deleted by the Finance Act 2025

Previously, businesses with exempt supplies under 10% of total turnover could claim full input VAT deduction. This rule was removed. You must now apportion even if your exempt supplies are small. Update your accounting process accordingly.

Documents Required for Input VAT Claims

To support your input VAT deduction, maintain these documents:

Valid eTIMS-compliant invoice: Generated through eTIMS with QR code and server confirmation code. Must show your KRA PIN. Retain both the PDF copy and the QR verification screenshot.
Customs entry (for imports): Import declaration (IDF), customs entry, and proof of VAT payment at the port of entry. The import must be declared in iCMS.
Credit / debit notes: If adjustments were made to invoices, keep the corresponding credit or debit notes issued through eTIMS.
Payment evidence: Bank statements, M-Pesa statements, or payment receipts showing you paid the supplier. While not always required, this is critical during audit.
Apportionment records (if applicable): A spreadsheet or schedule showing your taxable vs exempt turnover calculation and the resulting apportionment percentage each month.

Excess Input VAT: Carry Forward or Refund?

When your input VAT exceeds output VAT in a period, you have two options:

Option 1: Carry Forward

The excess is automatically carried to the next tax period. You offset it against future output VAT. This is the default option and requires no application. Most businesses with fluctuating sales use this method.

Option 2: Apply for a Refund

You can apply for a refund of excess input VAT through the iTax portal. Refunds are typically processed when the excess arises from zero-rated supplies or exports. Apply within 12 months of the tax becoming due. Refunds may trigger an audit.

See our VAT Refund Guide for the full step-by-step refund process.

Frequently Asked Questions

What is input VAT in Kenya?: Input VAT is the VAT you pay when you buy goods or services for your business. If you are VAT-registered and the purchase is used to make taxable supplies, you can deduct this input VAT from the output VAT you collect on your sales. You pay KRA only the difference. For example, if you collected KES 50,000 in output VAT and paid KES 30,000 in input VAT, you remit KES 20,000 to KRA.
What are the conditions for claiming input VAT in Kenya?: You must meet all of these conditions: (1) You must be VAT-registered. (2) The purchase must be for business use in making taxable supplies. (3) You must hold a valid eTIMS-compliant electronic tax invoice or customs entry. (4) Your KRA PIN must appear on the supplier's eTIMS invoice. (5) The invoice must have been transmitted to KRA by your supplier. (6) The supplier must have declared the sale in their VAT return. (7) The deduction must be claimed within 6 months from the date of supply or importation.
Can I claim input VAT without an eTIMS invoice?: No. For all local purchases, you must have a valid eTIMS-compliant invoice transmitted to KRA with your KRA PIN. Manual invoices, receipts, or pro-forma invoices do not qualify. For imports, you need a valid customs entry from iCMS. Without these, the input VAT claim will be disallowed on audit, and you may face a penalty of 75-200% of the tax evaded.
What is the 6-month rule for input VAT deduction?: You must claim input VAT within 6 months after the end of the tax period in which the supply or importation occurred. For example, if you made a purchase in January 2026, you have until July 2026 to claim the input VAT. After 6 months, the claim window closes permanently. This applies to both local purchases and imports. If your supplier transmits the invoice late, you can still claim it within 6 months of the invoice date.
What purchases are NOT eligible for input VAT deduction?: Input VAT cannot be claimed on: (1) Purchases not related to the business. (2) Purchases used for exempt supplies (e.g., if you sell exempt goods like basic food items, you cannot claim input VAT on related costs). (3) Passenger cars (unless you are in the business of selling or hiring cars). (4) Entertainment expenses (unless provided in the ordinary course of business). (5) Goods or services where you do not have a valid eTIMS invoice. (6) Purchases from non-VAT-registered suppliers.
What happens if input VAT exceeds output VAT?: If your input VAT exceeds output VAT in a tax period, you have a VAT credit position. You can carry forward the excess to the next tax period and offset it against future output VAT. Alternatively, if the excess arises from zero-rated supplies, exports, or certain qualifying circumstances, you can apply for a refund. The refund application must be lodged within 12 months of the tax becoming due (reduced from 24 months by the Finance Act 2025).