Guide — Withholding VAT

Withholding VAT Kenya Guide 2026

If you sell goods or services to large companies, government entities, or other appointed withholding VAT agents, your customer will deduct 2% from your VAT and pay it directly to KRA. This guide explains exactly how the system works — for both suppliers and appointed agents.

How Withholding VAT Works

Withholding VAT shifts the responsibility for remitting VAT from the supplier to the buyer (the appointed agent). Here is the flow:

You (the supplier) issue a normal eTIMS invoice for the full amount including 16% VAT. For example, goods worth KES 100,000 + VAT KES 16,000 = KES 116,000.
The appointed agent deducts 2% withholding VAT on the taxable value: 2% × KES 100,000 = KES 2,000. They pay you KES 116,000 - KES 2,000 = KES 114,000.
The agent remits the KES 2,000 to KRA by the 20th of the following month through the iTax portal.
The agent issues you a withholding VAT certificate as proof that the VAT was remitted.
You declare both the sale and the withholding VAT creditin your monthly VAT return. The credit reduces what you owe KRA.

Who Are Appointed Withholding VAT Agents?

The Commissioner appoints withholding VAT agents through a notice in the Kenya Gazette. Generally, the following entities are appointed:

Large taxpayers registered under KRA's Large Taxpayers Office
Government ministries, departments, and agencies
County governments and their entities
State corporations and parastatals
NGOs registered under the NGOs Coordination Act with significant funding
Insurance companies, banks, and other financial institutions
Telecommunication companies
Petroleum and energy companies
Manufacturing companies above a specified turnover threshold

How to check if your customer is an agent: Log in to iTax, go to the withholding VAT section, and check the list of appointed agents. Alternatively, ask your customer to confirm in writing. If they are not on the list, they should not deduct withholding VAT.

What Suppliers Need to Do

If your customer is a withholding VAT agent:

Issue normal eTIMS invoices

Do not create a special invoice for withholding VAT. Issue your standard eTIMS invoice with full 16% VAT. The withholding VAT is a separate remittance by the buyer, not a different invoice type.

Track your withholding VAT certificates

The agent must give you a withholding VAT certificate for each deduction. Keep these certificates in a dedicated file — they are your proof when filing returns and applying for refunds.

Declare the credit in your VAT return

On your iTax VAT return, declare the full output VAT from the sale. Then enter the withholding VAT credit in the withholding VAT section. The credit reduces your net VAT payable.

Reconcile monthly

At the end of each month, reconcile the withholding VAT certificates you received against the invoices you issued. Any mismatch means either the agent did not remit or the certificate is missing.

Follow up on missing certificates

If you have not received a withholding VAT certificate by the 10th of the following month, contact the agent's finance department. A late certificate means you cannot claim the credit that month.

What Appointed Agents Need to Do

If you are an appointed withholding VAT agent, your obligations are:

Deduct 2% on all qualifying supplies

For every payment to a VAT-registered supplier for taxable supplies, deduct 2% of the taxable value. This applies to both goods and services. Do not deduct on exempt supplies or supplies from non-VAT-registered suppliers.

Issue withholding VAT certificates promptly

Issue the withholding VAT certificate within 5 working days of deduction. The certificate must show your KRA PIN, the supplier's KRA PIN, invoice number, taxable value, VAT amount, withholding VAT deducted, and the tax period.

Remit to KRA by the 20th

Remit all withholding VAT deducted in a month by the 20th of the following month. Use the iTax portal to file a withholding VAT return and make payment. Late remittance attracts a 5% penalty plus 1% interest per month.

File a withholding VAT return

In addition to your own VAT return, you must file a separate withholding VAT return showing all deductions made during the tax period, the suppliers deducted from, and the total amount remitted.

Maintain a register

Keep a register of all suppliers from whom you deducted withholding VAT, including invoice numbers, amounts, and certificate issuance dates. KRA may request this during audit.

Refund of Excess Withholding VAT Credits

If you sell primarily to withholding VAT agents, your withholding VAT credits may exceed your net VAT payable. This can create a persistent credit position. You have two options:

Carry forward: The excess withholding VAT credit carries forward automatically to the next tax period. This is the simplest option if your sales pattern means you will eventually have output VAT to offset against.
Apply for a refund: You can apply to KRA for a refund of the excess withholding VAT credits. The application is filed through iTax and must include withholding VAT certificates, eTIMS invoices, and a reconciliation schedule. KRA may audit before processing. Apply within 12 months.

See our VAT Refund Guide for the full process.

Common Withholding VAT Mistakes

Deducting withholding VAT when not an appointed agent

If you are not on KRA's list of appointed agents, do not deduct withholding VAT. You are committing an offence if you do. Pay your supplier the full invoice amount including VAT.

Deducting on exempt supplies

Withholding VAT only applies to taxable supplies. Do not deduct on exempt supplies like basic food items, medical services, or educational fees.

Failing to issue the withholding VAT certificate

A certificate must be issued to the supplier within 5 working days. Failure to do so creates a dispute and may cause the supplier to miss their input VAT claim window.

Supplier not declaring the credit

Suppliers sometimes forget to declare withholding VAT credits in their returns. Train your finance team to always check the withholding VAT section when filing.

Late remittance by the agent

If the agent remits late, the supplier's credit is delayed. Agents should set a calendar reminder for the 15th of each month to prepare the withholding VAT return before the 20th deadline.

Frequently Asked Questions

What is withholding VAT in Kenya?: Withholding VAT is a system where appointed agents (typically large companies, government entities, and specified institutions) deduct 2% VAT at the point of paying a supplier and remit it directly to KRA. The supplier receives a withholding VAT credit note that they use to reduce their monthly VAT remittance. It is similar to withholding tax but applies to VAT rather than income tax.
What is the withholding VAT rate in Kenya?: The withholding VAT rate is 2% of the value of taxable supplies. This rate has been effective since 7 November 2019. It applies to the taxable value (excluding VAT). For example, on a KES 100,000 supply plus KES 16,000 VAT (total KES 116,000), the withholding VAT is 2% of KES 100,000 = KES 2,000.
Who are appointed withholding VAT agents in Kenya?: Withholding VAT agents are appointed by the Commissioner and typically include: large companies with significant turnover, government ministries and departments, county governments, state corporations, NGOs registered under specific provisions, and other institutions specified in the Kenya Gazette. KRA publishes and updates the list of appointed agents on the iTax portal. If you are unsure whether your customer is an appointed agent, ask them to confirm or check the KRA list.
How does withholding VAT affect my VAT return as a supplier?: When you sell to an appointed agent, you issue a normal eTIMS invoice including full VAT (16%). The agent pays you the invoice amount minus the 2% withholding VAT and remits the 2% directly to KRA. They give you a withholding VAT certificate. When you file your VAT return, you declare the full output VAT on the sale and also declare the withholding VAT credit as a payment. This reduces your net VAT payable. If the withholding VAT credits exceed your net VAT payable, you have a credit position that can be carried forward or refunded.
What is the deadline for remitting withholding VAT?: Appointed withholding VAT agents must remit the deducted VAT to KRA by the 20th day of the month following the deduction. This is the same deadline as the regular VAT return filing and payment deadline. Late remittance attracts penalties of 5% of the tax due plus 1% interest per month. Agents who fail to remit may be delisted or face compliance action.
How can I claim a refund of excess withholding VAT credits?: If your withholding VAT credits consistently exceed your net VAT payable, you can apply for a refund through the iTax portal. You will need to provide: (1) withholding VAT certificates from your customers, (2) eTIMS invoices for the related supplies, (3) proof of payment, and (4) a reconciliation schedule. KRA may audit before processing. Applications must be made within 12 months of the tax becoming due. See our VAT Refund Guide for the full process.