Selling to customers outside Kenya can be a good business, and the tax rules favour it: exports are zero-rated for VAT. That means you do not charge VAT on the sale, but you can still claim back the VAT on your costs. For an exporter, that often creates a credit, and the credit is cash if you can claim it.

What zero-rated means

A zero-rated supply is a taxable supply at 0%. It is different from an exempt supply. With zero-rating:

  • You charge no VAT to the foreign customer.
  • You can claim input VAT on the costs that relate to the export.
  • You must be VAT-registered, and your export sales count toward your taxable supplies.

With an exempt supply you could not claim the input VAT, so zero-rating is far better. See VAT for small businesses in Kenya for the three categories.

An example

You buy goods and services for export worth KES 5,000,000 plus VAT of KES 800,000. You export the goods for KES 6,500,000 and charge no VAT. Your input VAT of KES 800,000 has no output VAT to set against it, so you have a VAT credit of KES 800,000, which you carry forward or claim as a refund. The VAT return calculator shows the credit.

Proving it is an export

Zero-rating is only allowed if you can prove that the goods left the country. Keep:

  • The export entry filed through customs, with the exit certificate or the confirmation that the goods left
  • The commercial invoice to the foreign buyer
  • The bill of lading or airway bill
  • Proof of payment from abroad
  • Your eTIMS invoices; see eTIMS e-invoicing explained

Without the proof, KRA can treat the sale as a local sale and charge VAT on it.

Claiming the refund

If you have a credit that you do not expect to use, you can apply for a refund through iTax with the supporting documents. Time limits matter: recent changes shortened the period for lodging a VAT refund claim, so check the current limit; see shorter deadlines for VAT refund claims. Refunds can take time, so plan your cash. The free tax refund claim tracker keeps each claim's status and what is still owed to you.

Other points for exporters

  • Service exports to clients abroad can also be zero-rated if the conditions are met. Freelancers and agencies should check; see tax for freelancers and content creators.
  • Income tax still applies to your profit, whatever the VAT treatment.
  • Some export processing zone enterprises have special tax treatment.

Records and returns

File your monthly VAT return even when most sales are zero-rated. The VAT returns register separates standard, zero-rated and exempt sales, and carries credits forward.

Cash flow

The credit arrives late, but costs are paid in cash now. Forecast it; see how to build a cash flow forecast.

Registered exporters need to know how input VAT behaves in a normal month, which our VAT return calculator shows, and how much of it to expect back; the VAT input invoice register lists the invoices behind the claim. If you also import materials, see importing goods for resale: VAT and records, and for the filing steps read how to file a VAT return.

Rules change with each Finance Act. Confirm the current treatment and refund procedure with KRA.

Common questions

Do I need to register for VAT to export? If your taxable sales, including zero-rated exports, reach the threshold you must register, and registering lets you reclaim the input VAT on your costs even when your sales are zero-rated.

What proves that goods were exported? The customs export entry and exit confirmation, the bill of lading or airway bill, the commercial invoice and proof of payment, kept for your VAT refund claim.

How long does a refund take? It depends on verification. Make the claim within the time limit with complete documents, and keep a record of every follow-up.