When you buy from a supplier or hire a contractor, you are trusting them with more than the job. If they are not properly registered, do not issue valid invoices or do not pay their taxes, the problems can reach you: expenses you cannot deduct, VAT you cannot claim and delays when a regulator asks questions. A few simple checks before you start work can prevent most of this. This guide gives a practical checklist.

Ask for the basics

Start with identification. For a company, ask for the certificate of incorporation and the KRA PIN certificate. For a sole trader, ask for the business registration and PIN. For a contractor, ask for a PIN and an ID. Check that the names match across the documents and the invoices they will issue. Tax compliance certificate vs PIN certificate explains the difference between the two main documents.

Check VAT registration

If the supplier charges VAT, ask for their VAT registration details and confirm that the VAT number appears on their invoices. Charging VAT without being registered is a serious problem, and you may be unable to reclaim VAT on such an invoice. If a business tells you it is below the threshold and charges no VAT, that is acceptable, but the VAT registration checker helps you see where a business like yours would stand. VAT for small businesses in Kenya explains the rules.

Look at the invoice

A valid tax invoice shows the supplier's name and PIN, your name and PIN where required, a description, quantities, prices, the VAT and a unique number. With electronic invoicing, it should come from the system; see eTIMS e-invoicing explained and bookkeeping in the eTIMS era. If an invoice looks wrong or incomplete, ask for a corrected one before you pay. VAT invoices and quotations: what to include lists the contents.

Ask for a compliance certificate for larger deals

For bigger contracts, ask for a current tax compliance certificate and check its date. It tells you that the business was up to date at the time of issue. It is not a guarantee of the future, but a business that cannot produce one may have unfiled returns or arrears. Keep a copy in your supplier file.

Know when you must withhold tax

Some payments require you to withhold tax and pay it over to KRA, for example fees to contractors and consultants or rent to landlords. If you do not withhold when you should, the liability can fall on you. Use the withholding tax calculator and read withholding tax in Kenya explained. The contractor and consultant payments register records the withholding and the certificates you issue.

Check licences and permits

Many businesses need licences to operate legally: county business permits, sector licences and professional registrations. Ask to see them. Business licences and permits in Kenya lists the common ones. A business operating without the right permits is a risk to you as well, especially for contracts in regulated sectors.

Check their track record

Ask for references from other customers, look for reviews and check how long they have been trading. A business that has operated for years with satisfied clients is less risky than a new one with no history. For importers and suppliers abroad, use the checks in how to vet an overseas supplier before you pay.

Keep a supplier file

For each important supplier, keep a file with their registration documents, PIN, VAT details, compliance certificate, licences and contract. Update it yearly. The receipts and invoices filing index and the supplier comparison scorecard help you track and compare suppliers.

Red flags

  • A supplier who offers a discount if you pay in cash without an invoice.
  • A refusal to give a PIN or registration documents.
  • Invoices with missing or inconsistent details.
  • Payment requests to personal accounts for company work.
  • Pressure to pay quickly before checks can be done.

What to do if a supplier is not compliant

You can ask them to fix the problem, find another supplier or continue with extra protection such as holding back payment until documents are provided. Record what you decided and why. Good due diligence is quick and cheap compared with the cost of a rejected claim or a damaged reputation.