When you import goods for a VAT-registered business, you pay VAT to KRA at the border before the goods are released. That VAT is not a cost to the business if the goods are used to make taxable supplies. You claim it back as input VAT on your VAT return. Businesses that skip the claim, or make it without the right documents, either overpay or face disallowance. This guide explains how it works.

How import VAT is calculated

VAT is charged at the standard rate of 16% on the customs value plus import duty plus excise duty, and plus other charges that form part of the value for VAT. The IDF and RDL are added separately and are not part of the VAT base. For example, if the customs value is KES 1,000,000, duty is 25 percent (KES 250,000) and there is no excise, the VAT base is KES 1,250,000 and VAT is KES 200,000. The import duty calculator and landed cost calculator do the arithmetic, and how to calculate import duty on goods explains each step.

Who can claim it

A business registered for VAT can claim import VAT on goods and services used to make taxable supplies (standard-rated or zero-rated). If you only make exempt supplies, such as some financial services or residential rent, you cannot claim. If you make both, you claim a proportion. A business below the registration threshold, or one on turnover tax, cannot claim input VAT at all, so import VAT is a real cost to it. Check your position with the VAT registration checker and read VAT for small businesses.

Evidence you need

To claim, hold:

  1. The customs entry (the import declaration) showing your name and PIN as the importer, the value and the VAT paid
  2. Proof of payment to KRA, such as the payment slip
  3. The supplier's invoice, packing list and transport documents
  4. The agent's invoice for clearing fees, where VAT is charged on those services (the agent's eTIMS invoice supports that VAT)

The entry must be in your PIN. If goods are cleared in the agent's or another company's name, you cannot claim. Keep a register of import VAT: the VAT input invoice register has a place for it.

When to claim

Claim in the VAT return for the period in which the VAT was paid, which is the month of the customs entry's payment, as long as you hold the documents. KRA allows claims within a limited period, so do not leave them for months. Your return shows output VAT on sales less input VAT on purchases and imports. Use the VAT return calculator and see how to file a VAT return for the steps.

Cash flow effect

Import VAT is paid upfront and recovered later through the return, so it ties up cash for weeks. Plan for it in your forecast: see cash flow forecast for a small business. If you are in a refund position because you import more than you sell, you may have to claim a refund, with conditions and verification: shorter deadlines for VAT refund claims. Zero-rated exporters often face this: exporting from Kenya and zero-rated VAT.

Why claims are rejected

  • The entry is in someone else's name or the PIN is wrong
  • Goods are not used for taxable business supplies, such as personal items
  • No proof of payment
  • The VAT was claimed in the wrong period or twice
  • Missing agent invoices
  • The customs value on the entry differs from the supplier's invoice

Imports of services

Services bought from non-residents, such as software subscriptions or consultancy, can give rise to VAT on imported services, which the business accounts for itself and then claims. Check how it applies to your case.

Records

Keep entries, invoices and payment proofs for five years. Reconcile your VAT account each month. If KRA audits the claim, you must produce the file: what to expect in a KRA audit. A tidy import duty and landed cost workbook plus your register covers it.

Practical tips

Ask your agent to clear in your PIN and send you the entry the same day. Check the VAT figure against your own calculation. Claim promptly, and keep import costs separate from local purchases in your books: importing goods for resale: VAT and records.

Frequently asked questions

Is import VAT the same as VAT on local purchases? The rate is the same, but import VAT is paid to KRA at the border and supported by a customs entry rather than a supplier invoice.

Can I claim VAT on vehicle imports? Input VAT on vehicles is generally restricted unless the vehicle is stock for sale or used for qualifying purposes. Check the rules.

What if the agent paid VAT in their own name? You cannot claim without the entry in your PIN. Ask the agent to amend or re-issue the documents.

Do imports for personal use give input VAT? No. Only goods and services used for taxable business activities qualify.