Traders who import goods to sell face a double tax effect: VAT is paid at the border, then charged again when they sell. Understanding how the two connect avoids over-paying, and keeps the paperwork that makes your claim safe.

VAT at the border

When goods are imported, VAT at 16% is charged on the customs value plus duty and any excise. It is paid with the other import taxes before the goods are released. See how to calculate import duty on goods for the order of the calculation.

Claiming it back

If you are VAT-registered, the VAT paid on the import is input VAT that you can claim against the output VAT you charge on your sales. In your monthly return, it reduces the VAT you owe, or increases your credit. If you are not registered, the import VAT is simply a cost that you must add to the price of your goods.

For a registered trader, the true cost of imported stock is the cost excluding the recoverable VAT, although the VAT still has to be paid in cash upfront. The import duty and landed cost workbook shows both the total landed cost and the cost after recoverable VAT.

An example

You import goods with a customs value of KES 1,150,000 and pay duty of KES 287,500, giving VAT of KES 230,000. You later sell the goods for KES 2,300,000 plus VAT of KES 368,000. In your return, output VAT is KES 368,000 and input VAT on the import is KES 230,000, so you pay KES 138,000, plus any other VAT adjustments. Check the effect with the VAT return calculator.

Documents that support the claim

To claim import VAT you need:

  • The customs entry showing the VAT paid, in your name and with your PIN
  • The payment receipt
  • The supplier's invoice and the shipping documents

Keep them with the month's return. The VAT input invoice register lists the invoices behind the claim, and the VAT returns register tracks output and input VAT across the year. See how to file a VAT return.

Cash flow

You pay import taxes before you can sell, and you recover the VAT only when you file your return. A large import can tie up a lot of cash for weeks. Plan for it in your forecast; see how to build a cash flow forecast and the 12-month cash flow forecast. Duty, the declaration fee and the levy are costs, not recoverable.

Pricing imported goods

Set prices from the full landed cost, plus your margin; see how to price your products and services. Price lists that show VAT clearly help; the free product price list with VAT works out the VAT on each item.

Stock and records

Imported stock should be recorded at its full landed cost. See inventory management basics and the inventory and stock tracker. When you sell, issue eTIMS invoices; see eTIMS e-invoicing explained.

Common mistakes

  1. Importing in a personal name, then trying to claim the VAT for the business.
  2. Losing the customs entry.
  3. Forgetting that VAT on some goods, such as exempt items, cannot be claimed.
  4. Ignoring the cash needed upfront.

Whether VAT is recoverable depends on your registration and the goods. Confirm your position with KRA or a registered tax agent.

Common questions

Can I claim import VAT if I use an agent? Yes, as long as the customs entry is in your business name and PIN and you hold the payment evidence and the agent's invoice. If the agent clears in its own name, you cannot claim.

When should I claim the VAT? In the VAT return for the period in which the import VAT was paid, and within the time limit for claims. Do not wait for the goods to be sold.

How does import VAT affect cash flow? It is paid at the border, before you sell the goods, and recovered later through your return, so it ties up cash for weeks. Include it in your cash flow forecast.