Press Room

Over the years, the Kenya Revenue Authority (KRA) has aimed at increasing its revenue collection through expansion of its tax base. To achieve this, the authority has developed and implemented systems that enhance tax compliance.

With respect to the aforementioned goals, KRA identified a challenge in enhancing tax compliance when accounting for Value Added Tax (VAT) by tax payers. For instance, there were inconsistencies between purchases and sales invoices declared in the VAT returns, and parties claiming input VAT using fake documents under declaration of VAT tax payable by failing to issue invoices upon making a supply.

To address these challenges, KRA has implemented an internal system called VAT Auto Assessment (VAA). The system will reconcile inconsistencies between purchase and sales invoices declared on VAT returns.

As per the KRA guidelines, the system is expected to:

• Check the buyers return and compare it with the corresponding sales declared by the seller
• Identify any inconsistency and communicate the same to the buyer and the seller
• Ensure that the taxpayer amends the affected return within 15 days
• Send a reminder to both buyer and seller after 15 days in case of an outstanding inconsistency
• Send an auto assessment to the buyer if the inconsistency remains outstanding after further 15 days
• Create a task for a debt officer if the assessed amount remains unpaid after 30 days

In case of a dispute on the assessed amount, the taxpayer has a right to object.

The biggest challenge for the taxpayers will be when they transact with a non-compliant seller who fails to declare their sales, as the buyer will be denied a chance of claiming input VAT on the purchases.