When it comes to VAT treatment on exported services, Kenya takes a very different approach compared to the UK and much of Europe. Understanding these differences is crucial for businesses that operate across borders.
In Kenya, exported services are treated as zero-rated taxable supplies. This means they remain within the VAT system, but are charged at 0%. The key benefit of this approach is that businesses can still recover input VAT on related expenses while keeping their export services competitively priced in the global market.
In contrast, the UK and most EU countries apply place-of-supply rules to determine VAT treatment. Many exported services are considered out of scope, meaning they are not treated as taxable supplies at all. As a result, they typically do not count toward VAT registration thresholds, nor do they allow for the same input tax recovery as in Kenya.
Kenya: Exported services are in scope, but zero-rated.
UK & EU: Exported services are often out of scope, not part of VAT turnover.
For businesses working across these regions, this difference can have a significant impact on pricing, VAT recovery, and compliance strategies.
The treatment of exported services under VAT may appear similar across regions, but the differences between Kenya and the UK/EU are significant. While Kenya’s zero-rating ensures exporters can recover input VAT, the European “out of scope” approach changes how turnover and VAT registration thresholds are calculated. For businesses operating internationally, understanding these rules is vital to staying compliant while maximizing profitability.
Navigating VAT rules across Kenya, the UK, and Europe doesn’t have to be complicated. As a full-service accounting and advisory firm, Spondoo Kenya provides expert support on tax, compliance, and financial management. We help businesses not only stay VAT compliant but also strengthen their overall financial systems to remain competitive in global markets.
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