Introduction

In Kenya, any business must register for Value Added Tax (VAT) once its taxable turnover reaches or is expected to reach KES 5,000,000 within 12 months. But what exactly goes into this figure, and how do you calculate it correctly? Let’s break it down.

What Counts as Taxable Turnover

When adding up your taxable turnover, include:

• Standard-rated sales – supplies subject to 16% VAT.

• Zero-rated sales – such as exports of goods and some exported services. (These are still considered taxable, but at 0%.)

• Deemed taxable supplies – certain transactions, for example, services provided to related parties.

Both standard-rated and zero-rated supplies count toward the threshold, since they are “taxable supplies.”

What Does Not Count

Some types of income are excluded when calculating your taxable turnover:

• Exempt supplies – e.g., financial services, medical services, and some educational services.

• Sales of capital assets – such as selling machinery, buildings, or business assets.

• Out-of-scope supplies – transactions that are not considered supplies for VAT purposes.

Steps to Calculate Your Taxable Turnover

1. Add up all taxable sales (standard-rated + zero-rated) over the past 12 months.

2. Exclude exempt sales and capital asset sales.

3. Project forward: if you expect taxable turnover to cross KES 5 million in the next 12 months, you must register in advance.

Example

Imagine your business has earned:

• KES 3.2M from local taxable sales,

• KES 2.1M from exported services (zero-rated), and

• KES 1.5M from exempt financial services.

Your taxable turnover = 3.2M + 2.1M = KES 5.3M.

Since this is exceeds the KES 5M threshold, you must register for VAT with the Kenya Revenue Authority (KRA).

👉 Need support calculating your taxable turnover or registering for VAT? Contact Spondoo Kenya today—we’ll guide you through compliance and save you from unnecessary penalties.

Key Takeaway

Reaching the KES 5,000,000 taxable turnover threshold is not about your total income, but specifically about taxable supplies. If your business crosses this figure, or is expected to, you must register with the Kenya Revenue Authority (KRA) for VAT.

Don’t Risk Penalties—Act Now

Don’t wait until it’s too late; VAT compliance can make or break your business growth. Let Spondoo Kenya help you calculate your taxable turnover, register with KRA, and manage your VAT obligations with confidence. 👉 Book a consultation with us today and keep your business ahead of the tax curve.