The Finance Bill suggests increasing the threshold for businesses required to register as VAT agents from an annual turnover of Sh5 million to Sh8 million, potentially exempting businesses falling within this range from registration.
The Finance Bill proposes to amend Section 34 of the VAT Act, 2021, whose impact would be to relieve businesses with annual turnover between Sh5 million and Sh8 million.
Previously, these businesses have been collecting VAT on behalf of the government, of burden.
“Section 34 of the VAT Act amended in Subsection 1, in paragraph (a) by deleting the words ‘five million shillings’ and substituting it with the words ‘eight million shillings’ and in paragraph (b) by deleting the words ‘five million shillings and substituting them with the words ‘eight million shillings’,” the Finance Bill, 2024, suggests.
Immigration department issues update on passport collection
According to the VAT Act of 2021, individuals engaged in business activities are asked to register as VAT taxpayers if their annual taxable supplies reach a value of 5 million.
Registering as a VAT taxpayer obligates the business to withhold VAT and remit it to the government, failure to which one would be penalized.
“A person who in the course of business is about to commence making taxable supplies the value of which is reasonably expected to exceed 5million shillings in any period of twelve months, shall be liable, apply to the Commissioner for registration in the prescribed form,” the Act adds in Section 34.
If the Finance Bill 2024’s proposition is approved, it would mean that businesses earning less than 8 million annually would no longer be required to collect and remit VAT on behalf of the government.
A business with annual revenue of 8million shillings translates to an average daily revenue of Sh22,000. Currently, businesses with an average daily revenue of about Sh13,700 are obligated to withhold and remit VAT to the government, failure to which they face penalties.
