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VAT in Cross-Border Trade: Imports & Exports Rules

VAT in Cross-Border Trade: Imports & Exports Rules

Cross-border trade is subject to specific VAT rules that differ from local transactions. Whether you’re importing goods into Kenya or exporting products and services abroad, understanding how VAT applies can help you stay compliant and protect your cash flow.

VAT on Imports

When you import goods into Kenya, VAT is charged at the point of entry usually at 16%, unless the goods are exempt or zero-rated.

Key points:

  • VAT is payable alongside Import Duty and other taxes at the border.

  • The importer pays VAT regardless of whether the goods are for resale or internal use.

  • Import VAT can be claimed as input tax if you’re VAT-registered and the goods are for business use.

Example:
You import equipment worth KES 1,000,000. You may pay KES 160,000 as VAT at the border. If registered for VAT, you can claim this as input VAT in your return.

VAT on Exports

Goods and certain services exported outside Kenya are zero-rated.

What zero-rated means:

  • You charge 0% VAT on the invoice.

  • You can still claim input VAT related to those sales.

  • This creates a VAT refund position, which you can apply for from KRA.

Conditions to zero-rate exports:

  • Proper export documentation must be maintained (e.g. customs forms, shipping evidence).

  • The goods must physically leave Kenya.

Services in Cross-Border Trade

Some services supplied to non-residents may qualify as exported services and be zero-rated.

Examples include:

  • Consultancy to a client based outside Kenya

  • Software development for offshore clients

However:
The service must be used outside Kenya to qualify. If the benefit is consumed locally, VAT applies.

Common Pitfalls to Avoid

  • Failing to claim import VAT properly: Ensure you’re VAT-registered and retain all documentation.

  • Incorrectly zero-rating services: Confirm the place of consumption before applying zero-rating.

  • Lack of export evidence: Always keep documentation showing goods/services left Kenya.

In Summary

Cross-border VAT can be tricky, but with the right approach, you can avoid costly mistakes, claim refunds, and remain compliant.

Need Help with Cross-Border VAT?

We help businesses handle import VAT, export documentation, and VAT refund claims with precision and compliance.

📍 Biashara Plaza, Moi Avenue, Nairobi
📧 info@blueoceanoutsource.co.ke
📞 +254 729 842 847

Talk to us today and streamline your cross-border tax processes.