Today we are going to look at Difference between Sales Tax and Value Added Tax in Kenya.
The VAT ACT was initially cited as the Value Added Tax Act, 1989 and it came into operation as from 1st January 1990. It was later incorporated in chapter 476 of the Laws of Kenya. It replaced sales tax, which was in operation since 1973.
Sales tax was a reliable source of revenue but as the economy continued to grow and became more sophisticated, the limitations of the system became more pronounced
Difference between Sales Tax and Value Added Tax in Kenya
Find the difference between Sales Tax and Value Added Tax in Kenya below
|Sales tax system||VAT System|
|– Confined to goods only (narrow coverage/limited tax base)|
– Tax charged only at manufacturing & importation level- tax burden resting only on a few
– Refund claim lodged separately leading to cash flow problems
– Zero rating not put into consideration- only exports by registered persons were zero rated.
– No remission given to investors
– Low revenue yield
|– VAT charged on goods and services (wider tax base)|
– Tax charged at all points of sale- tax burden distribution
– Input / output tax system in place. Only tax due is payable
– Allows for Zero rating and hence promotes vital sectors
– Remission is provided for investors thus encouraging investments
– High revenue yield
Now you understand the Difference between Sales Tax and Value Added Tax in Kenya.