The three VAT treatments, clearly
Every product or service you sell falls into one of three VAT treatments, and your eTIMS invoice must reflect the correct one. Getting this wrong either overcharges your customer or understates your VAT, and both cause problems at filing.
The crucial and most-confused distinction is between zero-rated and exempt. They both mean no VAT is charged to the customer, but they treat your ability to claim input VAT very differently, which affects your bottom line.
- Standard-rated: VAT is charged at 16 percent, and you can claim related input VAT. Most goods and services.
- Zero-rated: VAT is charged at 0 percent, so the customer pays no VAT, but you can still claim input VAT on related purchases. Common for certain basics and exports.
- Exempt: no VAT is charged, and you generally cannot claim input VAT on related purchases. Common for certain financial, health and education services.
Getting VAT treatment right on eTIMS invoices
Apply this thinking to every product and service in your catalogue.
- 1
Classify each product
Decide whether each item is standard-rated, zero-rated or exempt, based on its nature, and record it against the product.
- 2
Set the treatment in your system
Configure the VAT treatment per product once, so every invoice applies the right one automatically.
- 3
Charge VAT only where due
Standard-rated lines carry 16 percent. Zero-rated and exempt lines carry none, but are still on a compliant invoice.
- 4
Track input VAT correctly
You can claim input VAT linked to standard-rated and zero-rated sales, but generally not for exempt sales. Keep the distinction.
- 5
Reconcile at the VAT return
Your return nets output VAT against claimable input VAT. Correct treatment per line is what makes that net accurate.
The costly VAT treatment mistakes
Confusing zero-rated with exempt
They look the same to the customer (no VAT) but differ on input VAT recovery. Treating zero-rated as exempt can mean you wrongly forfeit input VAT claims.
Charging VAT on zero-rated or exempt items
Adding 16 percent to items that should carry none overcharges customers and misstates your output VAT.
Claiming input VAT on exempt sales
You generally cannot recover input VAT tied to exempt supplies. Claiming it invites correction and penalties.
Applying one treatment to a mixed catalogue
Many businesses sell across treatments. A blanket rate guarantees errors. Classify per product.
A worked VAT treatment example
A shop sells three things to a customer: a standard-rated cleaning product at KES 1,160 inclusive, a zero-rated food basic at KES 200, and an exempt item at KES 500. On the compliant invoice, the cleaning product shows KES 160 of VAT inside its price, while the zero-rated and exempt items show no VAT at all.
The difference shows up behind the scenes. The shop can claim input VAT on purchases linked to the standard-rated and zero-rated lines, but not on purchases tied to the exempt item. If the shop had wrongly treated the zero-rated food as exempt, it would have needlessly given up a legitimate input VAT claim.
You can confirm any VAT split, like the KES 160 inside the cleaning product, with the VAT calculator, and work out a pre-VAT price with the remove-VAT tool. Getting the treatment right per line is what keeps both your invoices and your VAT return accurate.
Trading without eTIMS-compliant tax invoices risks KRA penalties, blocked VAT input claims for your customers, and receipts a business buyer cannot expense.
Veira signs every sale to KRA eTIMS automatically, so each receipt is compliant the moment it prints, with no separate device to reconcile.
How Veira keeps VAT treatment correct
Veira lets you set each product’s VAT treatment once, so every invoice applies standard-rated, zero-rated or exempt correctly without the cashier deciding. Mixed baskets calculate accurately, every time.
Because the treatment is captured per line, your VAT return reconciles cleanly, with output VAT and claimable input VAT correctly separated. You stop leaving legitimate claims on the table and stop overcharging customers.
Frequently asked questions
What is the difference between zero-rated and exempt?
Is zero-rated the same as no VAT?
What is the standard VAT rate in Kenya?
Can I charge VAT on exempt items?
Why does the zero-rated vs exempt distinction matter?
How do I apply the right treatment on invoices?
Zero-rated, exempt and standard-rated are not interchangeable, and on eTIMS invoices the difference decides both what your customer pays and what input VAT you can claim. Classify each product, set it once, and let your system apply it. Confirm any VAT figure with the free calculators, run the readiness checker, or book a free demo to keep every line correct.