Withholding VAT an appointed agent deducts on a taxable supply.
Withholding VAT (2%)
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Output VAT (16%)
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VAT balance to supplier
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A slice of VAT skimmed at source
Withholding VAT is a collection mechanism, not an extra tax. When a buyer who has been appointed as a withholding VAT agent by the Kenya Revenue Authority pays for a taxable supply, they hold back a small percentage of the supply value and send it straight to KRA. The supplier still issues a normal invoice charging full output VAT. What changes is how the VAT money reaches the taxman: part of it travels via the agent rather than entirely through the supplier's return. This calculator models the three numbers that matter. From the net supply value you enter, it works out the full output VAT at 16 percent, the amount the agent withholds at 2 percent, and the VAT balance the supplier still receives. The 2 percent here is the rate this calculator applies for appointed agents, and you should confirm it against the current KRA position, because the withholding VAT rate has been changed before.
Only appointed agents do this
This is the detail that defines the whole regime. Ordinary buyers do not withhold VAT. Only businesses and institutions that KRA has formally gazetted as withholding VAT agents have the duty, and the right, to deduct it. Large buyers, government bodies, and certain regulated entities are typical appointees. If your customer is not an appointed agent, none of this applies and you collect the full VAT yourself in the normal way. So before you expect a withholding, check whether the buyer is actually on the agents list. The supplier does not get to choose; it is driven entirely by the buyer's status.
A worked example: a KES 1,000,000 supply
Take the value the tool loads by default. You make a taxable supply worth KES 1,000,000 net of VAT to a buyer who is an appointed withholding VAT agent. Using the rates this calculator applies, the flows are as follows.
| Component | Amount |
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The supplier invoices the full output VAT but receives only the balance, because the agent peels off the withheld portion and remits that to KRA directly. The chart above the section shows the output VAT split into the part the agent withholds and the part that reaches the supplier.
The supplier does not lose the withheld VAT
It is easy to read the example and think the supplier is KES 20,000 worse off. They are not. The 2 percent withheld becomes a credit on the supplier's own VAT return. When the supplier files, the withheld amount is treated as VAT already paid toward their liability, so it either reduces what they owe or feeds into a refund. The cash-flow timing can sting, since the money leaves the transaction before the return is filed, but the VAT is not lost. Reconcile the withholding VAT certificates the agent issues against your return so KRA's records and yours agree and the credit lands.
How this differs from withholding income tax
Do not confuse withholding VAT with withholding income tax, even though both involve a payer holding money back. Withholding VAT is flat, the single 2 percent rate this tool applies, it only collects VAT, and only KRA-appointed agents operate it. Withholding income tax uses many different rates by payment type and residency, can apply to a broad range of payers, and collects income tax rather than VAT. A professional services invoice paid by an appointed agent could trigger both at once: income tax withheld on the fee and VAT withheld on the VAT element. They are separate lines with separate certificates.
What if my customer is an agent but my supply is exempt or zero-rated?
Withholding VAT only attaches to VAT that is actually charged. A zero-rated supply carries no output VAT, so there is nothing for the agent to withhold, and an exempt supply is outside VAT entirely. The 2 percent only bites where you have charged the standard rate. If your invoice shows no VAT, the agent withholds none.
Does withholding VAT change the price my customer pays?
No. The buyer still pays the full invoice including the 16 percent VAT. Withholding only changes the destination of part of that VAT, sending the 2 percent slice to KRA instead of to you. The customer's total outlay is identical to a non-withheld sale; it is your VAT cash flow, not their cost, that the mechanism touches.