Claiming Input VAT Without Getting Rejected

To keep an input VAT claim safe, you need four things: a valid tax invoice or customs entry, a real purchase, a business use that makes taxable supplies, and a claim made within six months after the end of the tax period of the purchase. Most rejected claims fail on one of these.

Input VAT is the VAT you pay on purchases, which you deduct from the VAT you charge on sales. A rejected claim means you pay that money yourself, usually with penalties and interest on top.

The time limit is six months

Section 17(2) of the VAT Act allows the deduction within six months after the end of the tax period in which the supply or importation occurred. KRA’s own VAT guide says the same.

A tax period is a month, so a purchase made in January can be claimed no later than the July tax period. The clock runs from the purchase, not from the day you found the invoice.

The Finance Act 2026 did not change this. It did change another period, from two years to three, in section 31 of the VAT Act. That one is about when you can apply for a refund of VAT on a bad debt. It does not extend the time to claim input VAT.

If you have filed returns late, take advice before relying on an old invoice. Tribunal and court decisions have looked at how the limit works with late returns.

The documents you must hold

Section 17(3) lists what supports a claim. The common ones are:

• Local purchases: an original tax invoice or a certified copy
• Imports: a customs entry certified by the proper officer, with a receipt for the tax paid
• Changes to an invoice: the credit note or debit note

A local tax invoice now needs to be an electronic one. Under section 23A(3) of the Tax Procedures Act, an invoice used to work out tax must be generated through KRA’s system, which is eTIMS. Give your KRA PIN at the point of purchase, so that it appears on the invoice.

Section 17(2) also refers to your supplier having declared the sale in its own return. So a supplier who does not declare can put your claim at risk, even when your papers look right. Check that your purchase invoices appear against your PIN, and take up any that are missing with the supplier quickly.

Purchases the law blocks

Under section 17(4), you cannot deduct input VAT on:

• Passenger cars and mini buses. This covers buying, leasing or hiring them, along with repairs, maintenance and spare parts. The exception is a business that regularly sells, deals in or hires out those vehicles.
• Entertainment, restaurant and accommodation services. There are two exceptions: where providing those services is your ordinary business, and they are not supplied to an associate or employee, or where the recipient is away from home for business.

Purchases that are only partly claimable

Section 17(1) allows a deduction only so far as the purchase was acquired to make taxable supplies.

• Taxable sales only. Claim the input VAT in full, subject to the rules above.
• Exempt sales only. Input VAT on those purchases generally cannot be deducted. The Finance Act 2026 added a narrow exception for supplies to named security agencies.
• A mix of both. Section 17(6) has a formula. You take all the input VAT linked directly to taxable sales, none linked directly to other uses, and a proportion of the rest based on your taxable sales against total sales.

Zero-rated sales still count as taxable, which is why exporters can build up credits and apply for refunds.

There is also a new rule to watch. Under section 17A, added by the Finance Act 2026, if goods you hold become exempt while still unsold, you must account for the input VAT you claimed on that stock.

The purchase has to be real

An invoice does not prove a transaction by itself. The Tax Appeals Tribunal has held that the section 17 documents are not enough without evidence of an underlying transaction, and the High Court reached a similar result in the Pearl Industries case.

So keep the rest of the trail with each invoice:

• the order or contract
• the delivery note or proof the service was provided
• the payment record

The law also expects you to keep records for five years (section 23 of the Tax Procedures Act). If KRA does query a claim, our audit guide covers how to respond.

A simple monthly routine

1. Collect every purchase invoice in the month it arrives.
2. Match them with your eTIMS purchase records, your books and your payments.
3. Chase any invoice that has not appeared, while you still have months in hand.
4. Remove blocked items before you file.
5. Note the last claim date for anything held back, so nothing passes the six months unseen.

If you have a credit balance from withholding VAT, track it separately, as the time limit for a refund claim is different.