💡 Introduction
VAT treatment of motor vehicles is one of the most confusing tax areas in Kenya, especially after the rollout of eTIMS, VAT Auto-Populated Returns, and tighter enforcement under Finance Act 2025.
Whether your business uses a pickup, double cab, van, motorcycle, delivery truck, SUV, or even company car, the question is the same:
“Can I claim input VAT on this vehicle?”
The answer depends entirely on Section 17(4) of the VAT Act — which provides clear rules on what you can and cannot claim.
Let’s break it down in the simplest, most practical way.
1. What Does the Law Say? – Section 17(4) of the VAT Act
Section 17(4) states:
Input VAT on passenger vehicles and related costs (repairs, maintenance, spare parts) is NOT claimable
unless the vehicle is used exclusively for a qualifying business activity.
The law exists to stop taxpayers from claiming VAT on private or luxury vehicles disguised as business assets.
2. Vehicles You Cannot Claim Input VAT On
These are treated as passenger vehicles, regardless of business ownership:
❌ SUVs
❌ Sedans
❌ Station wagons
❌ Double cabs
❌ Cars designed to carry less than 13 passengers
❌ Staff vehicles
❌ Manager or director vehicles
❌ Company-branded passenger cars
Also disallowed:
- Repairs
- Maintenance
- Tyres
- Insurance
- Spare parts
- Accessories
Even if the vehicle is “used for business” — VAT is not claimable unless it falls under the categories in Section 17(4)(b).
3. Vehicles You Can Claim VAT On
Section 17(4)(b) allows VAT claims on vehicles used exclusively for:
✔️ 1. Taxi / Cab Services
Tour vans, Uber/Taxify vehicles (if registered as a PSV taxi business).
✔️ 2. Commercial Transport of Goods
This is where your question fits.
If a vehicle is used exclusively for transporting:
- Raw materials
- Finished goods
- Stock
- Deliveries
- Industrial inputs
- Courier items
…then VAT is claimable, even if the vehicle has less than 13 seats.
BUT:
The burden of proof is on the taxpayer.
✔️ 3. Transportation of Passengers
Vehicles licensed as:
- PSV matatus
- Tour vans
- Company buses
- Staff buses (if exclusively for staff transport)
✔️ 4. Vehicles Used in Business of Hiring
Car hire companies may claim VAT on:
- Vehicles for hire
- Repairs/maintenance of hire vehicles
But only for the vehicles that are actually being hired out.
✔️ 5. Ambulances
VAT claimable on purchase + repairs.
✔️ 6. Hearses
VAT claimable.
✔️ 7. Vehicles Modified for Specific Business Use
This includes:
- Refrigerated vans
- Armoured cash-in-transit vans
- Mobile clinics
- Mobile laboratories
- Mobile workshops
- Construction and mining vehicles
- Forklifts
- Cranes
If the modification makes private use impossible → VAT claim allowed.
4. Special Case: What if the Vehicle Transports Raw Materials or Finished Products?
This is exactly where Section 17(4)(b)(ii) applies:
Vehicles used exclusively in the carriage of goods qualify for input VAT.
✔️ Meaning:
You can claim VAT on:
- Delivery vans
- Pickups used only for transporting goods
- Closed-body trucks
- Tippers
- Water bowsers
- Cement mixers
- Refrigerated trucks
- Fuel tankers
BUT the word “exclusively” is key.
If KRA establishes that the vehicle is used for both:
✔️ personal use
and
✔️ business use
→ VAT claim is disallowed.
5. Evidence KRA Will Ask For
To support your VAT claim, KRA may request:
- Delivery logs
- Delivery notes (DNs)
- Job cards
- Route schedules
- Fuel records
- eTIMS invoices related to delivery services
- Tracking logs
- Vehicle branding (optional but supportive)
- HR assignment of vehicle to logistics team only
- Restriction of the vehicle from private use
The more exclusive the use, the safer your VAT claim.
6. VAT on Motorcycles (“Boda Bodas”)
✔️ Claimable When:
- Used exclusively for deliveries, courier services, errands, or business transport.
❌ Not Claimable When:
- Used by staff for mixed travel
- Not tied to a commercial service
7. VAT on Fuel, Repairs & Maintenance
The same rules apply:
✔️ Claim VAT if:
- The vehicle itself qualifies for VAT input claim.
❌ You cannot claim VAT if:
- The vehicle is disallowed under Section 17(4).
Example:
Repairs on a double cab → disallowed.
Repairs on a delivery van → allowed.
8. Common Mistakes Businesses Make
| Mistake | Consequence |
|---|---|
| Claiming VAT on directors’ cars | Automatic disallowance |
| Assuming pickups qualify by default | KRA rejects unless exclusively carrying goods |
| Claiming VAT on repairs for double cabs | Illegal claim |
| No evidence the vehicle is exclusively commercial | VAT reversed |
| Claiming VAT on fuel for non-qualifying cars | Audit exposure |
9. What Happens If You Claim VAT Incorrectly?
KRA can:
- Disallow the VAT claim
- Charge penalties (5% or KSh 10,000)
- Charge interest (1% per month)
- Trigger a full VAT audit
- Place you on VAT Special Table
Under TPA, incorrect claims can also lead to:
- Tax shortfall penalties of up to 75%, depending on intent.
10. Quick Decision Guide (VAT Claim Eligibility)
| Vehicle Type | VAT Claim? | Notes |
|---|---|---|
| Double Cab (unmodified) | ❌ No | Considered passenger vehicle |
| SUV / Sedan | ❌ No | Even if business-owned |
| Pickup used only for goods | ✔️ Yes | Must be exclusive |
| Delivery van | ✔️ Yes | Strongest category |
| Closed body truck | ✔️ Yes | Always qualifies |
| Boda boda for delivery | ✔️ Yes | Needs evidence |
| Tour van / PSV | ✔️ Yes | Must be PSV licensed |
| Modified business vehicle | ✔️ Yes | If modification makes private use impossible |
11. Frequently Asked Questions (FAQs)
Q1: Can I claim VAT on a pickup used by the director?
❌ No. KRA treats it as mixed-use → VAT disallowed.
Q2: Can I claim VAT on my double cab?
❌ Generally no, unless permanently modified for goods only.
Q3: How do I prove exclusive use?
Use delivery logs, job cards, tracking logs, etc.
Q4: Can a business claim VAT on a motorbike?
✔️ Yes, if used only for deliveries.
Q5: What about lease vehicles?
Same rules apply — only claimable if the vehicle qualifies.
12. Conclusion
Section 17(4) of the VAT Act is one of the clearest — yet most misunderstood — VAT rules.
The key test is simple:
Is the vehicle a passenger vehicle? If yes → no VAT claim.
Is it used exclusively for commercial operations? If yes → VAT claim allowed.
If your business uses pickups, vans, trucks, motorcycles, or delivery vehicles, you may be entitled to substantial VAT savings — if the rules are followed correctly.