Want to stop filing VAT in Kenya? This verified 2025 guide explains when and how to deregister for VAT on iTax, legal conditions, penalties, and what happens after deregistration.
📘 What Is VAT Deregistration?
Deregistration is the formal process of cancelling your VAT obligation with KRA when you no longer qualify to charge VAT — or your business no longer exists.
This is governed by Section 36 of the VAT Act (Cap. 476) and supported by the Tax Procedures Act.
✅ Who Can Deregister from VAT?
You may apply to cancel your VAT obligation if:
| Reason | Condition |
|---|---|
| 📉 Turnover Falls Below Ksh 5M | Your taxable turnover drops below the legal threshold for 12 months or more |
| 🛑 Ceased Trading | Your business has closed permanently or temporarily |
| 🔁 Changed Business Activity | You’re now dealing in exempt goods/services only |
| ⚠️ Voluntary Registrant | You registered below Ksh 5M but no longer wish to continue |
🧾 Section 36(1) of the VAT Act allows for deregistration in such cases, but you must apply formally.
🛠️ How to Deregister from VAT on iTax
Here’s how to do it step by step:
Step 1: Log in to iTax
- Visit: https://itax.kra.go.ke
- Enter your KRA PIN and password
Step 2: Go to “Registration”
- Choose “Amend PIN Details”
- Select “VAT Obligation”
- Mark VAT as “Inactive” and choose appropriate reason for deregistration
Step 3: Attach Evidence
KRA will request documents such as:
- Last 12 months’ turnover records
- Business closure notice
- Audited accounts or deactivation letters
- Letter explaining your request
Step 4: Submit & Wait for Approval
Once submitted:
- KRA will review your case
- If approved, you’ll receive a notice confirming the effective date of deregistration
⚖️ Legal Warning: You Must Still File Returns
Even if you stopped trading, you must continue filing VAT returns until KRA approves the cancellation of your VAT obligation.
Otherwise:
- You’ll face a Ksh 10,000 penalty per late return
- You may be flagged as non-compliant on eCitizen and iTax
🧾 What Happens After Deregistration?
| Item | Impact |
|---|---|
| ✅ You stop charging VAT | You no longer issue tax invoices with VAT |
| ❌ You cannot claim input VAT | No refunds or offsets post-deregistration |
| ⚠️ Audit risk remains | KRA may review past filings and pending liabilities |
| 📜 You must retain tax records | For at least 5 years after cancellation per law |
💬 FAQs
Q: Can I deregister for VAT if my sales are irregular but still under Ksh 5M?
Yes — especially if your 12-month turnover has remained below the threshold. KRA may ask for evidence.
Q: What if I deregister then start trading again?
You must reapply for VAT registration once your turnover crosses the Ksh 5M mark again.
Q: Can KRA deregister me automatically?
Yes — under Section 36(2), if you stop filing returns for 12 months, KRA may initiate deregistration.
📣 Call to Action
Deregistering for VAT is a legal process — not just a business decision.
💼 Don’t leave your PIN marked “active” while your business is idle. It can attract penalties.
💬 Need help? Ushuru.com can walk you through VAT deregistration and compliance clean-up.