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How PMCs Stay KRA VAT-Compliant Without a Full-Time Tax Accountant

Who this is for

Your property management company is VAT-registered because you charge management fees and/or commercial rents above the KES 5 million threshold. You're required to file VAT returns monthly. You also pay VAT on some of your supplier inputs, which you can offset against your output VAT. Currently, preparing the VAT return requires a manual exercise of pulling invoices, tallying output VAT, and comparing against input VAT receipts.

The problem

VAT compliance for property companies is more nuanced than for a straightforward retail business. Some transactions are VAT-exempt (residential rent), some are zero-rated, and some are standard-rated (commercial rent, management fees). Applying the wrong VAT treatment to an invoice isn't just an admin error — it's a tax compliance failure that can result in penalties on KRA audit.

The monthly return preparation, done manually, requires pulling every invoiced transaction for the month, identifying those that have output VAT, totalling the VAT amount, then doing the same for input VAT on purchases. A single missed input tax invoice means overpaying KRA. A missed output VAT means under-declaring and facing a penalty. Most PMCs either overpay KRA because they miss input claims or take undue risk because the process is not systematic.

What you can achieve

  • Output VAT applied correctly to every commercial invoice automatically — no manual tax calculation errors
  • Input VAT on all supplier bills captured and netted — reduces tax payable by claiming every eligible credit
  • Monthly VAT return prepared in 15 minutes using the VAT Summary Report — not 2 days of manual tallying
  • Mixed VAT and exempt transactions managed in one system with correct treatment per transaction type
  • KRA audit preparedness: every VAT invoice and input receipt linked to a GL transaction
  • No under-declared or over-declared VAT — returns are backed by real transaction data, not estimates

The Kokodi workflow

  1. Step 1

    Configure VAT tax codes

    Setup

    Set up tax codes in Kokodi: VAT_16 for standard rate, VAT_0 for zero-rated, EXEMPT for residential rent. These are assigned at the unit or invoice level.

  2. Step 2

    Assign VAT treatment per unit

    Setup

    Residential units: EXEMPT. Commercial units and management fee invoices: VAT_16. The assignment is made once and applies to all generated invoices.

  3. Step 3

    Invoices generated with correct VAT

    Automated

    All invoices — rent, management fee, service charge — are generated with the pre-configured VAT treatment. No manual VAT calculation per invoice.

  4. Step 4

    Input VAT recorded on supplier bills

    Action

    When entering supplier bills, assign the input VAT amount. Kokodi posts it to the input VAT account for netting against output VAT.

  5. Step 5

    VAT summary report run monthly

    Report

    Run the VAT Summary Report for the month: total output VAT from all invoices, total input VAT from all supplier bills, and net VAT payable (or claimable).

  6. Step 6

    Return filed and payment recorded

    Action

    File the return on iTax using the numbers from the VAT Summary Report. Record the VAT payment in Kokodi as an AP payment: DR VAT Liability / CR Bank.

Kokodi features used

Tax Code ConfigurationVAT on InvoicesInput VAT on Supplier BillsVAT Summary ReportGL Engine (VAT Accounts)Accounts Payable

Ready to set this up for your portfolio?

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