LEGAL OPINION ON TREATMENT OF ADMINISTRATIVE FEES BY VAT LAWS IN KENYA (Case Study Sample)

14th July 2019
xyz Limited“Copy advanced via email”
Cape Office Park
NAIROBI
Attn: Mr. Titus Bartilol
Dear Sir,
RE: LEGAL OPINION ON TREATMENT OF ADMINISTRATIVE FEES BY VAT LAWS IN KENYA.
Introduction
We were taxed by your firm to give a professional legal opinion on whether administrative fees by financial institutions is subject to Vat application.
In your case the administrative fees would entail; loan processing fees, marketing fees, promotion fees, application, screening, monitoring, collections, and statements, loan maintaining fees and any other administrative financial task.
The financial sector is, as a main rule, taxed like other business activities in Kenya. An important difference, however, is that financial services are exempted from value added tax. The scope of the exemption is, roughly speaking, in line with the regulations governing the value added tax system. The rationale behind the exemption is that no satisfactory method had been identified for calculating the tax base.
In other words, it is not the financial institutions themselves that are exempted, but services and transactions that are typically performed by such institutions. Most businesses within the financial sector currently also provide services that are subject to value added tax, and thus have both sales that are subject to value added tax and sales that are exempted from value added tax (dual-regime businesses).