Kenya VAT on Asset Management Commissions Explained

Kenya's Tax Appeals Tribunal (Tribunal) announced its decision in a case concerning the taxability of asset management services. More specifically, the dispute revolved around whether that service may be exempt from VAT, as insurance brokerage services are, or whether it should be subject to the 16% VAT rate. The Tribunal's ruling is particularly relevant for insurance intermediaries who also engage in ancillary financial services such as asset management, investment advisory, or pension product sales.

Facts of the Case and Tribunal's Decision

The Kenya Revenue Authority (KRA) assessed that a 16% VAT rate should apply to commission earned from asset management products by a Kenyan citizen who worked as an insurance agent and broker. The KRA argued that as a VAT-registered person, the individual had not accounted for VAT. The individual appealed against this conclusion in January 2025, but the KRA upheld its previous decision, leading the individual to appeal to the Tribunal.

The circumstances of the case are vital, as the VAT registration followed the Tax Laws Act 2020, which had removed the VAT exemption for insurance agency and brokerage services. Notably, the High Court later ruled this amendment unconstitutional in the Association of Kenya Insurers v Kenya Revenue Authority case, restoring the VAT-exempt status of insurance and brokerage services. 

The outcome of the previous case directly affects this case and the position the taxable person took. Moreover, the taxable person applied to the KRA for VAT deregistration in May 2022, but the application was not processed, leaving VAT obligations in force. 

During the process, the KRA’s 2023–2024 tax audit found that the individual provided both insurance brokerage and asset management services, but the VAT assessments focused solely on asset management commissions Also, KRA argued that asset management services are not exempt under the First Schedule to the VAT Act, which exempts only insurance and reinsurance services, explicitly excluding management, consultancy, actuarial, and loss-adjusting services.

The Tribunal determined that the sales of asset management products did not fall within the definition of insurance business, adding that the High Court's decision only reinstated VAT exemption for insurance agency, insurance brokerage, and securities exchange brokerage services, and did not extend to asset management services. As a result, the Tribunal concluded that it is not possible to apply the insurance-related exemptions to asset management commissions. Consequently, commissions from such services are subject to a 16% VAT rate.

Conclusion

The Tribunal's decision clarified that the High Court's decision has a narrow and specific effect, and that a pending deregistration request does not suspend a taxable person’s VAT obligations. Furthermore, the ruling indicates that insurance intermediaries earning commissions from asset management, investment advisory, pension products, or similar financial services in Kenya should urgently review their VAT compliance. 

Source: KPMG