Mzee Yule deals in various kinds of goods including maize and beans. Due to a visual disability, Mzee was granted an income tax exemption on the first KES 150,000 of income per month.



In March 2022, Mzee’s purchases were as follows:



Item	No. of Bags	Unit price	Tax Status
Maize	700 bags	500	Exempt
Beans	500 bags	500	Vatable
Electricity	500 units	500	Vatable


In that month, Mzee sold 600 bags of maize only at KES 600 per bag exclusive of VAT. 



Calculate the amount of VAT input credits that Mzee will be allowed to claim in his March 2022 return

To calculate the VAT input credits that Mzee Yule can claim in his March 2022 tax return, we need to consider the VAT paid on vatable purchases (beans and electricity) and how these relate to Mzee's sales.

### 1. **Purchases Breakdown:**

- **Maize:** 700 bags at KES 500 each. 
  - Total cost: \(700 \times 500 = 350,000\) KES
  - VAT Status: Exempt (no VAT paid).

- **Beans:** 500 bags at KES 500 each.
  - Total cost: \(500 \times 500 = 250,000\) KES
  - VAT Status: Vatable (standard VAT rate in Kenya is 16%).
  - VAT paid: \(250,000 \times 0.16 = 40,000\) KES

- **Electricity:** 500 units at KES 500 each.
  - Total cost: \(500 \times 500 = 250,000\) KES
  - VAT Status: Vatable (16% VAT).
  - VAT paid: \(250,000 \times 0.16 = 40,000\) KES

### 2. **Total VAT Input:**

- VAT on Beans: 40,000 KES
- VAT on Electricity: 40,000 KES

Total VAT Input: \(40,000 + 40,000 = 80,000\) KES

### 3. **Sales and VAT Output:**

- **Maize Sales:** 600 bags at KES 600 each.
  - Total Sales: \(600 \times 600 = 360,000\) KES
  - Since maize is exempt from VAT, there is no VAT output related to these sales.

### 4. **Calculating the VAT Input Credit:**

Given that Mzee's sales were from maize (which is VAT-exempt), Mzee can only claim VAT input credits related to vatable items proportional to his vatable sales. However, because all the sales were from exempt goods (maize), he cannot claim any VAT input credit for this period.

### **Conclusion:**

Mzee Yule will **not** be able to claim any VAT input credits for his March 2022 return because his sales were entirely VAT-exempt.

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Do you want further details or have any questions?

Here are 5 related questions:
1. How would the calculation differ if Mzee sold beans instead of maize?
2. What if Mzee had a mix of vatable and non-vatable sales? How would VAT input credits be calculated?
3. How does the income tax exemption impact Mzee’s VAT calculation?
4. What is the process of filing a VAT return in Kenya?
5. How can businesses optimize their VAT input credits?

**Tip:** Always segregate vatable and non-vatable transactions to ensure accurate VAT credit claims.

Learn how to calculate VAT input credits for Mzee Yule's March 2022 tax return. Understand the impact of VAT exemption on income, vatable and exempt goods, and calculate VAT input credits based on Mzee's purchases and sales data.

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