Savings and Credit co-operative societies (SACCOS) are classified as “financial services providers” and therefore placed in the category of Tax Exempt services under part two of the first schedule of VAT Act 2013. Being tax exempt implies that SACCO’s are NOT entitled to claim inputs as per the applicable Law.

Legal Status/Definition:

A savings and credit co-operative society is an incorporated body whose core business is to accumulate savings from members and use the same to lend to its members at a reasonable interest rate for purposes of economic empowerment of its members. A Sacco is required to ensure that it does not diversify to other business operations which are considered non-core and therefore taxed heavily.


Saccos have today grown and diversified into other non-core business. For example, many Saccos have constructed their own buildings for purposes of hosting their offices and serving members better. The excess capacity in such buildings is rented out to tenants. The rental income earned will therefore attract commercial VAT and the Sacco will be required by Law to incorporate VAT obligation in the PIN so as to account and declare the VAT on that portion of income.  In such circumstances the Sacco will be required to apportion expenses based of office floor occupied while claiming input VAT to offset with output VAT. KRA will only accept inputs that are wholly and exclusively/directly incurred on the rented property.

VAT on Imported Services

Where a Sacco imports a service such as Software, consultancy etc., The Law requires that the VAT there in be fully declared and paid to KRA. This is irrespective of whether the Sacco is registered for VAT or not

Where a Sacco is Appointed VAT Withholding Agent by KRA

There are instances where Saccos are appointed Tax Withholding Agents by KRA and required to remit VAT deducted at source within the prescribed rates. In this case the Sacco is required to comply and ensure that VAT is withheld on each payment made for goods and services as prescribed in Law

Claiming of VAT Inputs

VAT inputs are only claimable where a tax payer is offering Zero rated services. Zero rated services are as prescribed in the second schedule of VAT Act 2013.



CPA Patrick Theuri

Partner, Henry Smith & Wilson CPA


For more on this, contact Henry Smith & Wilson CPA via: info@henrysmithwilson.co.ke or call us on 020 2104874.


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