# Understanding VAT Compliance for Small Businesses
VAT is the single biggest avoidable penalty on small retailers. The mechanics are actually simple; the bookkeeping discipline is the hard part.
## Who has to register
- **Kenya (KRA)**: KES 5M+ annual turnover.
- **Tanzania (TRA)**: TZS 100M+ annual turnover.
- **Uganda (URA)**: UGX 150M+ annual turnover.
- **Rwanda (RRA)**: RWF 20M+ annual turnover.
Under the threshold? You don't charge VAT. Over? You must.
## How it works
You collect VAT on sales (output VAT). You pay VAT on purchases (input VAT). You remit the difference monthly/quarterly.
A 20% VAT on a TZS 10,000 sale = TZS 1,667 of VAT, not TZS 2,000. (The VAT is included in the shelf price.) Your POS should default to VAT-inclusive pricing and expose the breakdown on the receipt.
## What actually trips people up
- **Not keeping supplier invoices with VAT numbers**. Without them, you can't claim input VAT.
- **Mixing taxable and exempt sales**. Some items (basic foods, medical supplies) are exempt or zero-rated. Your POS must handle this.
- **Missing the filing deadline**. TRA: 20th of the month. KRA: 20th. URA: 15th. Penalties are stiff — 10% of the tax due plus interest.
## Automating VAT
A POS that tracks VAT per line item end-to-end gives you:
- A one-click VAT return showing output - input.
- An audit trail of which supplier invoice each input VAT claim came from.
- The exact file format your revenue authority accepts.
Don't do VAT by hand. You will get it wrong.
For Tanzania businesses specifically: VAT filing accuracy depends on the receipt stream you generate at the till. Our TRA EFD/VFD POS setup guide for Tanzania covers the EFD vs VFD choice and how a modern POS records the structured data TRA expects.
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TaxComplianceFinance