Overview
Introducing Exempt Sales feature
Exempt Sales are transactions where the buyer is not required to pay VAT (Value Added Tax) due to their tax-exempt status.
You can now create sales (invoices) that are exempt from tax, even if the items therein were tagged as tax-incurring when creating them. i.e. VAT (Value Added Tax) or other.
Exempt Sales feature on the DigiTax Kenya Dashboard
When adding a sale (invoice), select "EXEMPT" under Invoice (Sale) Type, the default is "NORMAL", and proceed as usual. See screenshot below.
Exempt Sales feature on the DigiTax Kenya API
Below is a brief summary of the Exempt Sales feature on the DigiTax Kenya API. Read more in the API changelog here.
When adding a sale (invoice) - POST request to https://api.digitax.tech/ke/v2/sales endpoint - set "is_tax_exempt" property to true. See screenshot from our interactive DigiTax Kenya API reference page below.
Below is a JSON excerpt from the request body.
{
...
"is_tax_exempt": true,
...
}
Why We Built This
This feature ensures that sales, where the buyer is not required to pay VAT (Value Added Tax) due to their tax-exempt status, are accurately processed and recorded in the system without applying VAT charges.
Before this feature, suppliers needed to create copies of items and set them to exempt tax type to serve exempted buyers. Not any more!
Context
On DigiTax dashboard, a user needs to create an item before creating an invoice with that item.
On the DigiTax API, you can create an "express" sale - a sale with item information - in one go. Review the endpoint here. If this is valuable to you, and you've integrated with the DigiTax API, feel free to update your integration 🎉
Use Cases/Scenarios
This applies to businesses that deal with exempted buyers, such as:
Non-Profit and Charitable Organizations
Educational Institutions
Persons with Disabilities (certified)
Export Processing Zone (EPZ) or Special Economic Zone (SEZ) businesses
Other legally exempt entities
Feature Impact and how it works
Outlined above, are the steps on how to use the feature on the DigiTax dashboard and on the DigiTax API.
When a user creates an Exempt Invoice, the system automatically updates the tax treatment as follows:
VAT Categories on Items
If the items on the invoice were originally set with a VAT rate, the system converts the VAT class to "Exempt" for the purpose of that transaction.
Tax Summary Adjustments
The VAT category in the tax summary section will reflect the "Exempt" status. Tax amount will be adjusted to zero (0.00), even if items normally attract VAT.
Invoice Totals
The overall totals will reflect only the item value, with no VAT added.
This feature does not affect the item's tax configuration; it only adjusts tax treatment at the point of invoice creation.
Comparison with Normal sale (invoice) creation
Normal sales remain unchanged.
VAT will continue to be applied where appropriate, based on the item’s default tax category and invoice type.
Essential Guidelines
Please ensure that exempt invoices are only used where valid. The tax authority may require supporting documentation or eligibility proof for exemption.