You must be tax compliant: Expert warns auctioneers

Kenya’s auctioneering industry is under increasing scrutiny as regulators tighten enforcement on tax compliant. Experts are now warning that failure to meet statutory obligations could expose practitioners to severe legal and financial consequences.

According to CPAK Stephen Gichuki,  there is a need for auctioneers to align their operations with the requirements of the Kenya Revenue Authority (KRA), particularly in areas such as Value Added Tax (VAT),  income tax, and proper invoicing.

Speaking during an auctioneer's workshop forum in Machakos County, he pointed out that auctioneers must understand that they are not operating in isolation.

“The auctioneers' stakeholders need to note that every transaction they undertake has a tax implication, and compliance is not just a legal obligation; it is a professional responsibility. Over the years they have historically overlooked tax compliance, either due to a lack of awareness or deliberate evasion. However, with the digitisation of tax systems and increased data-sharing among government agencies, the space for non-compliance is rapidly shrinking,” says CPA Gichuki.

The forum organised by the National Association of Kenya Auctioneers (NAKA), Kenya National Society of Professional Auctioneers (KENSAP), and the Auctioneers Licensing Board brought together over 500 auctioneers from Nairobi, the Eastern, and the Mount Kenya regions.

According to Maurice Osundwa, Chairman of the National Association of Kenya Auctioneers (NAKA) tax compliance is no longer optional but a fundamental requirement for professional practice.

“As auctioneers must issue proper receipts, declare all income, and ensure that applicable taxes are remitted within stipulated timelines. Failure to do so not only undermines the profession's credibility but also exposes practitioners to penalties, audits, and possible license revocation,” Osundwa said.

The warning comes at a time when the KRA has intensified efforts to broaden the tax base, utilising digital tools such as the iTax platform and electronic tax invoice management systems (eTIMS). Auctioneers, who often manage high-value transactions involving repossessed assets, are increasingly being recognised as a sector with untapped revenue potential.

CPA Gichuki pointed out that an auctioneer must account for the 16 per cent VAT on margin (profit) only under the margin scheme.

“The burden of proof is on the auctioneer to maintain records of the original purchase price. New goods (from manufacturer/trader) 16 per cent VAT on the full selling price. The law only exempts goods such as agricultural products and financial services from being taxed at 16 per cent. However, in distress auctions / Bank repossessions, VAT is payable. The Tax Appeals Tribunal has ruled that the disposal of seized goods through auction is a taxable supply, separate from the provision of credit,” CPA Gichuki adds.

The tax expert argues that auctioneers are particularly vulnerable because of the nature of their work, which involves multiple parties, including creditors, debtors, and buyers, making it essential to maintain transparent financial records.

CPA Gichuki “Every commission earned, every asset sold, and every fee charged must be properly documented and taxed.The era of informal accounting is over.”

Under the law, auctioneers are required to charge VAT on their services if they meet the threshold for registration. In addition, commissions earned from sales are subject to income tax, while withholding tax may also apply in certain transactions.

Osundwa noted that confusion often arises around the application of VAT, particularly when auctioneers act as agents rather than principal sellers.

“There is a need for continuous education within the industry. Many practitioners are unsure about when VAT applies and how to structure their invoicing. This is where NAKA is stepping in to provide guidance and training,” he said.

He added that the association is working closely with regulators to develop simplified compliance frameworks tailored to the unique nature of auctioneering.

Njeri Thuku, the chairperson of the Auctioneers Licensing Board, revealed that over the years, the industry has faced criticism over unethical practices, a lack of transparency, and regulatory gaps.

“Auctioneers are not just service providers, they are the officers of the court and based on this, they are expected to uphold accountability, fairness and respect of human dignity. As the regulator, we are ready to work with you in ensuring that this industry is fully streamlined as per our laws,” comments Thuku.

She stated that its time for the auctioneers to embrace technology transformation in line with global auctioneer trends.

Thuku “Online auctions, electronic notices and digital asset tracking will soon be the norm because technology will continue to increase efficiency, transparency and reach. Those who will embrace it will thrive while those who resist it risk being left behind.”

Despite the clear benefits, many auctioneers face challenges in achieving full compliance. These include limited financial literacy, high operational costs, and inconsistent cash flows, especially for smaller firms.

Some practitioners also argue that the tax burden can be overwhelming, particularly when combined with licensing fees and other regulatory requirements.

However, experts insist that these challenges should not be used as an excuse for non-compliance.

Osundwa urged auctioneers to take advantage of these opportunities and proactively engage with the KRA to resolve any compliance issues.

“We are encouraging our members to come forward, regularise their tax affairs, and seek clarification where needed. The worst thing one can do is to ignore the law,” he said.

He also called on the government to adopt a more collaborative approach, including offering amnesty programs and simplifying tax procedures for small businesses.

“The future of auctioneering in Kenya lies in professionalism, integrity, and compliance. Those who embrace these principles will thrive; those who don’t will struggle to survive.”Osundwa concluded.