Companies without electronic tax invoices face more taxes from June

Times Tower in Nairobi, the Kenya Revenue Authority headquarters. FILE PHOTO | DENNIS ONSONGO | NMG

The Kenya Revenue Authority (KRA) will from next month start penalising corporates that do not provide electronic tax invoices for payments made to suppliers.

In a statement, the taxman said starting June, firms that will not furnish it with electronic tax invoices will not be able to claim input tax and refunds with regards to value-added tax (VAT), which means that their tax liability will rise.

These requirements are likely to widen the gulf between corporates and small suppliers that do not have an electronic tax invoice management system (e-TIMS) the taxman launched to enhance compliance with VAT.

E-TIMS is an internet-enabled tax register, which relays real-time sales data for businesses registered to collect the 16 percent VAT, a type of tax levied on all the sales of goods and services.

KRA said it is currently rolling out e-TIMS, a software approach that ensures that all VAT-registered taxpayers generate electronic tax invoices that are transmitted to KRA on a real-time or near real-time basis.

“The commissioner general wishes to notify the public that effective 1st June 2023, all VAT registered taxpayers are required to only accept electronic tax invoices from registered taxpayers in compliance with the VAT (Electronic Tax Invoice) Regulations 2020 for purposes of claiming input tax and processing of refunds,” said acting KRA commissioner-general Rispah Simiyu.

In the Finance Bill, 2023, traders who fail to issue electronic tax invoices to customers will be slapped with a fine of Sh1 million or 10 times the tax due in what is aimed at boosting compliance with the mandatory invoice.

The proposed changes will also apply to traders who fail to submit a tax return electronically as the State moves to weed out tax cheats and boost revenue.

Nikhil Hira, a tax expert, said the proposal will be prohibitive to millions of small businesses that operate informally.

The requirement, however, exempts non-resident suppliers of digital services who, instead, are required to issue invoices showing the value of the supply and tax charged.

“For VAT registered taxpayers who have not complied with the VAT (Electronic Tax Invoice) regulation 2020, Tax Compliance will not be issued unless they comply,” said the KRA boss.

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