Businesses with difficulties in complying with the current configuration of the electronic invoice tax management system (ETIMS) now have an opportunity to tailor-make an alternative system which fits their special needs.
This is after the government climbed down from an earlier position that all business-to-business transactions have to be backed up by an electronic tax invoice, according to the Tax Procedures (Electronic Tax Invoice) Regulations, 2023.
“A person who is required to issue an electronic tax invoice may, with reasons, apply to the Commissioner in writing to be exempted from the requirements of these Regulations where … an alternative automated method for recording, storing and transmitting the data relating to the transactions to the Commissioner is available and upon recommendation by the relevant authority,” reads part of the regulations.
This is a major boost for businesses for high-traffic businesses such as supermarkets and petrol stations, which cannot include all the buyer’s details in the tax invoice to be compliant.
According to Hakamba Wangwe, the KRA Chief Manager in charge of the electronic Tax Invoice Management System (e-Tims), what is more important is for the taxman to achieve visibility.
The regulations, published by the Cabinet Secretary for National Treasury, have also dropped the requirement for businesses with a turnover of below Sh5 million from the requirement of producing an electronic tax invoice.
Tax invoice generated from e-Tims has to have the PIN of the registered user, the time and date of issuance, the serial number of the invoice, the buyer’s invoice, the total gross and the total tax amounts.
Others include the item code of supplies, a brief description of the goods and services, the quantity of supply, the unit of measure, the tax rate charged, the unique register identifier, the unique invoice identifier, a quick response (QR) code and other requirements as may be specified by the Commissioner.
The exemption of businesses with a turnover below Sh5 million is a major win for farmers who make up the bulk of the small businesses.
However, they will not easily escape payment of the proposed five percent withholding tax on produce they sell to co-operative societies and agro processors contained in the Medium Term Revenue Strategy 2023.
Supplies with an annual turnover of less than Sh5 million are among the nine transactions that have been exempted from the electronic tax invoice in the Tax Procedures (Electronic Tax Invoice) Regulations, 2023.
“The following transactions shall be excluded from the requirement of an electronic tax invoice-…supplies by a resident person whose annual turnover is less five million Shilling,” reads the regulations.
Other transactions that have been exempted from the electronic tax invoice include emoluments, imports, interest, airline passenger ticketing.
Others are investment allowances including internal accounting adjustments, fees charged by financial institutions, services provided by a foreigner without a permanent establishment in Kenya.
Beginning this month, all businesses are required to produce an electronic tax invoice for all the transactions they undertake, failure to which they cannot claim the expense when filing for Income Tax.
In its new medium term plan for raising revenue, the National Treasury also plans to introduce a withholding tax of five percent on farm produce sold to cooperative societies and agro processors, in what is aimed at expanding the tax base.
A lot of small businesses, with a turnover of less than Sh5 million annually, or monthly sales of Sh416,000, are in the agricultural sector which the government reckons has not been paid its fair share of taxes despite its high contribution to the economy.
