Higher tax for traders without digital ETRs


A new model of an electronic tax register. FILE PHOTO | LUCY WANJIRU | NMG

Traders have less than two months to sign up for the electronic tax invoice management system (eTIMS) or risk higher taxes and stiffer penalties in a fresh bid by the taxman to enhance value-added tax (VAT) compliance.

The Kenya Revenue Authority this week said that non-compliant businesses will be blocked from subtracting expenses from revenue that are subjected to taxation.

“Please note that any business expenditure not supported by an eTIMS generated tax invoice shall not be deductible for tax purposes with effect from January 1, 2024,” Commissioner for Domestic Taxes Department Rispah Simiyu warned.

The deductible expenses that non-compliant companies stand to lose include capital expenditure on building and machinery for manufacturing, construction of farm works, and purchase of computer software rights for business.

Such expenses are usually deducted from revenue to arrive at income which will be subjected to taxation.

All VAT-registered businesses were required to have acquired internet-enabled electronic tax registers (ETRs) which generate electronic tax invoices that are transmitted to the KRA in real-time or near real-time.

The eTIMS enable the taxman to have increased visibility of transactions taking place in the economy and stock levels companies have.

From September, the Finance Act 2023 empowered the KRA to establish the electronic system through which electronic tax invoices must be issued and records of stocks kept for compliance.

Traders who fail to comply with the eTIMS are subjected to a stiffer fine of two times the value of tax due up from the current penalty of Sh100,000.

The KRA has set its sights on making VAT a top revenue generator after income tax. “As it is now if there’s one tax head that every single person is paying is VAT. Even to a small child on products that are not exempt. Everybody is incurring VAT,” Ms Simiyu said in the past.

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