Heard of Electronic Tax Invoice Management System(TIMS)?
According to section 67 of the Value Added Tax, 2013 the cabinet secretary for National Treasury and Planning published new guidelines on the implementation of the VAT Act on 10th September 2020. The Act provides for the CS to draft the necessary guidelines for further implementation. Among the new guidelines outlined was the introduction of the Tax Invoice Management System (TIMS). The main aim – to ensure compliance through improved record management and accuracy. Kenya Revenue Authority(KRA) also aims at reducing the challenges faced in VAT auto assessment reconciliation for the past years.
All business owners with transactions exceeding 5 million in turnover are expected to register for VAT. One can also register for voluntary VAT if they make a turnover of less than 5 million.
What is a Tax Invoice Management System?
Tax Invoice Management System, also known as (TIMS) is an upgraded electronic tax register that was rolled out in 2005. The electronic register has an almost real-time transmission of sales made to the KRA system.
New VAT guidelines to be implemented by 1st August 2022
- All VAT-registered taxpayers are required to have an Electronic Tax Register that is compliant. A compliant ETR will have the following functionalities:
- The invoice should have the following details; tax rate, value to be taxed, the total tax, and the gross total
- Should be able to transmit invoice data to KRA on a real-time or near real-time basis
The Electronic Tax Registers can be purchased from only the listed suppliers by KRA.
The key features of the tax invoice include:
- Buyer Pin – This refers to the pin of the customer which is a voluntary option. NB: It is the responsibility of the customer to provide their pin number if they would need to claim their input tax
- Control unit serial number – This is a unique serial number that will be used to identify each tax register
- Control unit invoice number – This is a unique number generated by the tax invoice upon issuance of the invoice number
- Quick Recovery code (QR code) – This is used to confirm the validity of the tax invoice by simply scanning the QR code on the invoice
Electronic tax registers which are compliant have the ability to create debit and credit notes which refer to the original invoice number.
Types of electronic tax invoice systems available in the market.
There are different types of electronic tax registers available and approved by the Kenya Revenue Authority, that are TIMS-ready.
- Type A – Suitable for small businesses
- Type B – Suitable for businesses outlets using point of sale
- Type C – Suitable for businesses with automated systems such as ERPs
- Type D – Suitable for all businesses
N/B; All the ETR machines are designed for different business types with different levels of transactions as above.
Conclusion
Migration of electronic tax registers to compliant electronic tax registers is a motive of the government to achieve the Tax Invoice Management System goal. The main reason for the introduction is to ensure 100% compliance through accurate and real-time data capture.
John Daniel and Partners LLP urges all businesses affected by the new guidelines to take note of the changes and comply before the new set deadline date – 30th November 2022. Failure to comply with the above regulations attracts a fine not exceeding 1 million or a sentence not exceeding 3 years or both as given under section 63 of VAT Act,2013.
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