The Tax Procedures Act in Kenya has been amended to introduce a new requirement for the use of electronic tax invoices by all taxpayers, including those who are not registered for Value Added Tax (VAT). This change, which will come into effect on September 1, 2023, means that every person engaged in business will be obligated to issue and transmit Electronic Tax Invoices (ETI) and maintain a record of their stocks through an electronic management system known as eTIMS, as prescribed by the Commissioner.
From January 1, 2024, all taxpayers will be expected to support the expenses claimed in their tax returns with electronic tax invoices that are generated and transmitted to the Kenya Revenue Authority’s (KRA) system. This move by the KRA is part of their broader strategy to enhance tax compliance across the country. To facilitate this transition, the KRA has developed tailored solutions within the eTIMS platform that cater to various business models, sizes, and types of taxpayers. These solutions are accessible on mobile phones, tablets, personal computers, and laptops.
For service-oriented businesses, an online portal has been made available, while entities using software billing systems and bulk invoicing have the option of system-to-system integration. The KRA is also collaborating with government and private agencies to develop simplified solutions for taxpayers who have limited access to technology devices. In addition, the KRA has established a comprehensive support framework across its offices to assist taxpayers in the onboarding process and provide education on suitable eTIMS solutions.
The introduction of electronic tax invoices is expected to enhance transparency in taxpayer transactions, streamline tax filing procedures, broaden the tax base, and improve revenue collection efforts. By digitizing the invoicing process, the KRA aims to reduce the risk of tax evasion and increase compliance among taxpayers. It will also enable the KRA to have real-time access to taxpayer information, making it easier to verify and audit transactions.
Existing non-VAT registered taxpayers have until March 31, 2024, to onboard to the eTIMS platform without incurring penalties for failing to issue electronic tax invoices. Once onboarded, these taxpayers will be required to progressively capture manually generated invoices and receipts issued after January 1, 2024, onto the KRA system. This grace period allows businesses to adapt to the new requirements and ensure a smooth transition to the electronic invoicing system.
The implementation of electronic tax invoices is a significant step towards modernizing the tax administration system in Kenya. It aligns with global trends in tax compliance and brings Kenya in line with other countries that have already adopted electronic invoicing. The move towards digitalization is expected to improve efficiency, reduce paperwork, and minimize errors in the tax reporting process.
In conclusion, the amendment to the Tax Procedures Act in Kenya will require all taxpayers, including non-VAT registered businesses, to use electronic tax invoices starting from September 1, 2023. The Kenya Revenue Authority has developed the eTIMS platform to facilitate this transition and provide tailored solutions for different types of taxpayers. The introduction of electronic tax invoices is aimed at enhancing tax compliance, improving transparency, and streamlining tax filing procedures. Existing non-VAT registered taxpayers have until March 31, 2024, to onboard to the eTIMS platform without penalties. This move towards electronic invoicing is a significant step towards modernizing the tax administration system in Kenya and bringing it in line with global standards.
