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An e-invoice is also known as electronic invoices. These invoices and their details are validated, signed, and transmitted to the Kenya Revenue Authority (KRA) portal on a real-time basis. This is on account of the Tax Invoice Management System, a new system.
The Electronic Tax Register or ETR was an earlier electronic tax invoicing system introduced for VAT e-invoicing regulations. For this register system, business organizations have to ensure that each transaction is recorded in the tax register and that an invoice is sent to the buyer for each sale made.
There are four types of approved ETRs.
Type A: An integrated ETR that generates, validates, and sends tax invoices or receipts to the KRA portal. Small businesses and businesses on the move (like van sales) should use this type of register.
Type B: For validation and transmittance invoices, there are two ways.
Retail outlets and businesses will find this type of register useful.
Type C: A control unit is connected to an enterprise resource planning for the validation and transmittance of invoices or receipts to the KRA. For this type, it is businesses that have invoice automation and electronic signature device usage.
Type D: This tax register is connected to different invoicing systems like ETR, point of sale, or enterprise resource planning. All types of businesses can use this type of ETR.
To make sure business organizations follow the tax regulations, KRA has published detailed guidelines and provided taxpayers with a list of approved suppliers and manufacturers of ETRs.
The e-invoicing system is called Tax Invoice Management System (TIMS). In this system, VAT-registered companies inform the KRA about each transaction in real time.
The main purpose of TIMS are:
The TIMS system is an upgrade from the previous Electronic Tax Register (ETR) system. The purpose of TIMS is to make businesses more tax compliant. This is done by making the tax return filing process simpler and standardizing tax invoices and receipts.
TIMS integrates easily with trader systems (for example Point Of Sale, Enterprise Resource Planning, and Electronic Tax Register Type C systems) and iTax. It stores the tax invoices and provides details on the tax invoices' validity by requiring QR codes on the invoices or tax checkers on the iTax portal.
The new electronic tax invoice is applicable to all the business organizations registered under VAT. From 1st October 2022, every business registered under VAT must give an e-invoice to all customers.
The KRA does exempt certain businesses from paying VAT, so these particular businesses aren't required to apply for upgraded electronic tax invoices. These exemptions may include certain businesses run by Kenyans beyond the Kenyan jurisdiction and non-profit organizations.
There are several benefits of having an e-invoice:
The KRA has released an electronic tax invoice presentation so that business organizations are better prepared and gained more knowledge about the upgraded e-invoicing system.
Below is a sample of an e-invoice.
An e-invoice must have the following items:
The implementation of the e-invoice comes with several advantages like business transparency, seamless operations, a better revenue collection system, easier VAT refunds, increased improvement in the ease of doing business, and better chances of predicting the economy based on accurate tax data.
With regard to business organizations and taxpayers, they must comply with the KRA guidelines, have a valid tax register regarding TIMS, have valid electronic tax invoices, and keep excellent tax records.
A taxpayer can now do business in Kenya much more easily due to these new regulations regarding the electronic tax register and TallyPrime can help business organizations with all their queries.
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4 Benefits of Transitioning to KRA Tax Invoice Management System (TIMS) For Businesses