Electronic Tax Invoice in Kenya


Electronic Tax Invoice in Kenya
Tally Solutions | Updated on: October 27, 2022

What is an electronic tax invoice?

Electronic tax invoice, commonly referred to as e-invoicing, is a system in which all the invoices are electronically validated, signed, and details are transmitted to the tax portal on a real-time basis.

Under the new e-invoicing system, business/accounting software used by businesses can be integrated with new electronic tax registers (Type C ETR), known as a control unit, which validates the accuracy of the invoice and electronically signs the invoice, and then transmits the details to tax portal. Once the invoice is successfully validated, a unique control unit invoice number is generated for each invoice by ETR. Along with the invoice number, each invoice is added with a QR code and control unit serial number. This process is collectively called e-invoicing or electronic tax invoice in Kenya.

With new electronic tax invoice, all registered businesses are mandated to issue the invoice only after the ETR validates the details.

What is the new Tax Invoice Management System (TIMS)

The Tax Invoice Management System (TIMS) is an upgrade of the previous Electronic Tax Register (ETR).

The system facilitates real-time standardization, authentication, and transmission of electronic invoices issued by traders to the KRA. It also provides seamless integration with iTax and various trader systems like Enterprise Resource Planning (ERP) and Point of Sale (POS).

The new TIMS system increases tax compliance by simplifying the tax return filing process and standardizing tax invoices and receipts. 

What is the due date for implementing e-invoicing in Kenya?

As per KRA’s recent update, the deadline to comply with e-invoicing regulations is extended to 30th September 2022. This implies that effective from 1st October, all VAT-registered businesses need to issue invoices that comply with the e-invoicing regulations. The original date of implementation was 1st August 2022. 

Type of business to whom electronic tax invoice will be applicable?

The new electronic tax invoice will apply to all the businesses registered under the VAT. If you are a business registered under VAT from 1st October 2022, you must issue an e-invoice to the customers.

Businesses that are exempted from e-invoice

The KRA exempts some businesses from paying VAT, and these businesses don’t need to apply for electronic tax invoices. Some of them include businesses run by Kenyans outside the Kenyan jurisdiction and non-profit organizations.

What are the different types of ETR devices?

Given that the businesses use different ways and systems to generate invoices, either manually or using software systems such as ERP, POS, accounting software, KRA has introduced different types of ETR devices that caters to specific needs of businesses.

Type of ETR

Business Suitability

Type A

Small business entities whose invoicing is still done manually. Also suitable for business making  sales on the move, e.g. van sales since the ETR is portable

Type B

Retail outlet and Shops. This comes with One ETR connects with many cashier tills and One ETR to One Cashier till

Type C

Businesses that have automated their invoicing using ERP, Accounting software etc.

Type D

This comes with ability of connect with all invoicing system used such as ERP, ERP etc. Thus, suitable for all types of businesses.

What are the requirements of the new electronic tax invoice system?

The new tax invoice management system(TIMS) requires businesses to use a new compliant tax register (ETR).  For example, if you are business using ERP/Accounting system, you need to use ‘Type C’ ETR device and integrate with the software you are using. Every invoice you generate will be validated and signed by the ETR with a unique invoice identifier number and a QR code. Then, the invoice will be printed and issued to the customer. The ETR is also designed transmit the invoice details in near to real-time to the KRA portal.

What all invoice details the new e-invoice ETR will validate?

To comply with the e-invoicing requirements, business owners should use a compliant tax register that validates the following details:

  • The tax rates
  • The taxable value
  • The total gross amount
  • The total tax

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