The March 31st deadline for on-boarding of businesses onto Electronic Tax Invoice Management System (eTIMS) slipped out quietly without much fan fare. Within a week , Kenya Revenue Authority (KRA) gazetted the Tax Procedures (Electronic tax invoice)regulations. A key highlight of the regulations is that any business regardless of turnover is now required to issue electronic tax invoices.
What this means is that from April 1st, any trader who is required to and does not issue an electronic tax invoice will face a penalty of two times the tax due.
But Who or Which Traders Are Supposed to Issue Electronic Tax Invoices(eTIMS)?
By law, any person who carries out business is supposed to issue an electronic tax invoice. According to Sec 23A Subsection 2 of Tax Procedures Act, “ Any person who carries out business shall issue an electronic tax invoice”.
However, the tax invoice matter presently revolves round business to business transactions. And this is where the rubber meets the road.
If you have a nursery and sell flowers to eTIMS registered landscapers in Kenya, you need to be on eTIMS. You are going to be lose business if you are not on eTIMS. How? Lets use the example of a nursery persons who sell flowers to landscapers.
Scenario A
Nursery A is eTIMS complaint. A landscaper in Kenya who is a registered business or company comes over to buy plants. At the end of the exercise, the landscaper gives Nursery A Ksh18,000 being the cost of plants. Nursery A will issue an electronic tax register which immediately reflects at KRA. .Over there, it registers that i Landscaper has purchased goods worth Ksh 18,000 from Nursery A. KRA has noted that this goods are an expense incurred by the landscaper.
When the landscaper files their tax returns, say value added tax (VAT), they will deduct Ksh 18,000 from the tax owed because it is an expense incurred. So if the landscaper was doing a project worth Ksh 120, 000, the landscaper was going to pay VAT of 19,200(16% of 120000). But since he has been issued with an invoice of 18000, they will deduct 18000 from 19200 and pay only 1200 as VAT.
Scenario B
The landscaper has bought Ksh 18000 worth of plants from Nursery B. However nursery B is not eTIMS complaint. Therefore he will not issue the landscaper with electronic tax invoice. Naturally, this sale will not be recorded at KRA and the landscaper will pay full VAT of Ksh 19200 since he cannot deduct the cost of plants as an expense incurred without an electronic tax invoice receipt.
What this means is that if a client wishes to recover the cost of purchases from their tax liability, a business on eTIMS will be a priority-regardless of whether you are along time customer or not. Infact businesses will deliberately avoid you if you are not eTIMS compliant because they cannot recover their costs when they do business with you
What Other Businesses Are Affected By eTIMS?
Every business is likely to be affected by eTIMS. This is especially so if you are dealing with registered business. For instance, if you are a boda-boda who does courier services to a given business, you will need to be on eTIMS. The business cannot be paying you for doing errands and absorbing the costs. If you rack up a serious amount, you will soon be called in and asked to invoice them on eTIMS.
Even the transport people will have to on-board to eTIMS. If you ferry goods for a company, they will want to recover the amount paid to you as transport costs. As such they will request an eTIMS invoice.
Which Businesses in The Green Industry Should on-board eTIMS?
Every one in the green industry will need to be on eTIMS. Landscapers, nursery operators, greenhouse growers,agronomists, fruit growers, farmers and transporters. As long as your business is dealing with other businesses being on eTIMS will be inevitable.
How Does One Register For eTIMS?
One way to register eTIMS is to upload the application on your device mostly a laptop. Go to ICEA building if you are in Nairobi and the system will be uploaded on your device. For very small businesses, there are lite version that can be accessed via SSD service or E citizen.
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