Businesses that pay Value Added Tax can temporarily breathe easy after the Kenya Revenue Authority extended the compliance deadline for a new tax invoicing system.
The system upgrade would have seen businesses spend close to Sh150,000 to purchase the necessary machines and align software by end of the July 31 deadline, pushing up operation costs.
Failure to comply to the new Tax Invoice Management System as per the the earlier set deadline would have attracted a fine not exceeding Sh1 million.
Talks between the Kenya Private Sector Alliance (Kepsa) and KRA on Monday saw the deadline pushed to September 30.
“Following a stakeholder meeting called by KRA commissioner general on August 1, TIMS compliance deadline has been extended to end of September,’’ Kepsa said in a statement.
The private sector lobby said there would be a bi-weekly review meeting by all stakeholders to monitor the implementation of the new tax system and ensure a seamless transition.
Kepsa told members that compliance costs could not be claimed as VAT (Electronic Tax Invoice) Regulation,2020 does not provide for it.
KRA promised to engage with suppliers to ensure that the TIMS kits being paid for are in the country.
Last week, traders rushing to meet the deadline told the Star that the extra cost could see them pass the bill to consumers, escalating the already high cost of living.
Yesterday, Kepsa said the extension offers businesses ample time to cater for the one-off cost hence no need to pass the cost to consumers.
“The additional time on top of the two years given to comply is enough for businesses. We thank the government for factoring in Covid-19 disruption, ongoing global volatilities and upcoming general election,’’ Kepsa said.
On 25 September 2020, the Cabinet Secretary for The National Treasury Ukur Yatani gazetted the Value Added Tax (VAT) (Electronic Tax Invoice) Regulations, 2020 to usher in a new electronic tax invoice regime.
The regulations took effect on gazettement and required VAT registered persons to comply within 12 months therefrom.
Although KRA issued a public notice citing its intention to roll out the new electronic tax invoice requirements commencing August last year, the notice provided a further twelve-month transition window.
To ensure integration of the tax register with the KRA system, every registered taxpayer is required to procure a control unit, being a point-of-sale terminal, an Enterprise Resource Planning (ERP) system, or simply an ETR.
The revenue man had given suppliers of ETR until mid-January to adopt the new ETR machines that are configured for real-time transmission of data to the taxman’s register.
It is banking on automated systems to beef up tax collections even as it targets to hit Sh6.8 trillion targets for the three financial years starting 2021 to 2023.
Last year, KRA exceeded its collection target for the first time in 11 years, a move attributed to the adoption of technology.
The revenue agency collected Sh2.03 trillion during the financial year under review, against an original target of Sh1.88 trillion and two revised targets of Sh1.91 trillion and Sh1.97 trillion respectively.
This was a 22.3 per cent improvement in revenue collection compared to the previous financial year when it collected a total of Sh1.66 trillion.
Value Added Tax collections amounted to Sh244.7 billion, reflecting a growth of 24 per cent. The performance is primarily attributable to enhanced compliance efforts by KRA and the economic recovery.
According to KRA, the new system will ensure real-time transmission of data to its digital system and iTax as it moves to seal tax evasion loopholes.
Taxpayers will also be required to keep and safeguard the data in the previously used Electronic Tax Registers (ETR) as the law requires them to keep the record for five years.
