The Kenya Revenue Authority is alarmed by the slow pace at which the traders are registering on the electronic tax information management system (eTIMS) to comply with the new law.
It said only about 17 per cent of the initial target group of 915,000 have since logged in.
As of last Friday, eTIMS had about 80,386 taxpayers with Value Added Tax (VAT) obligation, and another 76,902 are from the old TIMs.
This means more than 750,000 are yet to onboard, even KRA says the broader target is to bring all the seven million in the shadow economy into the system.
“It is important for us to have visibility of these transactions to enable the government to make policy decisions. They need to onboard on any of the solutions,” said Hakamba Wangwe, KRA chief manager for eTIMS.
She told the Star in an exclusive interview that KRA aims to bring all taxpayers with business income onboard.
“All traders must comply. We don’t have a provision for an extension. We gave them an allowance of time within which they all have to comply,” Hakamba said.
The KRA chief manager said no matter how long it takes the traders, the invoices [postdated] would still have to be brought into the system.
“Any invoices they are raising need to be noted and brought into the system at the time they onboard . . .there is no provision of extension in law,” the officer said.
The Finance Act, of 2023, introduced the electronic tax information management system, which is like KRA’s camera for tracking traders’ transactions and tax payments.
Faced with challenges of the cost of devices, KRA says it dropped the device-based approach and opted for an internet-based system to allow all to join.
The taxman thus unveiled eTIMS, with an offer of free software to facilitate onboarding.
The software, Hakamba said, can run on any device – laptop, tablet, phone, or desktop computer, depending on a trader’s level of transaction,
“You can decide what solution you want installed on your devices. For those dealing in services, all they need is credentials. There is no need to instal an app. They just log in and transmit invoices to KRA,” she said.
The official said the aim was to ensure taxpayers have flexibility in their choice of solution.
“Taxpayers with billing systems have provision for system-to-system integration,” she said.
The Finance Act, of 2023, set the commencement date at January 1, 2024, meaning traders are almost into the third month post-compliance deadline.
“We have extended it beyond VAT-registered taxpayers. Effective January 1, 2024, all transactions taxpayers have, for declaring expenditure or claiming the same, have to be supported with an electronic tax invoice,” Hakamba said.
The law thus extended eTIMS from VAT-registered taxpayers to apply to even those not registered for VAT.
“It applies to any taxpayer with business income . . . they need to register and generate invoices through eTIMS.”
KRA says businesses and taxpayers without electronic tax invoices will have their claims disallowed.
“It might have an impact on tax liability as these traders can’t claim invoice tax,” Hakamba quipped, citing Section 86 of the Tax Procedures Act, which provides a penalty of double the tax for non-compliant taxpayers.
She said eTIMS is the only sure way for KRA to determine the accuracy of declarations.
“The eTIMS gives us the basis for which we can compare transactions against declarations. The system is the camera for KRA. For taxpayers, they get the same visibility.”
She adds that compared to a manual setting, where traders and the tax agency may be working in the dark, eTIMs provide for better record keeping, inventory tracking and compliance.
Initially, the VAT threshold was Sh5 million and above but now KRA is going to lower the threshold below Sh5 million.
All taxpayers - resident or nonresident with the permanent establishment - as long as they have business income, should thus be on the eTIMS system.
“Most important is that if you are making supplies to another business entity, you have to generate an e-tax invoice. A supermarket, for example, needs to support its business expenditure with an e-tax invoice,” the KRA chief manager said.
For the taxman, the system has been made simple for anyone to join, including the mama mboga and other lowest-end taxpayers.
“We have more simplified solutions like USSD and on the eCitizen platform and support our lowest-end taxpayers,” Hakamba said.
KRA intends to roll out a mobile app solution in the next two weeks and is now reviewing the existing platforms ‘to make customer journey less arduous’.
The taxman explains that eTIMS is not a tax but a technology that is being applied so that where a trader is generating a receipt or invoice, it should be available to the Kenya Revenue Authority.
“We give you the means to be able to make it available to the authority,” the agency said, decrying a lack of awareness among a segment of taxpayers, especially those in remote places.
KRA, administratively, gave traders up to March 31, 2024, to comply with the requirement for them to register on eTIMS.
“The law has not changed . . .March 31, 2024, was our administrative deadline after interacting with taxpayers and learning their challenges,” Hakamba said.
KRA says that progressively, it has started with areas with higher revenue impact as it moves downwards.
“We are working so that the last person we are going to reach, it is possible for them to onboard.”
