COMPLIANCE WITH THE VAT ETR REGULATIONS

By: Mercy Irungu Date: 27/07/2022 Category: Tax and Compliance

Effective 1st August 2022, KRA is aligning itself with advances in technology in order to better streamline VAT administration. This includes the introduction of the electronic tax invoice Achieved through the implementation of the Tax Invoice Management System (TIMS) The overall objective is to increase VAT compliance, minimize on VAT fraud and increase tax revenue.

TAX INVOICE MANAGEMENT SYSTEM(TIMS)

TIMS is an enhancement of the ETR regime that was rolled out in 2005.

It aims at plugging loopholes resulting from weaknesses in this regime through:

• Integration with trader systems, i.e. ETRs, ERPs & Point of Sale (POS) systems.
• Standardization and authentication of tax invoices at the time of generation by the trader and transmission to KRA on a real time or near real time basis.
• Seamless integration with iTax.
• A module for storage of tax invoice data.
• Verification of the validity of a tax invoice by officers, traders and the general public through the Invoice QR Code or Tax Invoice Checker on the iTax portal.

VAT (ELECTRONIC TAX INVOICE) REGULATIONS, 2020

• The ETI Regulations were gazetted on 25th September 2020, Legal Notice 189.
• The Regulations provide for a period of 12 months to comply.
• Public Notice published on 13th July 2021 provided for extension of timelines to comply.
• Effective 1st August 2021, VAT registered taxpayers are required to use electronic tax registers (ETRs) that meet the requirements outlined in the Regulations.

KEY TO NOTE

• The List of Approved ETR Suppliers and Manufacturers to support TIMS Implementation is published on the KRA Website.
• Newly registered VAT Taxpayers and those who are replacing their ETRs will directly be on boarded on TIMS.
• Where a taxpayer replaces the existing tax register, they are required to safeguard the previously used tax register in line with requirement to keep records for five years as stipulated in Section 23 of the Tax Procedures Act, 2015 (TPA).
• VAT registered taxpayers are reminded to continue filing their VAT returns as stipulated in Section 44 of the Value Added Tax Act, 2013.