FINANCE
Tax Invoice Management System ( TIMS )
By CPA Peter Kinuthia
A new dawn in the way and manner in which Value Added Tax ( VAT ) is administered has come . With the dramatic growth and disruptions occasioned by digitisation , for an effective and efficient tax administration , there is every need to adopt digitally advanced electronic tax information systems .
In this regard , the Kenya Revenue Authority ( KRA ) is implementing the Tax Invoice Management System ( TIMS ). The legal basis being The VAT Act of 2013 , as amended , and the VAT ( Electronic Tax Invoice ) Regulations , 2020 .
All VAT registered taxpayers are required to transition from the old Electronic Tax Registers ( ETR ) regime to the new TIMS devices that conform with the requirements of the VAT ( Electronic Tax Invoice ) regulations 2020 . Further , sellers of the old ETR devices have been advised to stop selling the noncompliant devices with effect from 15th January 2022 , as per a KRA public notice on the same .
The overall objective of TIMS is to increase VAT Compliance , minimize VAT fraud and increase tax revenue . TIMS will achieve this objective by integrating with the different trader sales systems via a Control Unit . Each VAT registered trader will be required to obtain this Control Unit as an independent or integrated component in order to enable the seamless transmission of invoice data to TIMS .
What is TIMS
The Tax Invoice Management System ( TIMS ) is an enhancement of the current Electronic Tax Register ( ETR ) regime that has been in existence since 2005 . It aims at plugging loopholes resulting from weaknesses of the old ETR regime through : Integration with trader systems , standardization , and transmission of tax invoices issued by VAT traders on a real time basis , seamless integration with iTax , storage of tax invoice data , verification of the validity of a tax invoice through the Tax Invoice Checker on the iTax portal or Mobile app .
“ There are numerous benefits accruing from compliance including fostering a fair business environment , simplified return filing , faster processing of VAT refunds , and nonintrusive verification of tax matters .”
Who is liable
In compliance with the requirements of the Electronic Tax invoice regulations , all VAT registered taxpayers should transition to TIMS . This is by using tax compliant registers with the following functionalities and ability : ( a ). to check the invoice details ( tax rate , taxable value , total tax and total gross amount ) before issuance of the tax invoice to a customer , and ( b ). Transmission of the validated tax invoices to KRA over the internet on a real time or near real time basis .
As per the provisions of the VAT Act , a person is required to register for VAT , if he deals with taxable ( vatable ) supplies and the turnover in a year exceeds or is expected to exceed Kshs . 5 Million .
Upon assessment of the existing device or invoicing system , the ETR Supplier will advise a taxpayer whether they will need to replace their device or upgrade it in order to ensure compliance with the requirements . To comply with the TIMS requirements a taxpayer must : be VAT Registered as per the provisions of the VAT Act 2013 ; have an invoicing system with the capability to transmit invoices to KRA systems ; and must have internet connectivity
Timelines
With the gazettement of the Value Added Tax ( VAT ) ( Electronic Tax Invoice ) Regulations , 2020 , all VAT registered persons are required to comply . Through an earlier KRA public notice , the transition period is a twelve-month window commencing on 1 August 2021 and closing on 31 July 2022 . All VAT registered businesses are expected to acquire the new electronic tax invoice devices , implement and start complying .
As per the regulations , where a person is unable to comply within the timelines as provided , they are required to apply to the Commissioner for extension of time , which shall not exceed six months . The application for extension shall be made in writing and lodged within thirty ( 30 ) days before the expiry of the twelve-month period .
Key features
The key unique features of a valid Electronic Tax Invoice include : Buyer / purchaser PIN - this is
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