In a bid to alleviate compliance costs for small businesses, the Kenya Revenue Authority (KRA) has announced a new system that allows them to show a record of transactions instead of generating electronic invoices.
The change is set to take effect on January 1, 2024.
Hakamba Wangwe, KRA chief manager for eTims, highlighted the significance of this development, emphasizing its benefits for farmers and businesses with limited technical capacities.
In an interview with Business Daily, she stated, "We have worked on a further simplified solution for the lower-end taxpayers."
The proposed system seeks to streamline processes for businesses falling within a specific threshold.
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While awaiting approval, Wangwe indicated that the qualification threshold might align with businesses subject to turnover tax – an annual sales range from Sh1 million to Sh25 million.
"For the lowest end of taxpayers, we have solutions that are being developed that are very simple. All you need is for you to account for a transaction," Wangwe explained.
The focus is on visibility rather than intricate processes, as she noted, "You don’t have to do stock management. We just need to do visibility; ‘What did you sell to so and so?’"
The KRA plans to integrate the new system with the electronic Tax Invoice Management System (e-Tims) for other tax categories starting January 2024.
This means businesses declaring transactions must support them with electronic tax invoices. Invoices from suppliers not captured on e-Tims will not be accepted.
Wangwe emphasized the impact of the e-Tims implementation, revealing that it has exposed many Nil and non-filers.
"We have had a situation where taxpayers have actually been perpetual nil filers, and then they come to this implementation, and now they have to start filing payment returns," she stated.
The KRA has already on-boarded almost all registered VAT taxpayers, primarily large and medium enterprises, with 76,960 integrated through TIMS and 53,010 through e-Tims.
Wangwe expressed optimism about cleaning the register to include the entire 250,000 registered VAT taxpayers.
The VAT, a critical revenue source for the government, is charged at 16 per cent.
Wangwe attributed the growth in VAT to the implementation of Tims and e-TIMS, citing a 21.1 per cent increase in VAT on local products in the first quarter of the current fiscal year.
In addition to enhancing tax visibility, the KRA aims to use the new system to recruit more VAT agents.
Many businesses with an annual turnover exceeding Sh5 million, the threshold for collecting VAT on behalf of the taxman, remain unregistered due to their transactions being invisible to the KRA.
