Farmers have breathed a sigh of relief as the Kenya Revenue Authority (KRA) unveiled new regulations, exempting them and small businesses from the obligation to produce electronic invoices for their sales.

The rollout of electronic tax invoice management (eTims) introduces a Sh5 million threshold, sparing most micro, small, and medium enterprises (MSMEs) from this requirement.

In the recently issued Tax Procedures (Electronic Tax Invoice) Regulations, 2023, the KRA outlined nine transactions excluded from the electronic tax invoice, including supplies by businesses with an annual turnover of less than Sh5 million.

The official document states, “The following transactions shall be excluded from the requirement of an electronic tax invoice…supplies by a resident person whose annual turnover is less than five million shillings.”

Among the other exempted transactions are emoluments, imports, interest, airline passenger ticketing, investment allowances, internal accounting adjustments, fees charged by financial institutions, and services provided by a foreigner without a permanent establishment in Kenya.

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Addressing concerns about monitoring stock changes for small businesses, particularly farmers supplying cooperative societies, the KRA revealed the development of a new system awaiting approval.

Instead of generating and transmitting electronic invoices through eTims, small businesses under the new system will only need to show transactions.

Starting this month, all businesses are mandated to produce an electronic tax invoice for every transaction to claim expenses during Income Tax filing.

The National Treasury's medium-term revenue plan further proposes a five per cent withholding tax on farm produce sold to cooperative societies and agro-processors to expand the tax base.

Notably, a significant number of small businesses in the agricultural sector fall below the Sh5 million annual turnover threshold or monthly sales of Sh416,000.

The government aims to rectify what it perceives as an imbalance in tax contributions from the agricultural sector, which makes substantial contributions to the economy but has not received commensurate tax obligations.