Companies have started vetting their suppliers of goods and services to ensure that they comply with the Kenya Revenue Authority (KRA) requirements of using only the electronic Tax Invoice Management System (eTIMS) in their transactions.

The new KRA requirement takes effect from January 1, 2024, and companies must ensure that their suppliers are compliant with this condition to avoid the disallowing of expenditure procured from non-compliant suppliers. 

Failure to register exposes a taxpayer to a penalty that is twice the amount of tax due and makes the expense non-deductible for corporation tax purposes. 

This follows the enactment of the Finance Act 2023 mid-this year, which saw some provisions become effective on July 1, 2023, others on September 1, 2023, and more will take effect from January 1, 2024.

One of the provisions taking effect from January 1, 2024, relates to the amendment of section 16(1) of the Income Act by inserting a new paragraph(c) disallowing any expenditure or loss where the invoice of the transactions is not generated from an Electronic Tax Invoice management system except where the transactions have been exempted in accordance with Tax Procedure Act 2015. 

“Please note that any business expenditure not supported by an eTIMS generated tax invoice shall not be deductible for tax purposes with effect from January 1, 2024,” the taxman statement read in part. 

This amendment means that every purchase by any company of whatever goods or services must be accompanied by the required eTIMS-generated invoice, whether the suppliers of such goods or services are registered for VAT or not.  

Already, Farmer’s Choice, one of the leading producers of fresh and processed meat in the country has notified all its suppliers, including Rosemark and Choice Meats divisions, that effective the aforementioned date, the company will no longer be able to engage in trade with suppliers of goods and services unless accompanied by the requisite Electronic Tax Invoice Management system-generated invoice. 

The objective of eTIMS is to reduce the cost of compliance for VAT-registered businesses. Through integration with eTIMS, businesses will benefit from real-time invoice transmission providing accuracy in tax invoice declarations and reconciliation between filed returns and payments. This will also eliminate the need for multiple hardware purchases. 

All data generated through eTIMS will be transmitted in real-time to the KRA, giving the taxman visibility of revenues generated by taxpayers before tax returns are filed.