eTIMs to help KRA cast tax net wider
The law on eTIMs came into effect on 1st January 2024 meaning this year’s tax returns will have to be backed by electronic tax invoices.
If you run a business, big or small, whether in the formal or informal sector, whether you are VAT-registered or not, you MUST register on eTIMs and generate electronic tax invoices that will be transmitted to the Kenya Revenue Authority.
This is as a result of the Finance Act 2023 whose implications continue to unfold.
The law on eTIMs came into effect on 1st January 2024 meaning this year’s tax returns will have to be backed by electronic tax invoices. The Kenya Revenue Authority (KRA) offered a grace period for the mandatory eTIMs onboarding that lapses at the end of March 2024.
KRA records indicate that only 6.1million people file tax returns and only 2 million are active taxpayers. This in a country of 50 million plus Kenyans and 18 million registered voters. The question has for long been how to enhance overall tax compliance so as to widen the tax base.
eTIMs which stands for Electronic Tax Invoice Management System is the game changer as KRA seeks to meet its KSh 3 trillion tax target.
It is a software-running, web-based solution that can be accessed on computers and on mobile phone apps thus making it convenient, user-friendly and flexible for businesses to use. To onboard, one should go to the portal on etims.kra.go.ke.
To onboard Mama Mboga, the boda boda riders and all the businesses in the hustler or kadogo economy, KRA has introduced eTIMs Lite which can be accessed on eCitizen by dialing *222# or logging onto ecitizen.kra.go.ke.
This lower-level tech solution which is more simplified than eTIMs will act as a register and generate and transmit to KRA an electronic invoice for those who are supposedly tech-challenged in the same way many Kenyans are able to undertake mobile banking or digital loan apps. In places where someone does not have ready access to the internet, the transactions will be stored in the cloud and be transmitted when internet access is available.
Section 3 of the Income Tax Act states that business income is subject to income tax. For a sole proprietor its graduated on a scale of 10 – 35% while a company pays 30% corporation tax. There are deductions for business expenses so as to get taxable business income. Expenditure that needs to be accounted for in taxes must from this year be supported by eTIMs receipts.
In typically Kenyan fashion you may decide not to comply thinking that your business is too small for KRA to find. But that may quickly put you out of business because all businesses whether big or small shall not accept to transact or get goods and services from any business that is not generating electronic tax invoices as this will have an implication on their tax filing.
So, for example, if you sell chicken, milk or eggs and you supply to butcheries, schools, restaurants, the corner shop, etc., then you will have to register with eTIMs and generate electronic invoices so that when you and those who you are supplying are filing taxes, you are in good books with KRA.
The same will be the case for the Mama Mboga who delivers sukuma to a kibanda, for the boda boda rider who runs errands for whatever business, or for a flower seller who delivers to an office. eTIMs will also apply to those who earn residential rental income a.k.a landlords.
If you are a video editor, writer, cameraperson, make-up artiste, lawyer, accountant or anyone in the gig or service economy, you also must register with eTIMs so that when you get gigs and provide a service to a company you are able to generate an electronic tax invoice that enables all the parties involved in the transaction to be tax complaint.
Normally the chicken, egg or milk seller or the gig economy service provider issues a tax receipt for the goods or services usually for their record keeping and accounting. Or they may not even issue receipts as is the case for many informal sector transactions. But now the taxman wants to be involved in all the transactions so as to ensure taxes are paid as they should by everyone.
In social media parlance, showing receipts means backing up your claims with evidence.
Going forward, receipts and specifically electronically generated receipts that are integrated with the Kenya Revenue Authority systems via eTIMs will be an important component of business transactions in Kenya.
And the much-hyped KRA slogan, ‘Kulipa ushuru ni kujitegemea’ will be an actual, lived experience for a lot more Kenyans.