Answering the eTIMS question- Unpacking all you need to know about eTIMS tax compliance.

All You Need To Know About eTIMS Tax Compliance

What is eTIMS?

eTIMs stands for Electronic Tax Invoicing Management System. This is a software solution introduced by the Kenyan government that provides taxpayers with options for electronic invoicing in compliance with the provisions of the Tax Procedures (Electronic Invoicing Management System) Regulations, 2024.

Why is the government implementing eTIMS?

According to the Medium-Term Revenue Strategy FY2024/5 – 2026/7, the government aims to raise the tax to GDP ratio from 13.5% in FY2022/3 to 20% in FY2026/7. This is to be achieved by enhancing tax compliance.

Resultantly, the generation of eTIMS compliant invoices was mandated through the Finance Act, 2023, which also introduced a provision disallowing the deductibility of any expenditure or loss where the supporting invoices of the transactions are not generated from an electronic tax invoice management system except where the transactions have been exempted in accordance with the Tax Procedures Act.

Who is required to onboard on eTIMS?

• The Finance Act, 2023, introduced eTIMS for ALL taxpayers effective 1 January 2024.

• However, the following are the only expenses (and some suppliers) that are exempt from eTIMS compliance: emoluments; imports; investment allowances; airline passenger ticketing; interest; fees charged by financial institutions; expenses subject to withholding tax that is a final tax; and services provided by a non-resident.

Is eTIMS applicable to non-VAT registered businesses?

• Yes. Both VAT and non-VAT registered taxpayers are required to comply. Compliance with eTIMS means: issuance of eTIMS compliant invoices; and ensuring they maintain eTIMS compliant invoices for business expenses.

Is eTIMS relevant for individuals and sole proprietors in business?

• Yes. Individuals and sole proprietors need to ensure they issue eTIMS compliance invoices and request from their suppliers eTIMS compliant invoices for business expenses.

What are the benefits of eTIMS to businesses?

1. Enhanced tax compliance

2. Reduce compliance costs as the solutions are free of charge

3. Simplified return filing for taxpayers

4. eTIMS allows taxpayers to maintain record of invoices issued on the taxpayer’s portal

What are the options for onboarding eTIMS?

1. eTIMS Lite (Web) - Web based solution accessible through eCitizen. This solution is for businesses with minimal transactions.

2. eTIMS Lite (USSD) - accessed through the short code *222#. This solution is for individuals and sole proprietors.

3. Online Portal- Tailored for taxpayers in the service sector exclusively, where no goods are supplied.

4. eTIMS Client – a downloadable software designed for taxpayers dealing in goods or both goods and services. The software supports multiple branches and pay points/cashier tills.

5. Virtual Sales Control Unit (VSCU) – this solution enables seamless system-to-system integration between the taxpayer’s invoicing/ERP system and eTIMS, catering to taxpayers with extensive transactions or bulk invoicing.

6. Online Sales Control Unit (OSCU) – this solution also facilitates system-to-system integration between the taxpayer’s invoicing/ERP system and eTIMS. It is ideal for taxpayers using an online invoicing system.

What are the implications for not onboarding eTIMS?

• According to section 86 of the Tax Procedures Act, where a taxpayer fails to comply with the provisions relating to eTIMS, the Commissioner may issue a notice in writing to the taxpayer requesting the reasons for the non-compliance. If the reasons for non-compliance are not satisfactory, then the taxpayer shall be liable to a penalty of two times the tax due.

Found this helpful? Here’s how we can assist you!

Compliance with the latest eTIMS compliance requirements is highly recommended for the relevant entities to align with the evolving regulatory landscape.

Our team is ready and eager to assist with the seamless integration and adoption of eTIMS as an approved eTIMS integrator ensuring a smooth transition for you and your institution enabling you to meet the latest legal requirements.

Contact us today for further assistance. Email us at info@namiri.tech or call or Whatsapp 0112685368.