Answering Your Questions: eTIMS Compliance Essentials for Every Business
Frequently Asked Questions on eTIMS Compliance
ETIMS requirements for businesses
Are businesses earning below 1 million required to be on ETIMS?
Yes, they are required to comply with ETIMS.
On 18 June 2024, the President in a press statement indicated that after public participation, the ETIMS requirement would not be applicable to businesses with turnover of less than KES 5million. These amendments were included in the Finance Bill (2024) passed by the National Assembly. However, this Bill was not assented to by the President, who recommended rejection of all clauses in the Bill. Resultantly, the provisions of the Income Tax Act, Tax Procedures Act, and Tax Procedures (Electronic Tax Invoice) Regulations,2024, are still in force which do not provide a turnover threshold to exempt businesses.
2. Farmers on ETIMS
Why is it necessary for farmers to use ETIMS
It is necessary for farmers to comply with ETIMS for the following reasons:
to ensure their business expenses are supported by ETIMS compliant invoices which will enable them to deduct those business expenses when arriving at the taxable profit; and
avoid penalties for non-compliance with ETIMS.
How can factories and cooperatives assist in this process?
Provision of civic education to the farmers.
Engaging ETIMS integrators who can provide reverse invoicing arrangements i.e. where cooperatives invoice on behalf of the farmers to ensure ETIMS compliance.
3. ETIMS compliance
Is there a way to opt out of ETIMS?
No. Compliance with ETIMS is mandatory for all taxpayers.
Emoluments (i.e. salaries);
imports;
airlines when issuing passenger tickets;
interest and fees charged by financial institutions;
expenses subject to withholding tax that is a final tax; and
services provided by a non-resident.
When are the TIMS gadgets expected to be phased out?
The Tax Invoice Management System (TIMS) was an upgrade of the Electronic Tax Register (ETR) regime that was rolled out in 2005 for VAT registered taxpayers. It was meant to facilitate electronic tax invoice management through standardization, validation, and transmission of invoices to KRA on a real time or near real time basis using hardware devices.
What is the plan on educating farmers about ETIMS?
KRA have held several sector-based approaches to train various taxpayers including farmers on the ETIMS compliance requirements.
Penalties for non compliance with 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.
