After Kenya gained independence in 1963, the new government encouraged the formation of cooperatives to assist in economic development. This sector was critical in the economy particularly in the coffee, tea, dairy, and savings and credit sectors.
Today, Kenya boasts one of the most developed cooperative sectors in Africa, with over 22,000 registered cooperatives, a membership exceeding 14 million people and contributing to over 30% of the national Gross Domestic Product (GDP).
What is eTIMS?
The Finance Act, 2023, introduced amendments to the Tax Procedures Act, which introduced the Electronic Tax Invoicing Management System (eTIMS). eTIMS requirement for taxpayers is twofold i.e.:
taxpayers are required to generated eTIMS compliant invoices; and
all taxpayers business expenses are required to be supported by eTIMS compliant invoices.
The requirement to comply with the above is mandatory for all taxpayers except for exemptions provided for below.
eTIMS compliance for cooperatives
According to the Tax Procedures (Electronic Tax Invoice) Regulations, 2024, (the ‘Regulations) fees charged by financial institutions including cooperatives are exempt from the eTIMS requirement. Therefore, fees charged by cooperatives for their licensed activities qualify for exemption.
In terms of expenses, cooperatives need to ensure that their expenses are eTIMS compliant except those exempted by the Regulations i.e. emoluments; imports; investment allowances; airline passenger ticketing; interest; fees charged by other financial institutions; expenses subject to withholding tax that is a final tax; and services provided by a non-resident.
eTIMS compliance for farmers
Farmers are also required to comply with eTIMS i.e. in the generation of invoices and supporting of their business expenses with eTIMS compliant invoices.
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 5 million. These amendments were included in the Finance Bill, 2024, passed by the National Assembly. However, the Finance Bill, 2024, 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, including farmers.
Therefore, 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.
Found this helpful? Here’s how we can assist you!
Compliance with the latest 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
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