The Kenya Revenue Authority (KRA) introduced the Electronic Tax Register (ETR) in 2005 as part of its efforts to enhance Value Added Tax (VAT) compliance. The ETR was introduced in Kenya through the Value Added Tax (Electronic Tax Registers) Regulations, 2004 (now repealed). These Regulations mandated VAT-registered businesses to use ETRs to record sales transactions and issue receipts.
Later, there came about the introduction of the Tax Invoice Management System (TIMS) under the Value Added Tax (Electronic Tax Invoice) Regulations, 2020 (now repealed) as an upgrade to the ETR system. The TIMS Regulations required VAT-registered businesses to upgrade to internet-enabled ETRs capable of transmitting sales data to the Kenya Revenue Authority in real-time. ETRs were also subject to manipulation, system issues and court battles, and this resulted to the need of a more advanced system designed to enhance the accuracy and reliability of VAT data.
Challenges faced by TIMS users
High Costs - TIMS devices tend to be expensive, with prices starting at KSh 50,000. Businesses have also had to to incur annual subscription fees and additional maintenance costs.
Device Malfunctions- Frequent malfunctions of these devices have also led to issues such as inaccurate data transmission to the Kenya Revenue Authority, causing frustration and financial losses for businesses.
Introduction of eTIMS
The Electronic Tax Invoice Management System (eTIMS) is an advanced system introduced by the Value Added Tax (Electronic Tax Invoice) Regulations, 2020 (eTIMS Regulations) to enhance the accuracy and reliability of VAT data. Designed to automate the process of recording and reporting sales transactions, eTIMS was aimed at improving VAT compliance and reducing fraud.
The system was implemented in phases, starting with large taxpayers and gradually extending to smaller businesses, requiring them to upgrade their Electronic Tax Registers (ETRs) to eTIMS-compliant models capable of transmitting sales data in real-time. The eTIMS Regulations also outlined penalties for non-compliance, including fines. Subsequently, the issuance of eTIMS compliant invoices became mandatory for both VAT and non-VAT registered businesses.
Auto-populated returns
On 3 December 2024, KRA published a notice notifying all VAT registered taxpayers that the VAT return will be pre-filled with tax information available to KRA starting from the November 2024 tax period. This was meant to simplify the VAT return filing process.
All VAT registered Taxpayers were therefore advised to confirm the accuracy of their pre-filled returns from November 2024.
The implication of this requirement is that any input VAT claim that is not validated through TIMS/eTIMS or against existing customs import declarations for import VAT claims will not be allowed for deduction in the returns.
Benefit of using eTIMS
Because of the recent developments through the introduction of auto-populated returns, taxpayers need to ensure accuracy of the sale and purchase transactions. This will have an impact on their ability to record the correct VAT sales, claim input and at the end of the year also impact their corporate income tax filings.
Therefore, it is important for taxpayers to have fault proof data transmission devices especially arising from TIMS devices. Taxpayers are encouraged to adopt eTIMS which is more accurate in capturing sales and purchases data and avoid discrepancies which might not be solved easily resolved since the VAT returns are auto-populated.
Embracing eTIMS with DigiTax
For businesses grappling with the complexities of auto-populated VAT returns, adopting eTIMS is essential for seamless compliance. This is where DigiTax steps in as an industry leader in eTIMS solutions, to make the transition effortless ensuring your business is well-equipped to navigate this new tax environment.
How DigiTax Solves the Auto-Population Challenge
DigiTax offers a cutting-edge digital solution that eliminates the need for physical devices, ensuring a seamless and cost-effective transition to eTIMS compliance. Here’s how DigiTax stands out in addressing the auto-population challenge:
No Hardware Costs- Unlike traditional TIMS devices, DigiTax’s solution is entirely digital. Businesses no longer need to invest in costly hardware, annual subscriptions, or maintenance fees. This significantly reduces the upfront and ongoing costs associated with tax compliance. DigiTax operates entirely on the cloud, which means there is no need for expensive physical devices. Businesses can bypass the headaches of device malfunctions and inaccurate data transmissions associated with TIMS devices.
Accurate Real-Time Data Transmission- DigiTax ensures real-time, error-free transmission of sales data to KRA, significantly reducing discrepancies in auto-populated VAT returns. This enhances accuracy, enabling businesses to avoid costly penalties and non-compliance issues.
Works on Any Browser- With DigiTax, all you need is a reliable internet connection and a browser. Whether on Google Chrome, Safari, or any other browser, the system is accessible anytime, anywhere.
Simple Sign-Up Process- Getting started with DigiTax is easy and hassle-free. A quick and simple sign-up is all it takes to begin using the platform with automated processes throughout. No lengthy installations or complicated processes are required.
Multi-Device Compatibility- DigiTax works effortlessly on a phone, tablet, computer, or laptop. Businesses can choose the device that best fits their operations, offering flexibility and convenience.
User-Friendly Interface- Designed with simplicity in mind, DigiTax’s interface is intuitive and straightforward. Even users with minimal technical expertise can navigate the platform with ease, saving time and effort.
Reliable Support and Training- For businesses transitioning to eTIMS, DigiTax offers dedicated training and customer support to ensure a smooth onboarding process. From sign-up to full onboarding, DigiTax is there every step of the way.
Scalable for All Businesses- Whether you’re a small business or a large corporation, DigiTax’s solution is scalable to meet your specific needs. It integrates seamlessly with your existing systems, ensuring uninterrupted operations.
Why Businesses Trust DigiTax
Streamlined Processes: DigiTax simplifies tax compliance by automating workflows, reducing manual effort, and saving valuable time.
Peace of Mind: With DigiTax, businesses can rely on robust, compliant solutions designed to meet the tax compliance evolving requirements.
Proven Expertise: DigiTax is a trusted name in eTIMS solutions. Businesses rely on DigiTax for accurate guidance and seamless eTIMS compliance.
Customizable Solutions: Every business is unique, and DigiTax recognizes this. Its solutions are tailored to fit the specific needs of businesses across various industries, whether you're a small retailer or a large corporation using ERP systems.
Conclusion
The developments above signal a significant shift in Kenya's tax compliance landscape. To stay ahead, businesses need accurate, efficient, and compliant digital solutions systems like eTIMS. DigiTax stands as the trusted partner to ensure your business not only transitions smoothly but thrives in this new tax era.
Ready to simplify your eTIMS transition and safeguard your tax compliance? Contact info@namiri.tech or visit digitax.tech to get started.
