The Public Finance Management Act requires the Cabinet Secretary for National Treasury and Planning to submit the Finance Bill to the National Assembly by April 30th each year.
This Bill outlines how the government plans to raise revenue. Along with the Bill, budget estimates and other supporting documents were also submitted.
The Bill suggests various changes to different tax laws, including those affecting income tax, value-added tax (VAT), excise duty, tax procedures, miscellaneous fees and levies among others.
All these changes are expected to take effect from July 1, 2024, soon after the bill is signed into law and published.
Proposals introduced by the Finance Bill, 2024
Here are the key changes proposed in the Finance Bill, 2024, which eTIMS (Electronic Tax Invoice Management System) compliance:
Definition of a Tax Invoice
The Finance Bill, 2024 proposes amendment of Section 2 of the VAT Act to include the definition of a ‘tax invoice’ as ‘an electronic tax invoice issued in accordance with section 23A of the Tax Procedures Act.
The proposal seeks to align with the Tax Procedures (Electronic Tax Invoice) Regulations, 2024, requiring that all persons conducting business in Kenya should issue an electronic tax invoice in accordance with Section 23A of the Tax Procedures Act.
Features of a Tax Invoice
The bill proposes that a tax invoice must include the following main features:
The words “TAX INVOICE”
The name, address, and PIN (Personal Identification Number) of the supplier
The name, address, and PIN (if any) of the buyer/purchaser
The serial number of the tax invoice
The date and time the invoice was issued, and the date and time which the supply was made, if it is different from the date the tax invoice was issued;
The description of the goods or services supplied including the quantity of the goods or the type of services
The details of any discount allowed at the time of supply
The total amount payable for the supply
The tax rate and total amount of tax charged
Any other information as required or prescribed by the regulations
Additionally, the Tax Procedures (Electronic Tax Invoice) Regulations, 2024, published through Legal Notice 64 of 2024 and gazetted on 8 May 2024 also require an electronic tax invoice (eTIMS compliant invoice) to include:
The PIN of the user of the system;
The time and date of issuance of the invoice;
The invoice's serial number;
Where the buyer intends to claim the expenses or input tax;
The buyer’s PIN;
the total gross amount;
the total tax amount, where applicable;
the item code of supplies, as provided by the Commissioner;
a brief description of the goods and services;
the quantity of supply;
the unit of measure;
the applicable tax rate;
the unique system identifier;
the unique invoice identifier;
a quick response code; and
any other information as may be specified by the Commissioner.
Based on the above, it is evident that the Tax Procedures (Electronic Tax Invoice) Regulations, 2024, has additional compliance requirements.
What this means for your business is that you should proceed to ensure that your tax invoices comply with both the provisions in the Finance Bill (amending the Tax Procedures Act) and the Tax Procedures (Electronic Tax Invoice) Regulations, 2024.
Other Key changes;
Increase of the VAT Registration threshold to from KES 5 million to KES 8 million
The Bill proposes to amend Section 34 (1) of the VAT Act to increase the VAT registration threshold from KES 5 million to KES 8 million.
This is a welcome move for taxpayers as this reduces the compliance burden for low turnover taxpayers and is likely to improve VAT administration in Kenya.
Changes of the VAT Status
The Bill proposes changing the VAT rates for various goods and services. Here's a summary:
From Exempt to 16% VAT:
Gluten Bread
Unleavened Bread
The VAT status of the following financial services has been proposed to change from exempt to standard rated supplies:
• Issuing of credit cards and debit cards
• Telegraphic money transfer services
•Foreign exchange transactions, including the supply of foreign drafts and international money orders;
•Cheque handling, processing, clearing and settlement, including special clearance or cancellation of cheques;
• Issuance of securities for money, including bills of exchange, promissory notes, money and postal orders; and
• Assignment of a debt for consideration
The provision of financial services on behalf of another on a commission basis
Betting, gaming and lotteries services
Taxable supplies for the construction of tourism facilities, recreational parks of fifty acres or more, convention and conference facilities upon recommendation by the Cabinet Secretary responsible for matters relating to recreational parks.
Taxable supplies for the direct and exclusive use in the construction and equipping of specialized hospitals
Hiring, leasing and chartering of aircrafts excluding helicopters of tariff numbers 8802.11.00 and 8802.12.00
From 0% to 16% VAT:
Transportation of sugarcane from farms to milling factories.
The supply of locally assembled and manufactured mobile phones
The supply of ordinary bread
The supply of electric bicycles
Hiring, Leasing and chartering of aircrafts excluding helicopters of tariff numbers 8802.11.00 and 8802.12.00
Conclusion
The Finance Bill, 2024 is still open for public discussion until June 8, 2024, and it’s likely that some changes might be made based on the feedback received.
However, it's important to understand these proposals now and prepare for them since most of them will be effective from July 1 st, 2024.
Found this helpful? Here’s how we can assist you!
Compliance with the latest recommendations of the Finance Bill 2024 is highly recommended 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 business 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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