Kenya Revenue Authority’s (KRA) new regulation on Tax Invoice Management System (TIMS) | Update for Kenya Business Owners

Kenya Revenue Authority rolled out an Electronic Tax Invoice regulation 2020 on 1st August 2021. This is in pursuant to the public notice dated 13th July 2021 as an up gradation to the existing Electronic Tax Invoice. Where all Value Added Tax (VAT) registered businesses need to comply with the Tax Invoice Management System within a period of 12 months, i.e before 01st August 2022.

What is Tax Invoice Management System (TIMS)?

The Tax Invoice Management System is a mechanism powering up the Electronic Tax Invoice to curb tax evasion and VAT fraud. The generation of the electronic tax invoice will be achieved using tax registers that will integrate with trader POS/ERP and have the capability to validate invoice data and transmit the same to KRA on a real-time or near real-time basis facilitated by Tax Invoice Management System. This will greatly improve the accuracy of VAT data for transactional sales and purchase information, thus addressing the issue of invoice variations.

What is Electronic Tax Register (ETR)?

An Electronic Tax Register is a cash register with fiscal memory which helps to keep the record of the transactions that happen in the store to file the VAT that is charged for the sale. ETR was introduced in the year 2005 in Kenya to streamline VAT processing and minimize tax evasion.

How to comply with the new TIMS regulation?

Since the introduction of ETR, all businesses have been already using ETR to comply with the tax regulations of KRA. In order to abide by the new Electronic Tax regime 2020, businesses need to upgrade their ETRs. The upgraded ETR should be able to verify the invoice data generated from the POS/ERP. It then transmits the data to KRA instantly or in near time over the internet when a new sale invoice is issued. In order to choose the right ETR which abides by these regulations, KRA has published a list of approved ETR Suppliers and Manufacturers in Kenya.

What are the different types of ETRs?

From the list of Electronic Tax Registers (ETR) approved by KRA TIMS, four different ETRs are available depending on the nature of the business and their needs.

Type A – Suitable for small business entities whose record keeping is manual and those who make sales on the move, e.g. van sales since the ETR is portable. It is an ETR with inbuilt functionality to generate, validate and transmit tax receipts to KRA

Type B – Suitable for retail outlets and shops using multiple points of sale terminals. The data is transmitted to KRA either from a centralized register that connects to several points of sale or from each individual point of sale that has its own fiscal printer

Type C – Suitable for businesses that have automated their operations and are using software billing systems/ERPs. The register connects to a billing software system in order to transmit data to KRA

Type D – Suitable for all types of business entities. The register can be connected to any type of POS

What are the timelines for complying with the new regulation and what happens if the business is unable to comply?

Businesses must comply with the new regulation within 12 months from the date of the announcement. The last date to comply is 01st August 2022. If the business couldn’t able to comply with this regulation it can get an extension for a period of 6 months by applying to the Commissioner general of KRA for the extension of time. The application for extension should be made before 30 days of the expiry of the transition period.

Steps to adapt the new ETR by the registered taxpayer to comply with the new regulation:

  1. Check if your existing POS/ERP software is compliant with the KRA TIMS regulation. Also, see if it has the ability to integrate with the KRA TIMS compliant ETRs. If it’s not compliant, read below and know how to choose the new software which abides by the new regulations
  2. Procure the ETR from the KRA approved ETR suppliers list which abides by the new regulation and integrates with your POS/ERP
  3. Once the ETR is configured with the POS/ERP, the device will be auto-activated through iTax. It enables invoice validation and transmission to KRA. The VAT taxpayer is required to acknowledge the ETR assigned to them by responding to the confirmation email from iTax

How to choose a POS that is compliant with the new Electronic Tax Register (ETR)?

To comply with the new KRA regulation, choosing the right POS/ERP is as important as selecting the right ETR. The KRA has published a set of ETRs that comply with their regulations. But, business owners have to choose the right billing software that complies with the new KRA regulation. Here is how they can choose it easily.

  • A POS that has done such similar integrations with Statutory bodies
  • A POS that integrates with any of the approved ETRs without any complex setup
  • Secured and Reliable POS
  • A POS that can provide a frictionless checkout experience to your customers
  • Choose a POS that has the least downtime and turnaround time
  • A POS that allows you to connect with mobile billing apps while still complying with the KRA regulation

Couldn’t find the best POS/ERP that abides by the KRA TIMS regulation and above conditions? Click here to get a personalized demo for the ERP that suits your business.

KRA TIMS Compliant ERP Solution