Governance & Policy

Kenyan traders without electronic tax registers (ETRs) could face prosecution from July 31, 2022

July 28, 2022 · 2 min read
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Kenya has run out of Internet-enabled electronic tax registers (ETRs), which transmit real-time data on daily sales to the Kenya Revenue Authority (KRA).

This problem could shut down some traders’ activities from July 31, 2022, the implementation deadline. Also, it could attract a KSh1 million ($21,511) fine or a three-year prison sentence.

According to Business Daily, more than half of the licenced dealers of the new tax registers have sold out and are waiting for new shipments before the July 31 deadline.

The ETR is a cash register with fiscal memory that keeps a record of all transactions for purposes of the trader accounting for Value Added Tax (VAT) charged at the time of making a sale. 

Essentially, it links your business to the taxman, preventing fraud and increasing cash flow.

Without the devices, traders would be forced to halt activities or apply to the Commissioner of Domestic Taxes for a six-month extension of time to comply.

Getting the ETR begins with registration online via iTax. Once registered, the business will account for VAT charged on taxable supplies via monthly online returns and pay any VAT owed. 

These machines can be purchased from a KRA-approved vendor.

In 2005, Kenya launched the ETR to streamline the collection of VAT and minimise instances of tax evasion and it has become automated over the years.

Consequently, the Cabinet Secretary Treasury officially designated The VAT (Electronic Tax Invoice Regulations) 2020 in September 2020, introducing the Electronic Tax Invoice implementation.

And since its launch on August 1, 2021, taxpayers have had a 12-month transition period to ensure that any emerging issues are resolved. Essentially, all VAT-registered taxpayers must comply by July 31, 2022.

To comply, business owners must upgrade their ETRs, as upgraded ETRs can validate invoice data generated during a sale to ensure its accuracy. 

These upgraded ETRs are managed using the Tax Invoice Management System (TIMS). 

ETRs are required by law for all businesses with a minimum annual turnover of Sh5 million ($42,126).

It helps the taxman close revenue leaks and increases State coffers to reduce reliance on public debt.

The taxman had previously attempted to reassure traders that the devices were nationwide available and would not run out before the implementation deadline.

According to Business Daily, the stock-out is making it difficult for them because some traders have already indicated that they will sue to force the taxman to extend the deadline.

Victoria Fakiya

Victoria Fakiya

Author

I am a neurodivergent person who is interested in mental health and how technology can help Africans with mental disorders. Find me on Twitter @latoria_ria.

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