ETRs were first introduced in Kenya in 2005. They were meant to streamline the collection of VAT and minimize tax evasion cases. An ETR is a cash register with fiscal memory that keeps records of transactions so that the business owner is able to account for VAT charges at the time of the sale.
KRA Directive
In September 2020, the Electronic Tax Invoice was gazetted by the Cabinet Secretary Treasury. The Electronic Tax Invoice regulations state that all registered Taxpayers will be required to upgrade their ETR so as to comply with the requirements set out in the regulations.
The upgraded ETR’S have the ability to check the accuracy of the data generated from the invoices at the time of making a sale. When the customer is issued the receipt, the electronic version of the tax invoice is transmitted to KRA in real-time, unlike the older versions which stores data for 30 days before being analyzed by KRA.
The management of the upgraded ETR’s done by The Tax Invoice Management System (TIMS). The system is expected to minimize VAT fraud and increase revenue.
What It Means For you As A Trader
According to KRA’s chief manager in charge of Tax Invoice Management System (TIMS) Hakamba Wangwe, Kenyan businesses have till July 31st, 2022 to upgrade to the New ETR machines. If one does not comply they attract a fine of Ksh 1 million or 3 years in jail.
Can You Upgrade Your ETR?
Some of the recent models of the ETRs can be upgraded as long as they meet the technical specifications and functionality required. However, for those that cannot be reconfigured, the VAT trader will be required to replace their current ETR with one that supports the generation of the electronic tax invoice.
Below are some of the Benefits of the Upgraded ETR Machine;
Benefits of the Upgraded ETR Machines
Simplified return filing through the pre-filled VAT return
Automated activation of the ETR
It is a solution to the VAT Auto Assessments (VAA) process
The ability to confirm the validity of a tax invoice through the invoice number checker on the iTax portal or by scanning the QR Code
Faster processing of VAT Refunds by KRA for businesses
Trade facilitation by leveling the playing field in terms of taxation – All businesses ought to pay their fair share of tax.
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