The government gave Value Added Tax (Electronic Tax Invoice) Regulations of 2020 in September 2020. The regulations show how the new electronic tax registers must look like. This is an upgrade of the current Electronic Tax Register (ETR) regime that was started in 2005. All registered VAT taxpayers must use the new tax register to send their tax data to Kenya Revenue Authority in real time. The authority has allowed VAT taxpayers up to 1 August 2022 to start using the approved electronic tax invoicing machines.
Kenya Revenue Authority (KRA) has licensed seven firms to sell new electronic tax registers. The firms will buy the tax registers from four manufacturers. Two of the manufacturers are in Dubai while the remaining two firms are one from Bulgaria and the other from China.
Compulynx Limited. The firm is selling tax registers made by DTR International DWC from Dubai. KRA has approved Compulynx to sell three types of tax registers – type A, B and C.
Pergamon Limited. It holds licence to sell electronic tax registers made by Incotex Trade Europe Limited, which is based in Bulgaria. KRA approved Pergamon to sell types A, B and C.
Onesource Solutions Limited, Wisepower Technologies Limited and Novacom Systems Limited. KRA has allowed the three firms to sell electronic tax registers of Tevin International Limited from Dubai. All three firms will sell types A, B and C. The model of the registers is known as Ace.
Knots Computers Limited and Minitech Technologies Limited. The two firms will buy the electronic registers from Xiamen Fiscat Electrical of China. Knots Computers will sell types A and D. These two types are in three models – Neon, Super and IPalm. Minitech Technologies Limited will sell only type D, IPalm model.
Types of ETR
Kenya Revenue Authority has given out a guide on what each type of electronic tax register must be able to do.
Type A. Its control unit must integrate with electronic tax register. Wisepower Technologies Limited told Water Tower that type A electronic tax register is for traders with manual bookkeeping.
Type B. It must be able to work with a point of sales system. Wisepower Technologies said type B is most suitable for restaurants, supermarkets, and retail shops.
Type C. This type of electronic tax register must have an enterprise resource planning (ERP) software, which manages a firm’s daily activities. ERP software does accounts, procurement, projects, and risks management.
Type D. This electronic tax register must have all the features of types A, B and C. It must work with point-of-sale system and must have an enterprise resource planning software.
Who must use electronic tax register?
A person, individual, company or partnership must register as VAT taxpayer if they supplied or expects to supply taxable goods worth Sh5 million and above in a year. In addition, one can voluntarily register to be a VAT taxpayer before reaching Sh5 million sales.
All VAT registered taxpayers must use the electronic tax register.
A registered VAT taxpayer must account for VAT charged on their taxable supplies through online monthly returns and pay any VAT due.
What if ETR loses Internet?
All registered VAT taxpayers must use the new tax register to send their tax data to Kenya Revenue Authority in real time. This means the electronic tax registers must be able to connect to the Internet to allow transmission of data from the device to the KRA’s system.
If ETR loses Internet the VAT taxpayer must continue using the tax register as usual. The ETR will automatically send generated and stored invoiced to KRA once the Internet is restored.
What happens if the tax register fails to work?
A trader must report the malfunction to a service person. Also, the trader must report to KRA within 24 hours. KRA will guide how a trader will record sales when the tax register is broken down.
Fine, jail for breaking the law
Value Added Tax (Electronic Tax Invoice) Regulations of 2020 gives penalties for taxpayers who break the regulations.
A taxpayer could be given a fine of not more than Sh1 million, or a prison sentence not exceeding three years, or both, if found guilty.
will the new ETR system be able to accept credit notes if goods are returned?
Kenya Revenue Authority gives basic requirements, which an electronic tax register’s control unit must have. One of the requirements is a payment mode. The payment mode must include cash, debit card, credit card, pre-paid card, mobile money, ETF, RTGS and credit note.
The invoice number will be passed in case of a debit or credit note. KRA gives the following categories of invoice: (1) Tax Invoice; (2) Credit Note; (3) Debit Note.
Please read KRA’s Revised Electronic Tax Register Specifications.
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