- Supplier Details
- Client Details
- Electronic Invoicing Regulations in Kenya
- What is the TIMS program?
- What is the Control Unit?
- Simplified Tax Invoice
- Electronic Tax Invoicing
- Frequently Asked Questions – Invoicing in Kenya
- How will this change impact the buyers?
Supplier NameYour invoice should have your official business name as part of the letterhead. This can be a registered business name or company name that you use to file your taxes. If you are a consultant, using the names on your government issued ID or passport is acceptable. However, most corporate clients prefer that you use a registered business name.
Supplier AddressYour physical business address should also be on the invoice. Even if you offered services to your client at their premises, this address should be your actual location and not your client’s address.
Tax NumberYour invoice needs to have a tax number that can identify your business when filing taxes. Individual transacting less than $50,000 annually can use their personal Tax number, instead of a VAT number. If you have not registered your business in Kenya, you do not need to provide a VAT number. However, you can provide your country’s Tax number.
Invoice Number and the Word “Invoice”The invoice must have a unique invoice number, and the word “Invoice” should appear at the top or header of the invoice. In case you are sending a credit note, the number of the invoice that will be credited must be indicated. You should only send one credit note per invoice.
Phone Number and EmailYou should provide your phone number and email as well in your invoice. Furthermore, it is best to use the same phone number and email that you provided them to use on the PO they sent you.
Banking InformationThe invoice should also include a bank account number, account name, and bank name. The bank account name provided should match the business name you provided. Other important banking details include the SWIFT code for USD transactions and IBAN for EUR. Most customers prefer to use the same currency as that of the PO.
Description of Good and ServicesA description of the goods and services delivered, which should match what is in the invoice.
DateThe date you shipped or delivered the goods.
Taxable AmountThe invoice should have a tax amount if applicable, and the tax rate used. It should also specify the net amount.
Total Payable AmountYou should indicate the total payable amount separately, as well as the due date.
Client DetailsThe invoice should also have important customer details. You should extract these details from the invoice the client sent you. The client’s details on the invoice should include:
- Client’s legal business name
- Client Tax number
- The purchase order number (PO)
- Contact Details
Electronic Invoicing Regulations in KenyaThe Kenya Revenue Authority (KRA) issued a notice to all business owners and traders to get ready to start using electronic tax registers. In its notice, KRA noted that the new system will minimize errors encountered when filling of returns as well as lower tax compliance, which is a relief to the taxpayer. The notice targets businesses that record an income worth Ksh. 5, 000, 000 (€43,000) and above, to have these control units installed ready for operation. Kenya is in the process of changing the issuing of its invoices in an attempt to be in full control of the whole system. The KRA seeks to consolidate all the invoice data using the control units. They will automatically transmit the invoice information to the Tax Invoice Management System (TIMS) which is the latest system. The Control Units will rely on end-of-day reports and individual transactions to the TIMIS. Once in the Tax Invoice Management System, the data is seamlessly transmitted to the KRA’s iTax system for easy filling.
What is the TIMS program?According to KRA, the pilot phase will run from June 2019 all through to the end of 2020, working with various businesses on volition. The private sector is not left out during this transition period as KRA will incorporate their feedback into the system. To make sure the program is effective by the time its fully operational, KRA seeks to rectify all errors encountered during the trial phase and that is why it incorporates the comments even from the private sector.
What is the Control Unit?KRA demands that all businesses have installed the Control Unit (CU) which is a piece of hardware that they have certified. The CU can be integrated with businesses’ ERP or better still be installed on the businesses’ point-of-sale (PoS) or electronic tax register (ETR). Upon receiving the data in good time, the CU will sign the invoice after ascertaining its validity then dispatch it to the TIMS. The CU also sends the daily report as well as any additional values to the issuer.
Simplified Tax Invoice in KenyaAs a retailer, you are allowed to issue a simplified tax invoice (cash sales receipt). However, you must ensure that the quoted price includes VAT. However, that only applies to retailers whose annual gross sales don’t exceed $50,000 (KSHs 5 Million), and international online retailers who sell their products to Kenyans.
Electronic Tax Invoicing in KenyaThe Tax Invoice Regulations of 2020, stipulate that the supply of goods and services should be monitored. Therefore, every taxpayer is required to maintain an electronic tax register. For the user of the register, every transaction is recorded in the register. As a user of the register, you must ensure that the register is always accessible at the Point of Sale. You must also supply it with a power backup to keep it online, in case of a power interruption. You must also avail of the register for inspection by authorized personnel. Furthermore, you must make sure that the register is serviced on a regular basis and records of the servicing are kept. In case of register unavailability, the commissioner of the Kenya Revenue Authority should be notified within 24 hours.
Frequently Asked Questions – Invoicing in Kenya
What are the requirements of the tax register?
- The taxpayers must ensure the register has the following capabilities:
- The tax register should be compatible with the KRA’s systems.
- It must allow for future updates occasioned by changes in tax laws.
- It should have sufficient storage for the maintenance of records.
- The tax register must display clear messages.
- It should secure the data it holds and maintains its integrity.
Who is exempted from Issuing E-Tax Invoice?International suppliers providing online products are exempted from issuing electronic tax invoices. However, they are required to provide a receipt showing tax deductions.
What if I fail to comply with the tax invoice regulations?If you fail to comply with any of the tax laws, you can be fined up to $10,000 (KShs. 1 Million). You can also receive a prison term of up to 3 years. In some cases, you can receive a fine and a prison term.
What are my obligations in Tax Invoicing?As a taxpayer, you must ensure:
- All invoices contain all the features as defined under section 9 in the VAT regulation of 2017.
- All you simplified tax invoices (cash sale receipts) contain features as outlined in the VAT regulation of 2017
- Comply with the requirements of the tax laws.