Traders face Sh1 million fine as new ETRs final deadline looms

Manufacturers and traders risk a Sh1 million fine or a jail term of three years from tomorrow if they fail to install upgraded electronic tax registers (ETRs) at their premises.

The new system grants the taxman real-time access to invoices.

Under the new system, the Kenya Revenue Authority (KRA) will receive sales and invoice data from all registered firms and traders daily in a fresh push to boost revenue collections and curb tax evasion.

The move comes as the taxman moves to seal revenue leaks and boost State coffers as part of the efforts to reduce reliance on public debt.

Traders will also be required to seek the taxman's permission to perform any other business the next day under the system, meaning incorrect or incomplete data logged the previous day could lock them out.

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KRA has warned businesses that they must deploy the new Internet-enabled ETRs that track invoicing at every turn of a transaction to assess the tax dues promptly by tomorrow.

Economic difficulties

KRA had twice extended the deadline for compliance, which was initially July 31, sparing non-compliant traders a hefty fine.

This was on the back of supply hitches of gadgets and economic difficulties at the time.

But KRA has now ruled out any more deadline extensions. The ETR retails at between Sh45,000 to Sh120,000, while the billing software is about Sh80,000.

"Kenya Revenue Authority would like to remind the public and all VAT registered taxpayers that they are required to acquire and install the TIMS (Tax Invoice Management System)-compliant Electronic Tax Registers (ETRs) by Wednesday, November 30, 2022," said KRA in a public notice.

"All VAT registered taxpayers are required to fully transition to the new ETRs to generate and electronically transmit their validated tax invoices to KRA in compliance with the VAT (Electronic Tax Invoice) Regulations, 2020."

KRA asked taxpayers experiencing challenges in complying with TIMS requirements to report the same for facilitation.

"If a VAT registered taxpayer does not comply within the specified period, then we invoke section 53 of the VAT Act, which says that you will either be fined Sh1 million or three years' imprisonment or both if you don't comply within the specified timeline," said Chief Manager in charge of TIMS operations Hakamba Wangwe earlier.

Businesses have been digging deeper into their pockets to bear the cost of procuring the new registers. Besides the upgraded ETR software, traders are supposed to procure software for the devices.

Suppliers have been recording booming business amid the scramble by firms to comply.

"We are selling from Sh45,000 to Sh120,000 for the ETRs and about Sh80,000 for the billing software," said Charles Mwaura, the chief executive of Wisepower Technologies Ltd, one of the KRA-approved suppliers.

The new ETR will upgrade the current manual tax registers that store sales data for scrutiny by KRA after 30 days. "The system seeks to enhance compliance. With the existing situation where we have most of the processes being manual, we don't have visibility of vatable transactions," said Ms Wangwe.

The new ETRs will be connected through the Internet to KRA's systems, allowing the taxman to monitor all transactions in the traders' Point of Sale and invoicing systems.