FAQs

What is the legal basis for introduction of the electronic tax invoice?

The VAT Act of 2013 and the VAT (Electronic Tax Invoice) Regulations, 2020 provide the legal basis.

What if a person is unable to comply within the 12-month period, can they apply for an extension of time?

Yes. Where a person is unable to comply within the timelines provided, they will be required to apply to the Commissioner for extension of time, which shall not exceed six months, as provided in the Regulations.

The application for extension shall be made in writing thirty (30) days before the expiry of the transition period.

What is the criteria for on-boarding?

A taxpayer must:

  • Be VAT Registered as per the provisions of the VAT Act 2013
  • Have an invoicing system with the capability to transmit invoices to KRA systems
  • Have internet connectivity

What are the key features the public should look for in a tax invoice?

The following are the key features in a valid invoice:

  1. PIN and Name of trader;
  2. Time and Date of the Invoice;
  3. Invoice Serial Number;
  4. Buyer PIN (Optional)
  5. Total Gross Amount;
  6. Total Tax Amount;
  7. Tax Rate;
  8. Total Net Amount;
  9. Unique Register Identifier;
  10. Digital Signature (QR Code);

Taking into consideration the transition period, the new features e.g. the QR Code, will only be visible once a VAT registered trader his using the Tax Invoice Management System.

NB: The QR Code will only give a result where the invoice has been transmitted to KRA.

What happens when the VAT rate changes?

ETR Suppliers will support the traders to automatically update the tax register to reflect the change.

What happens in case of loss of internet connection?

The VAT taxpayer should continue using the tax register as usual. Once the internet connectivity is restored, the invoices generated and stored in the tax register’s memory will be automatically transmitted to KRA.

What happens in the event of a malfunction of the tax register?

A trader will be required to report the malfunction of the register to a service person, and report to the Commissioner in writing within 24 hours.

 In the period that the ETR is not working the trader will record sales using any other means as specified by the Commissioner.

I run a small retail business with turnover of less than KES 1,000,000/-. Am I required to comply with the electronic tax invoice requirements despite not meeting the VAT obligation threshold?

Only VAT registered taxpayers are required by law to use a tax register as per the VAT Act (2013) and the VAT (ETI) Regulations (2020)

 

My billing system is fully automated – must I still get an ETR to issue tax invoices?

Yes, the requirement to adopt a compliant ETR applies to all VAT registered taxpayers regardless of the billing system in use.

What happens to those who had made their VTDP applications manually?

Taxpayers who had made manual applications are requested to lodge an application via the iTax platform and attach a copy of the manual application together with evidence of payments already made as supporting documents. Once the Tax Service Office has reconciled the payments and confirmed that full payment of the taxes disclosed have been made, the taxpayer shall be issued with a certificate.

Where can I find the list of Approved ETR Manufacturers and Suppliers?

Can a taxpayer issue Credit notes and debit notes?

Taxpayers will be able to issue credit notes and debit notes as provided for in Section 9 (2) the VAT (Electronic Tax Invoice) Regulations 2020. In order to generate a credit or debit note, the taxpayer will need to reference the original invoice number on which the supply was made.

Are taxpayers still required to withhold VAT?

Withholding VAT will still be operational as per Section 25A of the VAT Act 2013.  Traders will continue to issue invoices as usual and utilize their Withholding VAT credits in their respective VAT returns every month.

How do I correct errors in data capture?

Data entry errors made when generating an invoice may be corrected through issuance of credit notes or debit notes  which must reference the original invoice number.

 

What happens to my previous ETR in case I have to replace it?

Where a taxpayer replaces the existing tax register, they are required to safeguard the previously used tax register in line with requirement to keep records for five years as stipulated in Section 23 of the Tax Procedures Act, 2015 (TPA).

What additional features do the compliant ETRs have?

  1. Validation of invoice data at the point of issuing an invoice
  2. Generation of a unique QR code
  3. Generation of a unique invoice number for every invoice/receipt; control unit invoice number
  4. Transmission of the electronic tax invoice to KRA on a real-time or near real time basis
  5. Capture of buyer PIN (optional); only for those who intend to claim input VAT
  6. Generation of credit and debit notes to correct or amend an invoice

What are some of the key features of a valid tax invoice/receipt?

  • PIN and Name of trader;
  • Time and Date of the Invoice;
  • Description of goods/services
  • Unit cost;
  • Quantity of supply
  • Total Gross Amount;
  • Total Tax Amount;
  • Tax Rate;
  • Unique invoice number;
  • Unique ETR identifier/serial number;
  • Digital Signature (QR Code);

What happens in case of internet downtime? Can I continue to use the ETR?

Yes. The VAT taxpayer should continue using the tax register as usual. The process of invoice validation and generation of the QR code by the ETR does not require internet connection.

Once the internet connectivity is restored, the invoices generated and stored in the tax register’s memory will be automatically transmitted to KRA.

Can I correct or amend an invoice that has already been transmitted to KRA?

Yes. The ETRs have the ability to generate credit or debit notes for purposes of amending or correcting invoices. The credit/debit note will also be transmitted to KRA and must make reference to the original invoice number.

What is Withholding Income Tax and what type of transactions does it apply to?

Withholding Income Tax is tax withheld at source. A person making certain payments deducts tax, at the applicable rate, and remits the tax to the Commissioner on behalf of the recipient. Examples of payments subject to withholding tax include, among others: -

  • Management, professional or training fees
  • Consultancy fees, Legal fees, Audit fees
  • Contractual fees
  • Winnings
  • Appearance at or performance to entertain
  • Royalties
  • Interest and deemed interest
  • Dividends