Getting it Right with the Tax Invoice Management System (TIMS)

BLOG 16/01/2022

KRA has made remarkable strides in advancing the tax processes that have led to effectiveness and efficiency in tax administration. For instance, the introduction of the Tax Invoice Management System (TIMS), which is an upgrade of the ETR regime is a game changer in VAT administration.

TIMS is the engine powering the electronic tax invoice. The generation of the electronic tax invoice will be achieved using tax registers that will integrate with trader systems and have the capability to validate invoice data and transmit the same to KRA on a real time or near real time basis. This will greatly improve the accuracy of VAT data for transactional sales and purchases information, thus addressing the issue of invoice variations.

The transmission of invoice data will require internet connection. However, in the event of internet disruption, the trader will continue with their operations, since the validation of the invoice data does not require internet connection. Once the connectivity is restored, the invoices generated will be automatically transmitted to KRA.

A key feature of the electronic tax invoice is the QR Code, which will allow one to confirm the validity of a tax invoice. The details populated on scanning the QR code will include the name of seller (VAT Taxpayer), invoice date, total invoice Amount, total taxable Amount and total VAT amount if applicable. This will go a long way in minimizing VAT fraud since anyone can verify the invoice/receipt issued by the trader.

The compliant tax registers will be activated automatically, thus there will be no need for VAT taxpayers to bring their tax registers to the KRA office for activation. In case of changes in the VAT rate, the tax registers will be updated automatically (over the air update) with the correct tax rate.

KRA is firming up the necessary measures to ensure that taxpayers are fully supported by the ETR Suppliers during this period of transition. The approved list of ETR Suppliers, has been published on the KRA website and can be accessed through this link https://kra.go.ke/images/publications/List-of-Approved-ETR-Suppliers-as-at-14th-December-2021.pdf .

The electronic tax invoice was rolled out on 1st August 2021 pursuant to the Public Notice dated 13th July 2021 on “Extension of Time to Comply with the Value Added Tax (Electronic Tax Invoice) Regulations, 2020”.  All VAT registered taxpayers are required to comply within a period of twelve months. Where a person is unable to comply, they can apply to the Commissioner in writing for an extension of time, which shall not exceed a period of six months.

The outcome of the successful implementation of TIMS will be an increase in VAT compliance, reduction in VAT fraud and overall increase in tax revenue.

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