Manufacturers risk VAT claims freeze in shift to tax invoicing

Manufacturers of zero-rated supplies risk seeing their request for input VAT reimbursements frozen should they fail to transition to the modern Tax Invoice Management System (TIMS).

The Kenya Revenue Authority (KRA) requires all VAT-registered taxpayers to have new Electronic Tax Registers by the end of this month.

“For any taxable purchases made on or after August 1, only validated electronically transmitted invoices will be admissible for claim of input tax. All VAT refund applications that will be made with respect to tax period commencing after August 1 must be supported by TIMS-compliant invoices,” KRA said in a public notice.

TIMS is an upgrade of the current Electronic Tax Register (ETR) regime that came to effect in 2005 and seeks to facilitate electronic tax invoice management through standardization, validation, and transmission of invoices to KRA on a real-time or near real-time basis.

The switch to TIMS was delayed by over a year to allow more time for compliance by VAT-registered taxpayers.

The VAT invoicing migration is anchored on the VAT (Electronic Tax Invoices) Regulations, 2020.

Failure to comply with the regulations shall attract a fine not exceeding Ksh.1 million, or to imprisonment for a term not exceeding three years, or both.