Non-TIMS compliant businesses have two days to seek extension

By , June 29, 2022

Individuals and businesses are in a last minute rush to comply with the Kenya Revenues Authority’s (KRA) monumental shift to tax digitisation to evade penalties while enabling the taxman to seal revenue leaks through Value Added Tax (VAT) scrutiny. 

As individuals file their returns, businesses are additionally pressed to beat the June 30 deadline for extension application to comply with KRA’s electronic tax invoicing under the new Tax Invoice Management Systems (TIMS).

“We are in the process of consolidating the numbers given that they (businesses) are applying through their tax service offices. So probably by the end of this month, we’ll have the full number because they are supposed to apply by the end of this month for those who want another 6 months extension,” says Hakamba Wangwe, KRA chief domestic tax manager and TIMS project lead.

Failure to apply for extension in the next two days will force businesses to migrate to TIMS by 31st July or risk a Sh1 million fine as the taxman keeps close tabs on VAT turnovers. KRA had in July 2021 offered a legal 12 months compliance extension which demanded all firms with an annual turnover of at least Sh5 million to shift to electronic registers that provide real-time data on traders’ invoices directly to KRA’s digital system, the iTax.  Businesses anticipating compliance hurdles must seek KRA’s additional extension which must be done 30 days prior to the deadline. The strict regulation has thrown firms into anxiety even as the taxman insists that further extension will only be guaranteed if the traders detail what warrants such extra extension.

Sealing loopholes

KRA is sealing loopholes that enables traders to under-quote the amount of taxes payable, commonly done through mis-invoicing of goods sold or produced. VAT is one of the key tax heads the government relies upon to fund its budget.

Domestic VAT, which accounts for 25 percent of the overall revenues collected, recorded a decline of 7.9 percent on the back of low business turnovers in the fiscal year 2020/21.

The VAT decline occurred even as the country’s economy grew 7.5 per cent in 2021.– Herald Aloo

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