Taxman way off target as eTIMS deadline beckons

Over 700,000 businesses are yet to onboard Kenya Revenue Authority’s (KRA) Electronic Tax Invoice Management System (eTIMS) as March 31 deadline looms closer, potentially exposing themselves to heightened tax liabilities.

This is after taxman unequivocally stated that failure to utilise eTIMS-generated tax invoices will render business expenses non-tax-deductible.

These expenses, essential for business operations, are typically subtracted from revenue to ascertain taxable income. Non-compliance with eTIMS regulations could impede these deductions, resulting in inflated taxable incomes and subsequently, increased tax obligations.

Andrew Momanyi, a tax expert overseeing eTIMS implementation at the KRA, disclosed that as of yesterday, only 186,566 taxpayers, a mere 20.39 per cent of the targeted 915,000, had successfully onboarded the system. His remarks were made during a media awareness workshop on eTIMS yesterday.

Despite the alarming figures, the authority expressed optimism, highlighting the straightforward onboarding process that requires a maximum of 90 seconds.

“We currently have 186,566 taxpayers who have successfully onboarded eTIMS… and in relation to our target of 915,000 taxpayers, we remain hopeful that more will meet the deadline, as the onboarding process is ongoing,” stated Momanyi.

He clarified that certain valid business costs such as emoluments, imports, investment allowances, interest, and air passenger ticketing have been exempted from the requirement of being supported by an eTIMS invoice.

Speaking at the same function, Hakamba Wangwe, the head of eTIMS at KRA allayed fears that eTIMS is a form of taxation, but rather a technological tool that provides information on transactions, serving as a new method for best practice in tax validation.

The taxman is grappling with significant challenges as it attempts to onboard more people, particularly farmers, onto the eTIMS. Robert Maina, a tax expert and director at Ernst and Young, highlighted the challenges faced by farmers in adapting to the new tax compliance system. He noted that the reluctance of companies to pay unregistered farmers poses a significant compliance hurdle.

Kenya Medical Association (KMA) has also opposed eTIMS and demanded its immediate suspension, saying the new payment system would compromise patient confidentiality.

Speaking to the Business Hub, Maina pointed out that technological barriers are a major concern, as many farmers lack familiarity with electronic invoicing systems and necessary resources such as KRA pins and smartphones.

He emphasised that these factors significantly hinder the onboarding process. “This lack of resources and technological familiarity is a major obstacle to onboarding,” Maina added.In light of these challenges, he hinted that KRA could consider postponing the deadline, especially considering it is the inaugural year of implementation, the objective to include more taxpayers, and the apparent lack of grassroots support for the system among politicians.

The repercussions of the eTIMS directive are evident across various sectors. Avocado farmers in Central Kenya, for instance, argue that this directive is detrimental to their trade and has prompted exporters to consider relocating to Tanzania, which is seen as a more conducive business environment.

Consequently, there have been appeals for exemptions, leading to the formation of a dedicated committee to evaluate these petitions by Deputy President Rigathi Gachagua.

The eTIMS onboarding initiative began on September 1, 2023, encompassing all business taxpayers, including those not subject to VAT but within the Income Tax category. The original deadline set for March 31, 2023, was deferred to March 31, 2024.