The month for Kenyan taxpayers to file returns is fast approaching. As the day draws near, there are common myths and misconceptions that we would like to demystify to help you file your returns without running into trouble with the Kenya Revenue Authority (KRA).
Paybill Payments and Tax Invoices
Paying taxes via the official GoK Paybill number 222222 is a convenient method that was introduced by the current government. It helps save time and gives the government easy tracking of its funds. However, it’s crucial to understand that such payments do not automatically generate a valid tax invoice. To obtain a compliant tax invoice, businesses must use approved tools like the Electronic Tax Invoice Management System (eTIMS).
eTIMS Onboarding Requirements
Not all businesses are mandated to onboard onto eTIMS. Specifically, only those with an annual turnover of Ksh 5 million and above are required to do so. For businesses below this threshold, while they are exempt from mandatory eTIMS onboarding, their buyers are legally obligated to generate electronic tax invoices on their behalf. The best thing to do? Onboard your business on eTIMS, whether it is within or outside the provided threshold.
Buyer-Initiated Invoicing for Small Traders
For transactions involving small businesses not registered on eTIMS, the responsibility of generating a tax invoice falls on the buyer. KRA has facilitated this through the Buyer Initiated Invoicing Solution, accessible via the eCitizen platform. Buyers can input transaction details, and upon the seller’s consent, provided through USSD code *222# or the eCitizen portal, a valid tax invoice is generated. This is crucial during tax refunds. Do not neglect it.
Personal M-PESA Transactions and Tax Implications
Receiving payments through personal M-PESA numbers does not automatically link individuals to KRA’s tax systems. There is s common misconception that KRA automatically knows whenever a payment is made using Till Numbers or Paybills, and that an invoice can be generated at that stage. This has made some either scared of using Paybills or Till Numbers to receive payments, or fail to file returns, thinking KRA has all the information already. KRA does not access your Paybills or Tills and relies on your honesty during filing and declaration.
Simplified eTIMS Solutions for Small Businesses
Recognizing the challenges faced by small and micro-enterprises, KRA has introduced simplified eTIMS solutions, such as eTIMS Lite. These are accessible via the eCitizen platform or by dialing *222#, catering to businesses with annual turnovers below Ksh 5 million.
No doubt navigating tax compliance in Kenya requires a clear understanding of the tools and obligations set forth by KRA. By leveraging platforms like eTIMS and staying informed about one’s responsibilities, whether as a buyer or seller—businesses can ensure compliance and contribute to the nation’s economic growth.
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