Small business owners and farmers with an annual turnover of less than Sh. 5 million are set to be exempted from complying with the Kenya Revenue Authority’s eTIMS invoicing system.
This is after the National Assembly’s Finance Committee made a recommendation that all businesses with annual sales of Sh. 5 million and below be exempted from complying with the stipulations of eTIMS. The recommendation will however need to be approved by parliament before taking effect.
Earlier this year, the KRA rescinded its decision to exempt this category of businesses. The eTIMS system however has been widely rejected by the small businesses category, with more than half of all registered businesses refusing to transact on the platform as at May 2024.
As at June 2024, 120,000 registered taxpayers with business income had signed up to the system. This was equivalent to 18.1 per cent of the nearly 663,000 businesses in the KRA’s records.
Starting January 1, 2024, all businesses had been required to produce an electronic tax invoice for all the transactions they conducted. Businesses that failed to do this wouldn’t have been able to claim the expense when filing for Income Tax, the KRA had stated.
KRA demands billions in taxes from Narendra Raval years after exemption
This decision was however lifted with the KRA saying that the eTims regulations would not apply to small businesses with an annual turnover of less than Sh. 5 million.
This exemption came as the KRA gazetted the final Tax Procedures (Electronic Tax Invoice) Regulations 2023. These were the regulations that were set to guide the implementation of Finance Act 2023’s amendment to Section 23A and Section 86 of the Tax Procedures Act on mandatory eTIMS onboarding.
Two months later, in March 2024, the KRA made a U-turn and announced that compliance with eTIMS would be mandatory for all businesses regardless of annual turnover. “KRA would like to remind the public that all persons [running] businesses, including those in the informal sector and small businesses, are required to electronically generate and transmit their invoices to KRA via the eTIMS system,” KRA had announced.
