Kenya is introducing an electronic tax system to monitor VAT payments. Kenyan media cautions taxpayers that the system will make it much harder to get away with VAT evasion.
Electronic monitoring of invoices
Kenya’s new Tax Invoice Management System (TIMS) is a real-time reporting system. Notably, the system processes invoices in real time.
Kenya’s The Standard reports that noncompliance could lead to fines of up to Sh1 million, up to three years imprisonment, or both.
Electronic tax registers and VAT
In order to comply with real-time reporting and e-invoicing, businesses need the appropriate VAT compliance technology in place. However, Kenya’s TIMS reporting involved an additional requirement. Businesses in Kenya must use an approved Electronic Tax Register (ETR) to record sales. According to the Kenya Revenue Authority, fully automated businesses need to use an approved Electronic Signature Devices (ESD).
Note that businesses that fail to adopt the mandated technology will not be compliant with the VAT reporting rules.
Modernising VAT in Kenya
Kenya’s tax authorities have introduced various measures to align VAT regulations to the modern economy.
The new rules have various implications for companies providing online services. For instance, Facebook recently began charging VAT on certain adverts displayed in the country.
As Facebook explained, the move was a response to Kenya’s updated VAT rules: “Due to implementation of a value-added tax (VAT) in Kenya, Facebook is required to charge VAT on the sale of ads to advertisers that are not advertising for business purposes in Kenya.”
Kenya also recently implemented a Digital Services Tax, covering a wide range of online services.
Managing VAT in a digital world
VAT compliance is about more than tax codes and regulations. In the modern economy, businesses often require specialised technology to meet their VAT obligations. Global VAT is complex. But Vatglobal’s proprietary VAT compliance technology makes it easy. It’s the simplest way to ensure you’re always 100% VAT compliant.