Kenyan Revenue Authority Retains July 31 Deadline for ETR Migration

The new transfer is expected to be done by taxpayers on or before July 31st 2022.

The Kenyan Revenue Authority, KRA has admonished manufacturers and traders to migrate from the old Electronic Tax Registers (ETRs) to the upgraded ones as it announces that it will not be shifting the July 31 deadline.

To avoid the closure of business, a Sh1 million fine, or a jail term of three years, traders have been instructed to leave the old ETRs and join the new and upgraded ones.

The 2020 VAT (Electronic Tax Invoice) regulations demand that all businesses with an annual turnover of at least Sh5 million have ETRs.

To improve VAT compliance, prevent tax fraud of any kind, and possibly increase VAT collection to about 35%, the new system will have the KRA receiving sales and invoice data from all registered firms and traders daily on its digital system, iTax.

Last year, the amount of VAT generated was Sh121.044billion against a target of Sh119.543billion.

The tax body stated that for traders who are still trying to get upgraded ETR, evidence of order and payment to the approved ETR Supplier will be accepted as proof of compliance. The supplier will help out by issuing them a letter that contains these details.

The KRA further noted that taxpayers who have already gotten the upgraded ETR devices must conclude the process of activation and integration by August 31, 2022.

At the moment, there have been some complaints over a shortage of the new devices as the tax body only has 16 suppliers.

Kenyan Revenue Authority: The Cost Implications Of Migration

Although transitioning to the new ETRs is a welcomed idea, the KRA isn’t considering the impact of the hefty cost involved in the migration to the new devices on Small and Medium Enterprises (SMEs) ability to comply, as the price of these devices is on the high side.

The KRA should consider the fact that most businesses haven’t bounced back from the effects of Covid – 19, which means this would only add more to their burden.

Since the purchase of the ETR machines cannot be considered as acquiring an asset, this will inevitably lead to a hike in the price of goods, as SMEs will eventually pass compliance cost to customers.

It will also increase the cost of doing business in an already unstable business environment.

According to a study by the International Centre for Tax and Development (ICTD), most tax authorities tend to ignore the additional burden that new laws and regulations would place on businesses.

While introducing the Value Added Tax (Electronic Tax Invoice) Regulations 2020, the KRA failed to reveal that the transition to new ETR devices would cost a whole lot.

The device costs between 500 to Sh160,000, depending on whether it is a Type A, B, C, or D machine.

This initiative mostly benefits the “shortlisted” suppliers of these machines to the detriment of the taxpayers as these devices are being sold at an inflated price.

The KRA should perhaps shed some light on how these devices are being sold at such high prices.

The tax body should have fixed a price for these machines to prevent suppliers from exploiting taxpayers like they are currently doing.

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