For Business Owners: How to Avoid Losing Money Because of the 2024 KRA Directive
Things are getting tougher for businesses. Following a directive released by the Kenya Revenue Authority (KRA) at the end of the year 2023, all businesses should generate their invoices through an invoicing system provided by KRA. This will help the government track all payments and expand the tax base.
Understanding and adjusting to this directive can be difficult for the average owner of a small or medium business. What does it even mean?
We’ll explain it with an example. Let’s assume you own a hotel, and you have an agreement with a nearby branch of Equity Bank to provide their staff with tea and mandazi at 10:00 AM every working day.
Before the recent KRA directive, when you needed to be paid, you would send Equity Bank an invoice and they would pay. It didn’t matter whether you generated the invoice using an online invoice-generation website or via Microsoft Word. As long as you and the bank had come to an agreement, they would pay.
The Significance of the Recent e-TIMS Directive by KRA
After the KRA directive, Equity Bank can’t pay you unless you have an invoice generated via the Electronic Tax Invoice Management (eTIMS) software. If Equity Bank pays you without the KRA invoice, that expense will not be recognized by KRA, and the bank won’t be able to deduct it when filing their tax returns.
Since Equity Bank won’t risk tax problems, they will stop using your services and start getting their tea and mandazi from a hotel that issues eTIMS-generated invoices. Unless you comply, you will lose a lot of business.
This applies to every business, which is why you need to comply with the new directive.
How to Comply With the Recent Invoicing Directive by KRA
To comply, you need to be onboarded onto the e-TIMS platform. The onboarding process can be done with the help of an accountant. Once it’s complete, you’ll download a software onto either your laptop or smartphone, and you’ll be using it every time you generate an invoice.
While filing your company’s or business tax returns, you won’t be able to deduct any expenses unless they are backed by e-TIMS invoices. This is important because a business’ expenses affect the tax that the business pays.
So, if you can’t prove some expenses, KRA will assume you got more profit than you did, and you will have to pay a higher tax than you are supposed to.
As with so many other government regulations, this can sound hectic. But with the right help, your business can comply and even take advantage of this situation to win business from others that are not as quick to comply.
At GVL Digital Solutions, we take care of non-core business processes like digital marketing and filing tax returns to allow you to focus on the core activities of your business. We have sector experts who work together for the success of your business.
If you need help, contact us today via +254 703 154 483.
