Tax Compliance for Micro-enterprises in Kenya and Leveraging eTIMS with DigiTax
In Kenya’s vibrant and dynamic business landscape, micro and small enterprises (MSMEs) are a cornerstone of economic growth and innovation. Recognizing their critical role, the government has introduced initiatives aimed at ensuring their compliance with tax regulations. The National Tax Policy's focus on hard-to-tax sectors and the rollout of the Electronic Tax Invoice Management System (eTIMS) are part of these efforts to bring MSMEs into the formal economy.
For micro enterprises earning up to KSh 650,000 annually, compliance with tax requirements, including the use of Personal Identification Numbers (PINs) and adherence to eTIMS regulations, offers significant benefits. Here’s a comprehensive guide to understanding these systems and how DigiTax can simplify compliance for your business.
What is a PIN, and Why is it Important?
A Personal Identification Number (PIN) is a unique identifier issued by the Kenya Revenue Authority (KRA). For micro enterprises, particularly those operated by sole proprietors or partnerships, the PIN serves as the foundation for meeting tax obligations.
Benefits of Having a PIN for Micro Enterprises
Simplified Tax Filing: A PIN allows businesses to file taxes, ensuring accurate income and expense reporting while reducing the administrative burden.
Access to Financial Services: Financial institutions often require a PIN for loan applications or other financial services, enabling businesses to access funding for growth and expansion.
Compliance with eTIMS: With eTIMS now a requirement, businesses must issue compliant invoices using their PIN. This ensures seamless reporting and transparency with KRA and allows clamining of business expenses when filing returns.
How to File Taxes as a Micro Enterprise in Kenya
1. Register for a PIN
Visit the iTax portal and follow the steps to create an account and obtain your PIN.
2. Maintain Accurate Financial Records
Keep detailed records of sales, expenses, and other transactions to ensure accurate reporting during tax filing.
3. Determine Applicable Taxes
Micro enterprises are subject to various taxes, including:
Income Tax: A tax on business profits, requiring annual returns.
Turnover Tax (TOT): At 1% of gross turnover, for businesses with revenue between KSh 1M and KSh 25M annually.
4. File Returns
select the appropriate return type. Fill in details such as income, expenses, and deductions, ensuring accuracy.
5. Pay Taxes
After submitting your return, you will receive a payment slip with the amount of tax due. You can pay your taxes through various methods, including bank transfers, mobile money (e.g., M-Pesa), and at KRA-authorized banks.
Ensure that you make the payment before the due date to avoid penalties and interest.
6. Keep Records of Submissions and Payments
Retain copies of your returns and receipts to ensure compliance and for audit purposes.
Leveraging eTIMS for Tax Compliance
The introduction of eTIMS by KRA is a game-changer for tax compliance. Designed to streamline invoicing, eTIMS enables businesses to issue electronic invoices that are automatically transmitted to KRA.
How eTIMS Impacts Micro Enterprises
Issuing Compliant Invoices: Micro enterprises must issue invoices that meet eTIMS standards to avoid penalties.
Maintaining eTIMS-Compliant Records: Accurate documentation of both sales and expenses is crucial for compliance.
Easy claim of business expenses.
How DigiTax Supports Micro Enterprises on eTIMS compliance
Our solutions are designed to simplify the process, making it easier for small businesses to navigate requirements such as eTIMS compliance.
DigiTax's Value Proposition
Quick Launch Time Get started fast! DigiTax helps you achieve compliance within 2 weeks to 1 month, minimizing disruption to your operations.
Testing Made Simple Use our sandbox environment to test integrations and ensure everything runs smoothly before going live.
Comprehensive Handholding Support From onboarding to go-live, our team is with you every step of the way, ensuring a seamless experience.
Real-Time Notifications Stay updated with real-time status notifications for every transaction, so you always know where you stand.
Full Visibility Our user-friendly dashboard provides a complete view of your transactions and compliance status at a glance. Access it on your phone, computer or laptop.
Flexible Integration Options We support multiple integration languages and provide interactive API documentation, making it easier to connect your systems.
Tailored Solutions for Every Business Whether you're a micro, small, medium, or large enterprise, DigiTax has solutions tailored to your specific needs.
Special Offer To Help You Get Started!
For micro-enterprises with an annual turnover of up to KSH 650,000, DigiTax is offering free eTIMS onboarding until December 31, 2024.
Afterward, enjoy a minimal compliance fee of only KSH 130 per month starting January 1, 2025.
Stay compliant, avoid penalties, and optimize eTIMS compliance with DigiTax!