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name, address, VAT registration number, PIN of the user of the register;

logo and identification number of the ETR;

serial number of the receipt; date of the invoice;

brief description of the goods/ services supplied;

total charge to recipient (VAT inclusive); and

statement that the price includes VAT.

The ETR requirement is aimed at ensuring that sales are recorded properly. Registered taxpayers must implement, install and use the ETR to issue invoices at each sales point. For taxpayers with computerised accounting systems for sales, an electronic signature device is required to be installed in their systems.

Credit notes and debit notes

Where a registered person amends the value of goods or services sold for a valid reason, e.g. a reduction in the price charged as a result of a price negotiation, or increasing the price charged to correct an undercharge, credit or debit notes must be issued.

A credit note should be: serially numbered;

contain the name, address, registration number and PIN of the customer;

contain details of the original tax invoice on which the supply was made and the VAT that was originally charged; and

not be issued more than 12 months after the relevant tax invoice was issued.

is required to be serially numbered and either generated through an electronic tax register (ETR) or have an attached receipt generated from an ETR containing details of all the transactions.

A tax invoice can be issued in a currency other than KShs but must be converted to KShs for purposes of recording and accounting in the VAT returns and records. Electronic invoicing is not yet permitted in Kenya for VAT purposes.

A proper tax invoice must include:

  • name, address, VAT registration number and personal identification number (PIN) of the person making the supply;

  • serial number of the tax invoice;

  • date of the tax invoice;

  • date of the supply;

  • name, address, VAT registration number and PIN (if known) of the recipient;

  • description, quantity and price of the supply;

  • taxable value of the supply (if different from the price charged);

  • rate and amount of tax in respect of each of the goods or services supplied;

  • details of cash or credit sale;

  • details of any discount offered;

  • total value of the supply and the total VAT charged; and

  • the logo and identification number of the ETR.

Simplified tax invoices are permitted where cash sales are made from retail premises or where cash sales to the same person in any one day do not exceed KShs500. A simplified tax invoice must have the following information:

When a VAT-registered person issues a credit note that effectively reduces the amount of VAT charged in his original invoice, he may claim a credit (via his VAT account or return) in respect of the VAT amount relating to the reduction in the value of the supply in the period in which he raises the credit note.

The debit note has the effect of increasing the taxable value indicated in the original invoice and therefore acts as an additional tax invoice for VAT purposes. It must contain the following details:

  • the same details as required for a standard VAT invoice; and

  • details of the tax invoice issued at the time of the original supply.

Record keeping

A registered person is required to keep records of all supplies, including zero- rated supplies, standard rated and exempt supplies. These details should be recorded in the VAT return.

Records must, for VAT purposes, be kept for five years. The records may be kept solely in electronic form, but businesses must assist VAT inspectors in accessing such records. Businesses may keep records outside the country, but the records must be made available for inspection in Kenya as and when required by the KRA.

A taxpayer must maintain a separate memorandum VAT account, which will be included in the audit of the accounts. The entries required to be included in the VAT account for each period are:

  • total of VAT charged on sales in the period;

  • total VAT incurred on purchases in each period; and

  • net total of VAT payable or recoverable at the end of the period.

PricewaterhouseCoopers 73

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