What is an ETR Machine?

An ETR (Electronic Tax Register) is a cash register with fiscal memory that keeps a record of all transactions for purposes of the trader accounting for VAT charged at the time of making a sale. Other fiscalized electronic devices that have been used by traders over the years include Electronic Fiscal Printers (EFPs) and Electronic Signature Devices (ESDs).

Over the years, Kenya Revenue Authority (KRA) has embraced automation with the aim of improving service delivery. As a result, in September 2020, the Cabinet Secretary Treasury gazetted The VAT (Electronic Tax Invoice Regulations), 2020 that introduced the implementation of the Electronic Tax Invoice.

What is this Electronic Tax Invoice? Is it different from the current ETR?

Essentially, and as per the VAT Electronic Tax Invoice Regulations 2020, you and other VAT registered taxpayers will be required to upgrade your ETR in order to comply with the requirements set out in the Regulations. The upgraded ETRs have the ability to check the accuracy of the invoice data generated at the time of making a sale through a validation process.  As the customer is issued with their copy of the invoice, the electronic version of the tax invoice is transmitted to KRA over the internet on a real time or near real time basis. 

KRA has published on the website the list of approved ETR Suppliers and Manufacturers who will facilitate you to comply.

Through this implementation of the electronic tax invoice, VAT will be accounted for at the point of issuing the invoice, since the data will be transmitted to KRA.

The management of these upgraded ETRs is being done through the Tax Invoice Management System (TIMS). The system is expected to have a positive impact on VAT administration as the overall objective is to increase VAT compliance, minimize on VAT fraud and increase tax revenue.

Do I need to replace my Current ETR?

Some of the recent models of the ETRs can be upgraded as long as they meet the technical specifications and functionality required. However, for those that cannot be reconfigured , the VAT trader will be required to replace their current ETR with one that supports the generation of the electronic tax invoice.

In the event you have to replace your ETR, you are advised to safe guard the previously used ETR in line with the requirement to keep records for five (5) years; Sec 23 of the Tax Procedures Act, 2015.  The Tax Invoice Management System (TIMS) is an upgrade of the current Electronic Tax Register (ETR). It facilitates Electronic Tax Invoice management through standardization, validation, and transmission of structured invoices to KRA in real-time or near real-time. It connects your business to the taxman, preventing fraud and improving cash flow.

The Tax Invoice Management System (TIMS) aims at plugging loopholes resulting from weaknesses in this regime through:

• Integration with trader systems, i.e. ECRs, Point of Sale system (POS), and ERP.
• Standardization and authentication of tax invoices issued by taxpayers and transmission to KRA on a real-time or near real-time basis.
• Tax Invoice Management System (TIMS) is an integrated module within iTax and will facilitate automated VAT returns.
• Secure and encrypted tax invoice data as per regulations.
• Verification of the validity of a Tax Invoice by KRA officers, traders, and the general public through the TAX Invoice QR Code or Tax Invoice Checker on the iTax portal

What type of ETR Machine is suitable for my business?

Depending on the usage you can opt between Four options available in the market.

• Type A or ETR– This is suitable for small businesses doing manual billing and has no software to integrate.
  There are few options for Type A,
  • Mobile ETR – A small compact design manual Electronic Tax Register machine with Wifi, LAN, GPRS and other communication options. The compact design allows the users to use ETR on the go and takes minimum space. Ideal for users with fewer bills daily.
  • Desktop ETR – A robust designed manual Electronic Tax Register machine with options for Wifi, LAN, GPRS and other communication modes for quick transfers. The Desktop Etr has a bigger keypad allowing users to key in the codes faster and do the manual billing.
    
    These are the best type A etr machines Daisy Compact M, Daisy Expert sx ETR Machine, Android FIS NANO- ETR Machine, NEXGO N86 Android ETR Machine, Aclas CRV3X Etr Machine and Aclas CRV5X ETR Machine.
    
    
• Type B Fiscal Device– Retailers using POS systems for their quick cash billing require a Type B fiscal printer or control unit for their outlets. The Fiscal Device is capable of doing quick processes due to its high processing speed and efficiency. Type B also comes in various forms
  • Fiscal Printer – Allows users to print receipts directly to the KRA-approved TIMS fiscal device cum printer. This fiscal device reduces hardware costs by having printers within the Control Unit.
  • Mobile Printer – As the name suggests the mobile printer is flexible to be carried around or integrate into mobile applications and use on the go. Mobile printers generally come with Wifi and GPRS options. These small printers help users to either use it as a handheld or connect it to the belt for better handling.
  • Control Unit – With the option of allowing multiple cashier points to connect the Control unit is one of the best cost-saving options when it comes to Retail outlets. The Control unit can be used with a network or other options available in the device.
    
    
• Type C:- The traders using ERP or accounting systems with a need for network and multiple connection options are supposed to be buying Type C which can be easily integrated into their systems.
  
  Type C Control Unit(INCOTEX 600) – ESD is the best device under this category.
  
  
• Type D – These ETR machines are a combination of Type A, B and C generally the device is configured as per user needs and is suitable for all types of business entities. NEXGO N5 Android ETR Machine is the best type D etr machine in the market supplied by Bititec Systems & Supplies Limited

Differences between Old ETR and the new TIMS

The new TIMs or e-invoicing system being a more advanced and upgraded version of ETR, it has more features and functionalities, making compliance easy and also eliminating some loopholes that initially existed in the tax management process. The below table summarizes the difference between the old and the new system considering the ‘Type C’ ETR machine which is recommended for businesses using ERP or business software.

Staying tax compliant is now simple with the new TIMS system, which generates, validates, and transmits electronic invoices faster. Since the tax management process is now fully automated, filing VAT returns would also be simplified for business owners.

How ETR Machines Can Help with Your Company Taxes

Data is transmitted each time a transaction is made through the ETR machine. This means KRA is constantly watching the taxpayer. It also has (GPRS) which helps a taxman track the location of each ETR device. The risk of your business failing to pay taxes when the register is stolen and KRA losing revenue is completely eliminated.

Whenever a transaction is made, data is transmitted to the central KRA server. It’s calculated and stored ready for reconciliation when actual tax returns are filed each time the month comes to an end. The technology helps KRA save millions in the cost of operation. GPRS is used remotely to track the location of ETRs, transmitting data to a central KRA location. It ensures KRA has access to all payment records made before filing tax returns.