An invoice is more than a request for payment. For a VAT-registered business it is the document that lets your customer claim input VAT, and lets you prove your output VAT. An invoice with missing details can cost your customer the VAT claim and bring you queries from KRA. This guide lists what to include and how to handle related documents.

When you must issue a tax invoice

If you are registered for VAT and make a taxable supply, you must issue a tax invoice. Since the introduction of eTIMS, invoices must generally be generated through KRA-approved systems so that they carry a control code or QR code. Read eTIMS and e-invoicing explained. If you are not registered for VAT, you must not charge VAT, and your documents should not show it.

What a valid tax invoice shows

  1. The words "Tax Invoice"
  2. Your name, address and PIN
  3. The customer's name and PIN, which is vital if they are a business claiming VAT
  4. A unique invoice number in sequence
  5. The date of supply
  6. A description of the goods or services, with quantity and unit price
  7. The amount before VAT, the VAT rate and amount and the total
  8. Any discount shown clearly
  9. The eTIMS control unit data or QR code

Use the invoice with VAT template as a base, and the VAT calculator to add or remove VAT correctly. Pricing both with and without VAT is explained in VAT for small businesses.

Show the VAT clearly

Most standard-rated sales carry VAT at 16%. State whether prices are inclusive or exclusive, and show each rate separately if you sell zero-rated or exempt items on the same invoice. A mixed invoice with unlabelled items makes input VAT claims difficult.

Quotations

A quotation is an offer, not a tax invoice. It should show the same details the invoice will, with the validity period and whether VAT is included. Do not use the quote as a tax invoice, and avoid quoting a total without saying if VAT is inside it. The quotation with VAT template handles the layout. When the customer accepts, issue a proper invoice at the time of supply.

Proforma invoices and receipts

A proforma invoice asks for payment in advance. Because VAT arises at the earliest of invoicing, delivery or payment, a payment in advance can trigger the VAT liability, so record it and issue an invoice for the payment. A receipt confirms payment. Keep a receipt voucher or a receipt book for cash sales.

Discounts, credit notes and corrections

If you give a discount after the invoice, or the customer returns goods, do not alter the original. Issue a credit note that refers to the invoice and reverses the sales and the VAT. The credit note with VAT template is a model. The customer must reduce their input VAT by the same amount. If you made an error, cancel the invoice with a credit note and issue a corrected one.

Invoices you receive

To claim input VAT, you need a valid supplier invoice in your business name and PIN, for goods or services used to make taxable supplies. Keep a register: the VAT input invoice register and eTIMS sales invoice register are laid out for this. Expenses not supported by eTIMS invoices may be disallowed: eTIMS and your expenses.

Mistakes to avoid

  • Charging VAT when you are not registered
  • Missing the customer's PIN on business invoices
  • Invoice numbers that skip or repeat
  • Backdating or altering an invoice
  • Mixing VAT-inclusive and exclusive prices without saying which
  • Late invoices that push VAT into a later period

From invoices to returns

Your VAT return compares output VAT from sales invoices with input VAT from purchase invoices. The VAT return calculator summarises it, and how to file a VAT return shows the steps. Keep copies of all invoices for at least five years: how to keep business records for KRA.

Frequently asked questions

Can I issue a handwritten VAT invoice? KRA requires tax invoices to come through the approved electronic system for registered businesses, so handwritten invoices will not support input VAT claims.

Do I need a customer's PIN on every invoice? For business customers, yes. For consumers, it is not needed unless they ask for it.

What if my customer pays late? VAT is due on the invoice date or supply, not the payment date, unless you use a special accounting rule. Plan for the cash.

Can I issue an invoice in dollars? Yes, but you must show the shilling equivalent for VAT, using the rate stated by KRA or the Central Bank for the date.