Am no CPA or CPS, but will give my two cents, just an overview
Business name is same as sole proprietorship, all the business obligations are also ‘Yours’ legally. Meaning the business is not a separate legal entity your KRA PIN is the business PIN there is no separation from business earnings and your earnings. Advantages? Easier/cheaper/faster to open or register. A good place to start this can grow to a limited company in future. Easier to wind up or close down Cons: The business is no separate legal entity. Can not trade with certain companies. There are Government and private business who do not trade with business names/sole proprietors! Even some banks put a limit/cap on loans and facilities granted to such.
Company Name by this I think you mean Limited company, best way to go, the business is a separate legal entity with its own legal documents, KRA PIN as well. Advantages: Separate legal entity, more room for growth can sell shares, have joint ventures, etc from experience Banks, Customers, take limited companies more ‘seriously’ than business names or sole proprietors. Cons: Difficult more processes before winding up, more tax obligations, Needs* two or more directors (though I hear rules have changed). Expensive to register (15-100,000K) depending on law firm. Pays more business taxes, licenses compared to business name.
@dusko You say…
You are only required to file VAT returns if you have the VAT obligation. And this is given if your gross business turnover is over 5 mirrions per year. Otherwise with the normal IT obligation, you are required to file annually.
[COLOR=rgb(184, 49, 47)]That’s what’s on paper but if you are selling, invoicing KRA expect you to issue ETR receipt if goods are VATABLE or NOT! Now if you don’t issue ETR invoices you can not hide the excuse that you have no VAT obligation! Even if you don’t file VAT returns the customers you are giving Invoices will ‘claim’ or file them then when they audit you they will ask why you issued invoices with no ETR!
The safest way is to apply for VAT obligations the soonest you get KRA PIN and file ‘NIL’ returns if you have had no sales or file the sales/purchses you made.
Again, you are only required to issue an ETR receipt if you have the VAT obligation in your PIN. Otherwise hiyo ni wisi ya pesa ya serikal na ukishikwa kinoti na hajji hawatakuhurumia.
[COLOR=rgb(209, 72, 65)]Again ETR invoices are a must, if you argue about this you have never been audited by KRA!
[COLOR=rgb(209, 72, 65)]See This below, Note what the law says, there is NO VAT Obligations mentioned! (i.e. if you have VAT Obligations or NOT),
You are to issue etr invoices! End of stories!
[ATTACH=full]188299[/ATTACH]
It’s supposed to be tamper proof enabling KRA officials to know whether you are remitting all the VAT you have collected or if you are stealing from them.
Not Necessarily the purpose of an ETR is to ensure Tax is charged on Vatable goods or services, If not this is shown as well either 16% or 0% or other. What you do with VAT collected is another matter, ETR ensures at the point of sale taxes were collected/charged on the goods or services.
How do you get paid? Do you issue Invoices? All Invoices must be ETR compliant! Don’t be cheated by stories of having/not having VAT obligations see the screenshot from my reply above.
This is where the catch is. Lets say a supplier supplies you with goods then issues you with an invoice plus an ETR receipt where he has charged VAT. When you do your monthly VAT returns, you include the supplier’s KRA pin. KRA on the other end reconciles to see if the supplier remmited the VAT amount he charged you. Some suppliers are crooks…they have a suspended PIN while they still charge VAT, thats why you should insist that a supplier should first comply with VAT registration before accepting their goods.
You still don’t get it:D!
Even if Invoices are Zero rated/exempt an ETR receipt is a MUST! It will just show 0% taxes charged! ETR receipts/slips are not for Vatable goods or services only. Even for things like medicines which are VAT exempt you must issue a zero rated ETR receipt!
Buy an ETR machine and Issue Invoices with ETR slips. And very few goods/services are VAT exempt these days save from drugs/medicines and a few food stuffs a majority of goods and almost ALL services attract VAT! Especially consultancy services those have VAT. Again not to be a prophet of doom buy Invoices with no ETR slips especially for VATABLE goods attract major fines!
Now the problem is I employed a fresh graduate who missed my filling of returns. Nikikasirika! Every month the VAT late penalty was KES 50,000 (10,000 per company).
Atakama alikuwa internship, I had no money to continue with bad interns: at least for the time of internship alijua umuhimu wa kufile returns. This month it’s 15th, at least right now I have remembered to file nil return.
Always have a reminder for filling tasks. Especially, for dormant companies.
Is there a way to negotiate VAT settlement agreement?
