Everyone knows that VAT reporting and payments should be made on or before the 20th of every month. A lot of us have been using the old Taxpayer software/ ITMS before but are slowly shifting to iTax as required by KRA.
We have been doing a series of posts on the different company tax obligations required by law that can be done on iTax. This is yet another post of that continued coverage on how to use iTax.
- Monthly Z report from your ETR machine – for output VAT/ sales
- Expense sheet for the month (with VATable items) – for input VAT/ purchases
“Where any amount of tax remains unpaid after the date on which it becomes payable, an interest equal to two percent per month or part thereof of the unpaid amount shall forth with be due and payable.”
Step 1: Download the VAT excel sheet from iTax (similar to the one from the old taxpayer software/ ITMS).
The VAT excel sheet that you need to download is found under the “Returns” menu item. You have to pretend that you are doing an actual return to actually get the required file.
So, go to Returns >> File Returns >> Value Added Tax (VAT) >> Download File (select one of the available downloadable excel file).
The available VAT spreadsheets are in MS Excel format and Open Document Format (for Open Office). However, when we tested it the ODS format file we found that it was not working at all! So that seems that right now, the only way is to buy Microsoft Excel (not cheap) and use the excel version. Also for the smoothest operation we recommend that you do this on a Windows machine.
Step 2: Fill out the details of the excel sheet and generate the output – zip file.
Using your monthly Z report and expense sheet, fill out ALL the relevant tabs on the VAT spreadsheet. There are several tabs and they all need to be filled out correctly. This procedure is similar to what they had on the taxpayer software and ITMS, now just on an excel spreadsheet. When you are done, validate the spreadsheet – if it has any errors, the validation will let you know otherwise it will prompt you to generate a zip file that you will upload onto iTax.
Save the zip file on your machine where you can easily access it for uploading.
Step 3: Upload the zip file onto iTax.
At this point, your VAT spreadsheet, now saved as a zip file is ready for submission. Go to iTax then login using your company security credentials. On the top menu bar, click the “Returns” menu item and select the option, “File Return” on the drop down.
Now on the “e-Returns” page, click the drop down menu and select “Value Added Tax (VAT) as your “Tax Obligation”.
Proceed to fill out the blanks on the “Value Added Tax (VAT)” form. That should probably only be the “Return Period From”, the “Return Period To” will automatically be filled out as the system only expects you to do a return for one month at a time. Click the upload button, locate your saved zip file, check the “Terms and Conditions” and “Submit” the return.
If the file you have uploaded does not have any issues, the system will allow you to proceed to the next step. Otherwise you will get an error message that will require you to go back to the excel file that you prepared to make corrections.
For example, this month we did a mistake when we were preparing our VAT return. On the last tab where you are supposed to fill out any credit amount from the previous month, we indicated that the amount was “0” (from habit as we always pay our VAT 😉 only that last month, we had a negative credit balance that we were meant to offset with this month’s return).
These are some of the mistakes to watch out for. Good thing, iTax will notify you to the mistake and you can correct the error then validate and save the excel afresh. You do not need to use the “File Amended Return” menu item when submitting the second time as technically, you had not successfully submitted the first time. Just repeat the process and you will be fine.
A successful submission will give you an “Acknowledgement Number” and a download link to access your “Returns Receipt”.
Step 4: Generate payment slip for the just submitted VAT liability.
Having submitted the return, you now need to generate the payment slip for this liability. There are two ways of doing this, either click the “Payments” menu item and select the “Payment Registration” option from the drop down, OR, from the image above, simply click the “Payment” button to proceed (this is highly recommended).
Proceed to fill out the blanks on the “e-Payment Registration Form”. Good thing you click the “Payment” button from the previous page so that a lot of the detail is already filled out for you. If not, confirm that the “Tax Head” reads “VAT”, the “Tax Sub Head” reads “Value Added Tax (VAT)” and so on (refer to image below).
Confirm that the liability amount under “Liability Details” is what you expect to be paying, select the radio button and click the “Add” button.
This adds the liability details to the “Payment Details”. This should then give you the total that you are meant to pay (there could be more then one liability that you are paying for).
Proceed to select the “Mode of Payment”; Cheque, Cash or RTGS and finally select the “Receiving Bank Name” – this should be the bank where you intend to make your payment from. Chances are, it is the bank that you bank with as a company. Click the “Submit” button to submit the payment details.
A successful submission give you a “Payment Registration Number” an expiry date for your “Payment Slip” and a download link where you can access your payment slip.
Step 5: Pay the VAT liability at your local bank
Final step is to print the “Payment Slip” in 2 copies and take both to your local bank with a cheque for the amount indicated on the payment slip.
One of those copies will be kept by the bank as an indication of your payment while the other one will be stamped and given back to you as your receipt for your own books. This is a very important document as it’s actually shows that you have paid your liability. In case the bank has an issue with their system and miss to register your payment, you can always fall back to this document as evidence for the payment.
iTax also sends you a confirmation email when you have made a payment and you can always check your “General Ledger” on iTax for verification of the payment entry.