WHAT ARE VAT INCONSISTENCIES AND HOW DO THEY COME ABOUT?
 
In every transaction in the supply chain where VAT is applicable, there are two participants:

• The seller, a taxpayer who is registered for VAT for the provision of goods and/or services and;
• The purchaser, who in this context, we will refer to as a buyer who is registered for VAT.  

The seller is required by law to declare and remit the VAT charged (Output VAT) in a particular month by the 20^th day of the following month. On the other hand, the purchaser is required to declare the VAT charged on a purchase made (Input VAT) within a period of six months from date of invoice.

A VAT inconsistency is raised where any of the following invoice details as captured by the seller and the buyer in their respective returns do not match:

• Invoice number
• Invoice date
• Supplier/purchaser tax Personal Identification Number (PIN)
• Transaction amount

Common causes of the above, from our experience, are:

1. Inaccurate data capture in the VAT return by either the seller, buyer or both.
2. Non-declaration i.e. the seller fails to declare the sale in their VAT return.
3. The seller declaring vatable sales as a lump sum figure without specifying the tax PINs of their customers.
4. Foreign exchange differences arising as a result of different exchange rates used while filing their returns by both parties.
5. The purchaser wrongly claiming input VAT on zero-rated or exempt supplies.

WHAT HAPPENS WHEN AN INCONSISTENCY REPORT IS GENERATED?
 
The inconsistency report is sent via email to the both the affected purchaser and seller. The two are given 15 days to resolve the inconsistency and file an amended return for the month in question. A further 15 days are granted in instances where they are unable to resolve the inconsistencies within the period given.

If there is no resolution of the inconsistencies, the system will generate a report of outstanding inconsistencies and disallow related input VAT. This could create a tax liability for the purchaser or reduce the credit balance if they were in a credit position.

If the assessed amount remains unpaid for a period of 30days, debt enforcement and recovery measures will take effect.
 
WHAT SHOULD YOU DO WHEN YOU GET AN INCONSISTENCY REPORT?
 
DO NOT IGNORE IT!

1. You may have declared incorrect invoice details listed above. File an amended return reflecting the correct details
2. Your supplier may have declared different details from those on your invoice. Reach out to them, if possible, to amend their return.
3. The details may be correct as declared. Contact KRA with documentary proof so that the matter is resolved.
4. Seek support from your tax consultants where not clear how to deal with the issue.