The recent introduction of the Electronic Tax Invoice Management System (eTIMS) marks a significant milestone in Kenya’s tax digitalisation journey. Rolled out over the last few years, eTIMS was designed to curb revenue leakages and give the Kenya Revenue Authority (KRA) real-time visibility into business transactions.
eTIMS replaced the former Electronic Tax Register (ETR) system with a fully integrated, data-driven framework. Through the Tax Procedures Act, the Tax Procedures (Electronic Tax Invoice) Regulations, 2024, and the Income Tax Act, the scope of eTIMS has been expanded beyond VAT-registered businesses to all persons carrying on business. Electronic invoicing is now the standard proof of transactions for tax purposes.
Aligned with global best practices under the OECD’s digital tax initiatives, eTIMS positions Kenya among countries leveraging real-time e-invoicing to enhance tax compliance, transparency, and administrative efficiency.
At Makabe Consulting, we work closely with you to help you understand and practically comply with eTIMS requirements while minimizing tax and audit risks.
All persons engaged in business whether VAT-registered or not are required to onboard on eTIMS and issue eTIMS-compliant invoices.
Effective 1 January 2024, any business expense claimed for tax purposes must be supported by an eTIMS-compliant invoice. Without such documentation, the expense risks being disallowed for tax purposes.
Where goods or services are supplied by a small business or a small-scale farmer who may not be eTIMS-enabled, KRA provides a buyer-initiated invoicing solution, commonly referred to as reverse invoicing.
In such cases, the purchaser issues a tax invoice on behalf of the seller to support the deductibility of the expense. This ensures compliance while allowing buyers to legitimately claim costs incurred from non-eTIMS-enabled suppliers.
The following transactions are currently exempt from eTIMS requirements:
-Emoluments (salaries and wages)
-Imports
-Investment allowances
-Interest income
-Air passenger ticketing
-Payment of withholding taxes and similar statutory deductions
Understanding these exemptions is important to avoid unnecessary compliance errors.
Although taxpayers are expected to ensure system continuity, eTIMS may occasionally experience technical failures or downtime. Where this occurs:
-The taxpayer must notify the Commissioner in writing within 24 hours of the failure; and
-Record sales using any alternative method specified by the Commissioner.
Once the system is restored, all transactions must be captured on eTIMS to ensure completeness and compliance.
Where a taxpayer intends to discontinue the use of eTIMS due to business closure, a change in business model, or any other reason, they must notify the Commissioner in writing at least 30 days in advance. The notification should include details of existing stock, where applicable.
In cases of unplanned closure, notification may be made within seven days after closure. The Commissioner may retire the system within 30 days of receiving the notice.
Where stock is transferred upon closure, the taxpayer must declare the quantities transferred and ensure that all applicable taxes are fully settled.
KRA has significantly intensified eTIMS enforcement. Recent public notices confirm that:
- A prerequisite for obtaining a Tax Compliance Certificate (TCC) is onboarding on eTIMS; and
- Effective 1 January 2026, KRA will validate income and expenses declared in tax returns against:
a) eTIMS invoice data
b) Withholding tax records
c) Customs import data
This means that all declared income and expenses must be supported by valid eTIMS-compliant invoices, correctly transmitted with the buyer’s PIN, unless specifically exempt under Section 23A of the Tax Procedures Act, 2015.
While eTIMS strengthens transparency and accountability, it also presents compliance challenges—particularly for small and growing businesses with limited systems or technical capacity.
Taxpayers should proactively address the following areas:
Non-eTIMS-compliant invoices risk being disallowed as deductible expenses. Businesses should consistently ensure that all invoices received are eTIMS compliant. One practical step is verifying the QR code on invoices using a QR reader.
KRA is building advanced analytics to cross-check tax returns against eTIMS, customs, and withholding tax records. Businesses should anticipate more frequent and comprehensive audits, potentially covering prior years. Given the five-year statute of limitation, historical non-compliance may still attract scrutiny.
Internal processes must be strengthened to support eTIMS compliance. This includes staff training, supplier onboarding, and aligning invoicing workflows with KRA requirements.
Proper record-keeping and document retention policies are now more critical than ever. Accurate and accessible records will be key during audits and return validations.
Key Takeaway
eTIMS is more than a compliance tool it is transforming how tax evidence is created, transmitted, and verified by KRA. Businesses that embrace eTIMS early reduce audit exposure, improve governance, and build stronger, more transparent systems for long-term growth.
At Makabe Consulting, we help businesses navigate eTIMS compliance, strengthen internal controls, and stay ahead of evolving tax enforcement requirements.
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