Kenya’s electronic tax invoice rules have been in place for some time, but 2026 is the year they started to bite. From 1 January 2026, KRA validates income tax returns at the point of filing against its own electronic data. If your figures do not tie to eTIMS invoices, withholding tax returns and customs records, you may not be able to file the return as prepared, and the differences may be adjusted against you.
The rule in brief
The Finance Act, 2023 disallows the deduction of business expenses that are not supported by an invoice generated through eTIMS (or TIMS), unless a statutory exemption applies. The Tax Procedures (Electronic Tax Invoice) Regulations, 2024 extended the obligation to issue electronic invoices to everyone carrying on business, whether or not they are registered for VAT.
What KRA now checks
- Income: sales recorded in eTIMS, or income reported by your customers in withholding tax returns, that does not appear in your return may be treated as undeclared.
- Expenses: costs without a compliant eTIMS invoice, and not covered by an exemption, may be disallowed.
- The direction of adjustments: in general, KRA uses the higher of your declared income and its own data, and the lower of your declared expenses and its own data.
The consequences include upward adjustments, penalties and interest, and difficulty obtaining a Tax Compliance Certificate, which many clients need for tenders and donor contracts.
Common exemptions
Not every payment needs an eTIMS invoice. Exempt categories include employment income subject to PAYE, imported goods and services, transactions subject to final withholding tax, certain core fees of financial institutions and insurers, airline passenger tickets and internal accounting adjustments that do not represent a supply. Government services are not on the list, so they appear to require compliant invoices.
How to prepare
- Reconcile regularly. Compare your ledger with eTIMS purchases and sales, withholding tax certificates and import data monthly or quarterly, not only at year end.
- Build eTIMS into procurement. Make a compliant invoice a condition of payment, and check buyer PINs and descriptions on every invoice.
- Onboard suppliers properly. Small and informal suppliers are the usual gap. Confirm they can issue eTIMS invoices before you engage them.
- Document exemptions. Where you rely on an exemption, record which one and keep the support.
- Train non-finance staff. Programme and operations teams often make purchases. They need to know when an eTIMS invoice is mandatory.
We help organisations reconcile their records with KRA data and fix the gaps before filing. Read about our tax services or contact us.