The Kenya Revenue Authority (KRA) has reminded businesses across the country that they must issue electronic tax invoices through the electronic Tax Invoice Management System (eTIMS) for most transactions as part of efforts to improve tax compliance and transparency.
The directive is supported by provisions in the Tax Procedures Act and the Income Tax Act. Under these laws, businesses are required to generate digital invoices for every sale of goods or services.
KRA has warned that any expense not supported by a valid eTIMS invoice cannot be claimed as a deductible expense when filing tax returns.
According to the tax authority, businesses must issue electronic invoices for both business-to-business (B2B) and business-to-consumer (B2C) transactions unless they fall under specific exemptions provided by law.
This means that most commercial transactions — whether conducted physically, online, or through mobile platforms — must be recorded through the eTIMS system.
KRA explained that the system helps verify transactions in real time and ensures that tax declarations submitted by businesses match their recorded sales.
Transactions That Must Have eTIMS Invoices
KRA outlined several common transactions that must be accompanied by an eTIMS invoice, including:
Sale of goods within Kenya – All domestic sales, whether paid in cash or on credit.
Provision of services – Professional services, repairs, logistics, and freight services.
Export of goods or services – Even though exports are zero-rated for VAT, invoices must still be issued.
Sales to government institutions – Government agencies must receive eTIMS invoices.
Business-to-business transactions – Required for companies to claim input tax deductions.
Retail sales to consumers – Businesses must issue electronic receipts at the point of sale.
Online or mobile transactions – Sales made through digital platforms or mobile payments.
Rental and hire services – Property rent and equipment hire charges must be invoiced electronically.
Insurance-related services – Domestic insurance transactions must also generate eTIMS invoices.
Exempt supplies – Sectors such as education and healthcare must still issue invoices indicating zero-rated or exempt VAT.
Transactions Exempt from eTIMS
However, some categories are excluded under current tax regulations. These include:
Salaries and wages processed through payroll systems
Imports handled through customs documentation
Airline passenger tickets
Investment allowances
Interest income
Bank charges subject to final tax
Dividends and royalties under withholding tax rules
Services offered by non-residents without a permanent establishment in Kenya
Penalties for Non-Compliance
KRA warned that businesses failing to issue electronic invoices risk facing significant penalties.
Under Section 86 of the Tax Procedures Act, businesses that fail to generate the required eTIMS invoices may be fined twice the amount of tax due on the transaction.
Additionally, the Income Tax Act disallows any business expense that lacks a valid eTIMS invoice. For instance, if a company claims rent expenses of KSh100,000 but does not have a valid eTIMS invoice from the landlord, the entire amount may be disallowed during tax assessment.
Under the system, invoices are transmitted instantly to both the buyer and KRA’s database. Businesses are also required to ensure that their invoicing systems remain online at the point of sale.
In cases where internet outages prevent real-time issuance, businesses must notify KRA within 24 hours and upload the missing transaction records once the system is restored.
KRA says the digital invoicing system is part of its broader strategy to seal tax leakages, improve revenue collection, and promote transparency in business transactions across Kenya.
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