Background: eTIMS and Temporary Exemptions
The Kenya Revenue Authority (KRA) introduced the electronic Tax Invoice Management System (eTIMS) to modernize tax compliance, enable real-time transaction tracking, and tackle tax evasion. Under the Finance Act, 2023, all businesses were required to issue electronic tax invoices via eTIMS. Non-compliance would result in loss of expense deductions for corporate income tax purposes.
However, widespread pushback—especially from small businesses and farmers—highlighted challenges such as limited internet access, poor banking infrastructure, and low digital literacy. In response, Parliament amended the law in December 2024, exempting businesses with annual sales below KSh 5 million from mandatory eTIMS registration. This move was welcomed by the informal sector, allowing continued access to broader supply chains without the burden of eTIMS.
KRA’s Renewed Push for Mandatory Compliance
Despite the exemption, KRA is advocating for a repeal of the amendment, citing concerns that it:
- Shrinks the tax base,
- Limits traceability of transactions, and
- Enables inflated costs among larger businesses.
KRA reports that only 41% of targeted non-VAT registered taxpayers have adopted eTIMS, hindering transparency. The Authority argues that the exemption effectively isolates small enterprises, as larger firms are reluctant to engage them due to non-compliant invoicing systems.
Insights on the Latest Shifts
Issue 1 – KRA’s Proposal
Reintroduce mandatory eTIMS registration for all businesses, including small enterprises.
Issue 2 – Parliament’s Position
The exemption was legislated after extensive public engagement and Finance Committee recommendations.
Issue 3 – Compliance Challenges
Small firms face infrastructural, technical, and cost-related barriers to adopting eTIMS.
Issue 4 – Economic Impacts
SMEs drive Kenya’s economy—overregulation could threaten their sustainability.
Issue 5 – System Improvements
To ease adoption, KRA has automated registration, introduced self-service portals, and rolled out simplified tools like USSD and web invoicing options.
The Road Ahead
This debate underscores the need to balance revenue collection with economic inclusion. While enhancing tax compliance is critical, any move to reimpose eTIMS on small businesses must be backed by:
- Strong technical support,
- Financial incentives or tax relief, and
- Streamlined, user-friendly systems.
At RKCO East Africa Consulting, we are closely following these developments and remain dedicated to helping businesses navigate Kenya’s dynamic tax and compliance environment.
Stay Updated
Follow us for timely insights.
📧 Email: info@rkcoeastafricaconsulting.co.ke
📞 Phone: +254 715 503 403/+254 751 740 909
🌐 Website: www.rkcoeastafricaconsulting.co.ke
Stay Ahead. Stay Aligned.
RKCO East Africa Consulting – Guiding Business with Legal Precision and Policy Expertise.
