As KRA continues strengthening its systems for validating income and expenses, many businesses are working to understand what these changes mean for their day-to-day operations. Whether you’re managing monthly reconciliations or preparing for year-end reviews, staying compliant has never been more important.
To make things easier, we’ve put together clear, practical answers to some of the most common questions businesses have right now — so you can stay organized, compliant, and confident throughout the process.
What does the notice say?
KRA is changing the game.
Starting January 2026, when you file your tax returns for the 2025 Year of Income/Accounting Period, the iTax system will automatically check everything you declare, your income, your expenses, everything, against:
- eTIMS invoices
- Withholding tax records
- Import/customs data
In short: if it’s not supported by a proper electronic record, KRA won’t accept it.
What does this mean for anyone who earns an income?
Think of it like this:
If you say you made money, or you spent money, KRA now wants a digital trail to prove it. That means:
- Every income you declare must have an eTIMS invoice behind it.
- Every expense you deduct must also have an eTIMS invoice with the buyer’s PIN (where needed).
If you’re a consultant, freelancer, creative, or any kind of service provider, you must be on eTIMS. All your invoices now need to come from there. No shortcuts.
What does the notice mean for business intending to declare expenses on the income earned?
The era of paper receipts and handwritten notes is over. To claim an expense, you’ll need:
- An electronic tax invoice generated via eTIMS
- With your buyer’s KRA PIN (if required)
No eTIMS invoice? KRA will treat that cost as profit, meaning you’ll be taxed on it.
But What if Most of My Suppliers Operate informally and They Can’t Issue Me With an eTIMS Invoice?
Good news the law has a workaround. Under Section 23A (3A) of the TPA, if your supplier is a:
- Small business
- Small-scale farmer
- Earning less than KSh 5M annually
…and they can’t issue an eTIMS invoice, you can generate one on their behalf.
This is called a buyer-initiated invoice. You create it via eCitizen (under KRA services). Your supplier just needs a KRA PIN so they can approve it.
What about airtime and matatu fare? How do we claim those?
These everyday expenses pose a compliance challenge because Matatu operators and airtime vendors rarely issue eTIMS invoices.
Unless exempted under Section 23A or listed in KRA’s exceptions (e.g., emoluments or air ticket costs), such expenses cannot be claimed for tax deduction.
Individuals should assume these costs are personal expenses, not deductible, unless KRA provides specific guidance.
But I think my business is too small and I am not ready to onboard on eTIMS yet?
It is mandatory. Section 23A of the TPA requires that any person who carries on business shall issue an electronic tax invoice through eTIMS
Furthermore, if you fail to comply, it will result in:
- Disallowed expenses
- Increased tax liability significantly raising your overall tax burden..
What is the consequence of failing to comply?
If an individual or a business fails to comply with these regulations, they shall be liable to a penalty of two times the tax due unless they offer satisfactory reasons for their non-compliance (Section 86, TPA)
What Should My Next Steps Be?
- First, onboard to eTIMS as soon as possible so that all your invoicing is compliant from the start.
- Next, make sure every supplier you work with can issue proper eTIMS invoices. If they can’t, begin that conversation early or consider shifting to suppliers who are already compliant.
- Before accepting any invoice, confirm that the buyer’s KRA PIN is correctly captured to avoid future disputes with KRA.
- It also helps to train your staff on how eTIMS works, so they don’t accidentally upload non-compliant documents.
- Finally, keep clean, digital records of all your invoices and transactions so that if KRA ever reviews your file, everything is clear, organized, and easy to validate.
Written by: Michael Muya | Tax Lead | MMW Advocates LLP