Kenya Revenue Authority (KRA) is making eTIMS the backbone of how taxes are assessed, validated, and enforced in 2026.

For many businesses, eTIMS used to feel like “a VAT tool” or “an invoicing upgrade.” In 2026, it becomes something bigger: a compliance gate that can affect expense deductibility, VAT returns, income tax declarations, and even whether you qualify for a new type of tax compliance certificate.

This guide breaks down what’s changing, why KRA is doing it, what it means for SMEs and larger firms, and the practical steps to stay compliant.

Related reading: KRA Will Now Treat Unexplained Bank Deposits as Taxable Income: What It Means for Kenyans

What is eTIMS?

eTIMS stands for Electronic Tax Invoice Management System. It is a digital platform that requires businesses to issue electronic tax invoices for taxable supplies. The invoice information can be transmitted to KRA in real time or near real time depending on the solution being used.

The practical outcome is simple:

  • KRA can see sales activity through invoices that are generated.
  • KRA can match purchases/expenses to invoices that suppliers issue to you.
  • KRA can cross-check what you report in iTax against what the electronic data shows.

The new Merchant Tax Compliance Certificate (what it means)

KRA plans to introduce a Merchant Tax Compliance Certificate for businesses that fully adopt eTIMS.

Unlike the ordinary Tax Compliance Certificate (TCC), which mainly tracks return filing and tax payments, the Merchant Tax Compliance Certificate is designed to integrate eTIMS compliance as part of “being compliant.”

Why this certificate matters

Tax compliance certificates are often required when:

  • bidding for government tenders,
  • clearing goods at customs,
  • applying for or renewing licenses (including liquor licenses and clearing/forwarding agent licenses),
  • applying for government jobs (individuals),
  • work permit applications/renewals (foreign nationals).

If eTIMS compliance becomes part of the certificate criteria, then eTIMS becomes a business necessity, not a “nice-to-have.”

The biggest operational shift: income and expense validation starts in 2026

Effective 1 January 2026, KRA will validate income and expenses declared in both individual and non-individual income tax returns using:

  • TIMS/eTIMS data
  • Withholding tax records
  • Import records from customs systems

The validation applies when submitting the 2025 year of income / accounting period return via iTax.

The rule behind the validation

KRA’s position is that declared income and expenses must be supported by valid electronic tax invoices, correctly transmitted, and with the buyer’s PIN captured where applicable — subject to legal exceptions.

In practical terms, the system is meant to answer:

  • Does your declared income match what third parties and invoice data suggest you earned?
  • Do your declared expenses match invoices that exist in the electronic system?
  • Do your imports and customs records support the costs you claim?

“No eTIMS invoice, no deduction”: why many SMEs will feel the pressure

For many businesses, this is the hardest concept:

You can spend real money on a real business cost… but if the expense is not supported by a valid eTIMS invoice (where required), KRA may treat it as non-deductible.

That creates a painful scenario:

  • you pay the supplier,
  • the supplier doesn’t issue a compliant invoice,
  • the cost may be “added back” in your return,
  • your taxable profit increases,
  • your tax bill rises even though you already spent the money.

This is why 2026 will force many businesses to tighten procurement and supplier compliance.

Who must onboard to eTIMS?

KRA’s guidance covers persons engaged in business broadly, including:

  • companies
  • partnerships
  • sole proprietors
  • associations and trusts
  • taxpayers under Turnover Tax (TOT)
  • taxpayers with rental income obligations
  • businesses in both formal and informal sectors

Even businesses not registered for VAT can still be required to onboard, depending on their tax obligations and supply type.

Not every transaction must have an eTIMS invoice. KRA recognizes exceptions under Section 23A of the Tax Procedures Act and related electronic tax invoice regulations.

Examples commonly referenced include:

  • certain employment-related items (e.g., PAYE-covered income),
  • imports governed under customs law,
  • importation of services from outside Kenya,
  • certain financial institution and insurance core activity charges,
  • payments subject to final withholding tax in specific cases,
  • internal journal entries that do not represent an actual supply,
  • other categories exempted by the Commissioner.

The important part is not just “the exception exists,” but:

  • your transaction must truly qualify, and
  • you should keep documentation showing why it qualifies.

eTIMS fuel station system: petrol stations under tighter scrutiny

KRA has rolled out an eTIMS Fuel Station System that requires petrol stations to issue electronic tax invoices for every transaction, regardless of amount.

What this changes in daily life:

  • every refuel should generate a digital receipt,
  • receipts can be transmitted to KRA through integrated systems,
  • motorists and businesses claiming fuel costs may need to provide the buyer PIN at the pump so the invoice is valid for expense claims.

KRA set 31 December 2025 as a key compliance timeline for fuel stations, with rollout phases that included pilots and stakeholder engagement.

What eTIMS means for VAT: why domestic VAT collections are rising

KRA has stated that monthly domestic VAT collections rose sharply after requiring supply transactions to be accompanied by eTIMS-generated tax invoices.

Why this happens:

  • sales become harder to hide,
  • invoice trails improve VAT reporting,
  • input VAT claims can be cross-checked against supplier invoices,
  • reconciliation becomes more automated for compliant businesses.

VAT remains one of the largest revenue lines in Kenya, which is why KRA has prioritized invoice visibility.

How to onboard to eTIMS (choose the right solution)

KRA provides multiple onboarding options. Your best choice depends on transaction volume, business complexity, and whether you need integration with an ERP/POS system.

Common options

1) eTIMS Lite (Web)

  • Web-based
  • Accessible through eCitizen
  • Suitable for minimal transactions

2) eTIMS Lite (USSD)

  • Accessed through *222#
  • Suitable for individuals and many sole proprietors
  • Useful when internet access is limited

3) eTIMS Lite Mobile App

  • Available for smartphones
  • Useful for small operators needing quick invoicing from mobile

4) Online portal (services-only)

  • Tailored for service businesses where no goods are supplied

5) eTIMS Client (downloadable software)

  • Designed for taxpayers dealing in goods or both goods and services
  • Can support multiple branches and pay points/cashier tills
  • Requires a stable setup and proper operational controls

6) VSCU (Virtual Sales Control Unit) / OSCU (Online Sales Control Unit)

  • System-to-system integration options
  • Best for businesses with bulk invoicing, ERP systems, or high transaction volumes
  • Integration can be self-done (if capacity exists) or done by certified third parties

7) Buyer-initiated / reverse invoicing solutions

  • Allows the buyer to generate an invoice on behalf of a seller in specific scenarios
  • Helpful when dealing with small traders or suppliers who cannot issue invoices consistently

What to do now: a practical compliance checklist for 2026

If you want to avoid last-minute tax stress, build a monthly routine. The biggest mistakes happen when businesses wait until filing season.

1) Reconcile sales monthly

  • compare POS/ERP sales reports with eTIMS sales data
  • ensure credit notes and reversals are correctly reflected

2) Reconcile purchases monthly

  • compare your purchase ledger with supplier eTIMS invoices that include your buyer PIN
  • follow up immediately for missing or incorrect invoices

3) Fix procurement rules

Adopt a simple policy:

  • No invoice, no payment (where applicable), or
  • No invoice, payment goes to “risk” bucket until supplier complies.

4) Segment suppliers into three groups

  • compliant
  • partially compliant
  • non-compliant/informal

Then decide:

  • formalize key suppliers,
  • shift high-value procurement to compliant suppliers,
  • use buyer-initiated invoicing where allowed.

5) Build an “exception file”

For exempt transactions, store:

  • the category/justification,
  • supporting documentation (contracts, customs docs, WHT evidence),
  • internal notes explaining why the transaction is exempt.

6) Validate withholding tax records

Withholding tax often exposes mismatches when:

  • third parties declare payments to you, but you declare lower income, or
  • WHT credits are not properly captured in your return.

7) Prepare for submission-time checks

Because validation occurs when submitting via iTax, mismatches can cause delays. Filing late can still trigger penalties even if the delay started as “a systems issue.”

Common mistakes that trigger mismatches

  • Supplier issued an invoice but did not capture buyer PIN.
  • Supplier issued a manual receipt but never transmitted the invoice in eTIMS.
  • Business recorded an expense in books but it never appears in the electronic invoice data.
  • Timing differences: accrual expense recorded in one period while invoice is issued in another.
  • Credit notes and returns not correctly reflected.
  • ERP integration duplication or missing invoice transmission.
  • Purchases from informal suppliers without invoices (and no valid exemption documentation).

The bottom line

In 2026, eTIMS is no longer just about “issuing receipts.” It affects:

  • whether your expenses are recognized,
  • whether your income declaration looks credible,
  • whether your VAT return reconciles,
  • whether you qualify for compliance certificates that unlock tenders, licensing, and operational approvals.

The simplest way to stay safe is to treat eTIMS compliance like cashflow:

  • build a routine,
  • fix suppliers early,
  • reconcile monthly,
  • document exceptions properly.

Frequently Asked Questions (FAQ)

What is eTIMS?

eTIMS (Electronic Tax Invoice Management System) is KRA’s electronic invoicing platform that generates electronic tax invoices and transmits invoice data to KRA. It supports VAT compliance and is now used for income/expense validation.

Is eTIMS mandatory in Kenya?

For many persons engaged in business, eTIMS onboarding is required under electronic invoicing rules. The solution you use depends on transaction volume and business setup.

What changes on 1 January 2026?

KRA begins validating income and expenses declared in 2025 tax returns against eTIMS/TIMS invoices, withholding tax records, and customs import data during iTax submission.

What is the Merchant Tax Compliance Certificate?

It is a proposed KRA certificate that integrates eTIMS compliance, going beyond return filing and tax payments, to encourage stronger adoption of electronic invoicing.

If I don’t have a valid eTIMS invoice for an expense, can I still deduct it?

Generally, KRA’s validation approach requires expenses to be supported by valid electronic tax invoices (with buyer PIN where applicable), unless the expense qualifies under exceptions allowed by law.

How do I verify an eTIMS invoice?

Common methods include scanning the QR code on the invoice or using an invoice number checker in KRA platforms where available.

What is the eTIMS fuel station system?

It is an eTIMS module for petrol stations that integrates invoicing with dispensers/POS systems so electronic receipts are generated and transmitted to KRA in real time for every transaction.