NAIROBI, Kenya — The Kenya Revenue Authority (KRA) is tightening tax enforcement by shifting from summary-based reporting to continuous, transaction-level scrutiny, a move that will see business expenses automatically disallowed if they are not supported by compliant electronic Tax Invoice Management System (eTIMS) invoices.
The changes are outlined in a tax alert issued by audit and advisory firm KPMG, which warns that KRA is now algorithmically reconciling income tax returns against multiple electronic datasets, including eTIMS records, withholding tax filings, and customs data.
Under the new approach, expenses that are not backed by valid eTIMS invoices — and that do not fall under specific exemptions — will be rejected outright, even where the underlying costs were genuine.
“Business expenses that are not supported by compliant eTIMS invoices will be automatically disallowed, regardless of whether the costs were genuine,” KPMG said.
The alert notes that KRA will also cross-check declared income against its digital records. Any income reflected in eTIMS or withholding tax data but omitted from tax returns may be treated as undeclared income, triggering upward tax adjustments, penalties, and interest.
Taxpayers are now required to ensure that all transactions are supported by electronic invoices transmitted with the buyer’s PIN, a requirement that places significant compliance pressure on procurement, accounting, and supplier management processes.
KPMG cautioned that income declared outside eTIMS data may similarly be flagged as undeclared, exposing taxpayers to reassessments even where revenue was reported through alternative accounting records.
The compliance requirement applies broadly across the economy, covering companies, partnerships, sole proprietors, professionals, and rental income earners carrying on business in Kenya.
However, KPMG clarified that certain categories remain exempt from the eTIMS invoicing requirement.
These include employee emoluments subject to PAYE, interest income from financial institutions, and airline ticketing, although the firm stressed that proper documentation remains essential.
The alert also flags operational challenges businesses are likely to face, including timing mismatches between accounting periods and invoice issuance, as well as difficulties dealing with informal suppliers and small vendors who may not be eTIMS-compliant.
To mitigate risk, KPMG advised taxpayers to carry out regular reconciliations between accounting ledgers and eTIMS data, strengthen supplier onboarding controls, and embed eTIMS compliance checks into procurement and payment workflows.
