NAIROBI, Kenya — The Kenya Revenue Authority (KRA) has recorded a sharp rise in domestic Value-Added Tax (VAT) collections, signalling the impact of stricter enforcement and digital invoicing reforms.
KRA Director-General Humphrey Wattanga said monthly domestic VAT receipts now range between Sh28 billion and Sh30 billion, up from about Sh20 billion recorded before the rollout of mandatory electronic invoicing.
The gains, he said, are largely driven by the compulsory use of Electronic Tax Invoices under the Electronic Tax Invoices Management System (e-TIMS).
“If you look back two or three years, we were collecting domestic VAT at a rate of about Sh20 billion,” Wattanga said. “Once e-TIMS was made mandatory, we have seen that number rise to between Sh28 billion and Sh30 billion.”
He was speaking during the swearing-in ceremony of newly appointed KRA board member Risper Olick.
Based on current trends, annual domestic VAT collections are now estimated at between Sh96 billion and Sh100 billion. Domestic VAT is charged at a standard rate of 16pc on taxable goods and services supplied within Kenya.
Wattanga said the authority is now working to simplify e-TIMS further to ease compliance, especially for small and medium-sized enterprises.
“So, it has had a significant impact,” he said. “We are focusing on making the system easier to use across all sectors.”
Introduced in early 2023, e-TIMS enables KRA to track taxable sales in real time, closing loopholes that previously allowed under-declaration and tax evasion, particularly in cash-heavy sectors.
The system has also expanded beyond VAT-registered traders. From January 1, 2024, only expenses supported by e-TIMS invoices qualify for income tax deductions, forcing wider adoption across the economy.
This shift has posed challenges for large traders such as supermarkets and fuel stations that transact with informal suppliers.
In response, KRA introduced reverse invoicing, allowing buyers to generate tax invoices on behalf of eligible suppliers.
Since its rollout on December 27, 2024, reverse invoicing has captured about Sh800 million in previously unreported transactions. The option applies to businesses with annual turnovers below Sh5 million.
In the 2024/25 financial year, tax base expansion efforts generated Sh2.9 billion from businesses that were previously outside the tax register.
VAT remains a central pillar of KRA’s medium-term strategy to raise Kenya’s revenue-to-GDP ratio to 20pc, with the tax viewed as having stronger growth potential than income-based taxes.
In the first half of the current financial year, Kenya collected Sh1.39 trillion against a target of Sh1.44 trillion, achieving 96.2pc of the goal.
This left a shortfall of Sh55.5 billion, despite revenue growth of 11.6pc over the same period last year.
