Quick Summary: Key eTIMS Compliance Requirements

Mandatory for all businesses: All persons engaged in business must onboard eTIMS, regardless of VAT registration status or turnover
Tax Compliance Certificate requirement: eTIMS compliance is now mandatory for obtaining a Tax Compliance Certificate (effective October 2025)
Income tax validation: From January 1, 2026, KRA validates all income and expenses against eTIMS invoices, withholding tax data, and customs records
No deductions without eTIMS invoices: Expenses not supported by valid eTIMS invoices are disallowed for income tax purposes (effective January 1, 2024)
Penalties for non-compliance: Offenders face penalties of twice the tax due, VAT refund holds, and denied tax compliance certificates
Multiple onboarding options: Online portal, eTIMS Client software, eTIMS Lite, VSCU/OSCU integration, and reverse invoicing for small suppliers
Exempted transactions: PAYE emoluments, imports, certain financial fees, airline tickets, and services from non-resident suppliers without permanent establishment

Kenya’s tax compliance landscape has undergone a fundamental transformation with the mandatory implementation of the Electronic Tax Invoice Management System (eTIMS). What began as a solution for VAT-registered businesses has evolved into a comprehensive digital invoicing requirement affecting every business entity in the country. Understanding and complying with eTIMS regulations is no longer optional—it’s essential for business survival in Kenya’s increasingly digitized tax environment.

Understanding eTIMS: From TIMS to Digital Transformation

The Kenya Revenue Authority introduced the Tax Invoice Management System in August 2021 to combat VAT fraud involving missing traders and fictitious invoices. eTIMS evolved as a software-based solution offering greater flexibility than traditional Electronic Tax Registers. Operating through cloud-enabled software accessible on computers, smartphones, and tablets, eTIMS transmits invoice data to KRA in real-time, creating unprecedented transparency in Kenya’s tax ecosystem.

Who Must Comply with eTIMS?

Since September 1, 2023, all persons engaged in business must onboard eTIMS and issue electronic tax invoices. This includes companies, partnerships, sole proprietors, associations, and trusts—regardless of VAT registration or annual turnover. The previous five million shillings exemption has been eliminated. Even businesses dealing in zero-rated or exempt supplies must comply, though small enterprises benefit from reverse invoicing provisions.

Critical Compliance Milestones and Enforcement

The most significant enforcement began January 1, 2024, when only eTIMS-compliant invoices became recognized for income tax deductions. Businesses cannot claim expenses from manual invoices or non-compliant documentation, directly impacting taxable profits. From January 1, 2026, KRA validates all income and expenses declared in tax returns against eTIMS data, withholding tax records, and customs information. This automated cross-referencing makes illegitimate claims virtually impossible. As of October 2025, eTIMS compliance became mandatory for obtaining Tax Compliance Certificates.

Onboarding Options and Technical Solutions

KRA provides multiple eTIMS compliance pathways. The eTIMS Lite platform serves small-scale traders through a web interface or USSD code. Larger businesses use the eTIMS Client software supporting multiple branches. Companies with sophisticated systems integrate directly through Virtual Sales Control Units or Online Sales Control Units. Self-onboarding through the eTIMS portal eliminates bureaucratic delays, while certified third-party vendors assist with complex integrations.

Consequences of Non-Compliance

Penalties for eTIMS non-compliance are severe. Businesses face penalties of twice the tax due, withheld VAT refunds, denied tax compliance certificates, and intensified audits. More critically, customers cannot claim expenses from non-compliant suppliers, making them uncompetitive. Companies increasingly refuse to transact with suppliers lacking eTIMS invoices, creating market pressure that effectively enforces compliance beyond regulatory penalties.

Moving Forward with Confidence

eTIMS compliance represents a permanent shift in Kenya’s business environment. While the transition requires investment in technology and training, it creates a more transparent and efficient tax system. Businesses embracing eTIMS position themselves for sustainable growth in Kenya’s digital economy, while those who delay face mounting penalties and lost opportunities.