Kenya’s tax system is entering a new era of automation. On November 7, the Kenya Revenue Authority (KRA) announced that from 2026, it will automatically verify tax returns against eTIMS invoices, withholding tax (WHT) filings and customs records to ensure that expenses and incomes match official data.
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On November 12, KRA further announced that effective December 1, all bank guarantees shall be executed exclusively through the integrated Customs Management System (iCMS).
This shift marks a decisive move toward tech-driven tax verification, promising speed and efficiency – but also raising the stakes for taxpayers. It comes at a time when KRA is under pressure to expand the tax base and raise tax-to-GDP ratio to 22 percent. The journey to this point has been gradual. It began with the introduction of the Tax Invoice Management System (TIMS) in 2022 to replace the Electronic Tax Register (ETR) regime in force since 2005. TIMS required VAT-registered businesses to purchase specialised devices to issue invoices.
The aim was to create a secure, standardised way of capturing VAT transactions and transmitting them to KRA real time. It also made it harder to fake invoices or manipulate records while making VAT audits easier by closing gaps on VAT reporting.
However, the hardware requirement and technical hurdles made it costly for businesses. In response, KRA launched eTIMS in 2023 – a software solution accessible via computers, smartphones, and USSD.
At this point the focus also expanded to cover income tax.
Initially, eTIMS compliance was limited to VAT-registered taxpayers. However, legislative changes under the Finance Act 2023 and the Tax Procedures (Electronic Tax Invoice) Regulations, 2024 expanded the scope significantly.
From January 1, 2024, all businesses – whether VAT-registered or not – were required to issue eTIMS invoices. The rationale was simple: for an expense to qualify for income tax deduction, it must be supported by an eTIMS-compliant invoice.
The regulations also revoked the exemption that spared traders with annual turnover of below Sh5 million from mandatory eTIMS compliance. KRA argued the exemption hindered efforts to expand the tax base and track financial flows in the informal sector.
To accommodate small enterprises, simplified solutions such as eTIMS Lite (Web), a mobile app, and a USSD option (*222#) were introduced, ensuring accessibility in remote areas.
Initially, compliance uptake remained slow due to technological barriers and limited awareness. As a result, KRA extended onboarding deadlines, intensified public education, and introduced sector-specific solutions like the eTIMS Fuel Station System – mandatory for all petroleum retailers by June 30, 2025 as the latest eTIMS update.
eTIMS has redefined the approach to tax compliance. First, it creates a direct link between the income declared by one taxpayer and the corresponding expense claimed by another. Every electronic invoice is transmitted to KRA real time and linked to the seller’s and buyer’s PIN.
When the buyer claims that invoice as an expense, KRA will match the figures and descriptions. This creates a traceable link by ensuring both sides of the transaction are visible and subject to the correct tax treatment.
Second, automated checks ensure expenses are not claimed multiple times or by entities that did not incur them. It blocks inflated or fictitious expenses-since only costs supported by valid eTIMS invoices can be deducted. Finally, by requiring all businesses to issue eTIMS invoices, it brings previously unrecorded transactions into the tax net.
The KRA uses WHT records for several checks. First, if you earn income subject to WHT, the taxman compares the gross amount in the WHT return with what you declared in your tax return.
If the figures don not match, this gap is identified and a compliance alert raised.
The check also links the payer’s WHT filing to the payee’s tax return to prevent situations where one party claims an expense, but the other fails to declare the income.
Second, for businesses claiming expenses where WHT applies (like professional fees or rent), KRA checks if WHT was remitted. For customs, the system match tax returns with declarations in iCMS to confirm goods were actually imported, values align with customs records, and duties were paid.
Looking ahead, the integration of eTIMS with other compliance tools will deepen. KRA has already linked Tax Compliance Certificate issuance from October 2025 to eTIMS registration.
To succeed in this automated environment, businesses must ensure harmony across all records. All data points – financial statements, eTIMS invoices, WHT records, and customs records – must tell the same story to avoid costly mismatches.