Introduction
The Kenya Revenue Authority (KRA) has issued a public notice informing taxpayers that, effective 1st
January 2026, the Authority shall validate income and expenses declared by both individuals and
companies against the following sources;
• E-TIMS/ TIMS data records.
• Withholding Income tax gross
• Import records from customs.
Validation of Income
E-tims was introduced in 2023 and became effective in July of that year. It is therefore expected that
from the effective date, all invoices raised are e-TIMS compliant. The validation shall take place upon
submission of the financial year 2025 income. Validation of income means that before filing the
corporate tax payable at the end of an accounting period, the Revenue Authority shall validate the
income declared against e-tims data and or withholding income tax gross. As such, the higher of the
income declared from audited accounts, e-tims data, or withholding income tax gross shall be
considered and validated for filing and taxation purposes.
Validation of expenses
Effective 1st January 2026, there shall be an automatic validation of expenses incurred by a business
that are transmitted via e-TIMS. This means that while filing for corporate tax at the end of the
accounting period, e-tims compliant expenses incurred by the business shall be automatically allowed
for the purposes of determining the tax payable. However, the following categories are exempt under
the Tax Procedures Act 2015 and e-tims regulations.
• Employees salary
• Interest
• Investment allowance
• Airline ticketing
• Payments subject to final withholding tax
• Fees charged by financial institutions
• Imports
Implications for the Taxpayers
Income declarations inconsistencies from various validation sources, that is, e-tims sales records,
withholding tax gross income versus declaration on the audited accounts, shall be flagged and
invalidated. On the other hand, expenses lacking proper e-TIMS documentation will be disallowed,
increasing taxable income and risk of potential penalties and interest.
Therefore, taxpayers should reconcile the following records before filing of Financial Year 2025
income tax returns;
• Withholding tax records
• e-tims records
• Accounting records
• Custom entries
With KRA’s new validation covering the entire 2025 income year, every invoice must now comply
with ETIMS requirements. However, where the supply is received from a small business enterprise that
is not onboarded on e-TIMS, the purchaser can issue a tax invoice on their behalf through the
following methods:
1. Buyer-Initiated Invoicing
The Buyer-Initiated Invoicing solution under eTIMS allows a purchaser to generate a tax invoice on
behalf of a seller. This can be done either by dialing the USSD code (*222#) or by accessing the service
through the eCitizen platform. To initiate the invoice, the buyer provides the transaction details,
including the seller’s ID No. or KRA PIN, Name, and Mobile number, description of supply, unit
price, quantity, and total invoice amount. The seller is required to give consent once the invoice is
raised by the buyer. Consent can be provided via USSD option (*222#) or by logging into the
eCitizen platform.
2. Reverse Invoicing Solution
The Reverse Invoicing solution is designed as a purely system-based solution and requires system-tosystem integration with eTIMS. This option is limited to taxpayers whose transactional information is
accessed from a trusted billing system where the various players operating within that system are well
defined and share records of transactions.
To utilize this option, taxpayers must obtain prior approval from the Kenya Revenue Authority
(KRA), as reverse invoicing is subject to regulatory authorization.
At present, the solution has not yet been deployed. KRA will issue detailed guidelines and
implementation procedures for reverse invoicing in due course.
Conclusion and call to action
As we prepare for the upcoming implementation of KRA’s enhanced validation measures effective 1st
January 2026, ensure your business has taken proactive steps to ensure full compliance. Review your
2025 income and expenditure records to confirm that every transaction is fully supported by valid
TIMS/eTIMS invoices. At Ndakala Advisory LLP, we shall collaborate to ensure a seamless and
compliant return filing process under the new validation framework.
By Max & Gitu.
