12 Steps Every Kenyan Business Must Take to Stay Fully eTIMS-Compliant
12 Steps Every sME & freelancer Must Take to Stay Fully eTIMS Compliant in 2025
Kenya’s tax landscape has shifted permanently. With the KRA’s aggressive enforcement of the Finance Act requirements, every taxpayer, whether corporate, SME, or sole proprietor, must align with eTIMS or face immediate financial consequences.
Two critical rules now define your business survival:
No eTIMS registration = No Tax Compliance Certificate (TCC)
No eTIMS Invoice = Disallowed Expenses: Starting with 2025 tax returns (filed in 2026), any expense not supported by a valid eTIMS receipt will be added back to your profits and taxed.
This means your business must urgently tighten its internal controls.
Below are 12 practical, "audit-proof" steps to stay fully compliant.
1. Align Your Item Codes
KRA systems are becoming smarter at matching what you sell/buy with standard tariff codes.
Action: Ensure your internal inventory or service codes map correctly to eTIMS service codes. If you sell "Consultancy," don't invoice it as "General Goods." Misclassification flags you for audit.
2. Perform Monthly "Purchase vs. eTIMS" Reconciliation
Do not wait for the end of the year. If a supplier claimed they invoiced you, but it doesn't reflect in your KRA ledger, you will lose that deduction.
Action: Download your eTIMS Purchase Report from iTax monthly and reconcile it against your internal Expense Ledger. Disputed invoices must be fixed within the same tax period.
3. Train Staff Beyond Finance
Many compliance gaps happen at the front desk or in the field, not in the accounts office.
Action: Train procurement officers, drivers, and admin staff. They need to know that a "Delivery Note" or a "Cash Sale" receipt is invalid for tax purposes unless it has a QR code and the eTIMS control unit number.
4. Adopt a Strict "No eTIMS, No Payment" Policy
Your suppliers must adjust, not you.
Action: Update your payment policy. Explicitly state: "Payment will only be processed upon presentation of a valid eTIMS invoice." This forces compliance before money leaves your account.
5. Vet New Suppliers Before Onboarding
Do not add any supplier to your system until they prove they exist on the KRA radar.
Action: Run every new supplier’s PIN through the KRA PIN Checker. Confirm their name matches their ID/Certificate of Incorporation and check their "Tax Obligation" status.
6. Enforce PIN Capture for Field Purchases
If your team buys fuel, spare parts, or meals in the field, a generic "customer" receipt is useless.
Action: Instruct all staff that for any purchase over KES 100 (or corporate policy limit), they must ensure the vendor captures the Company KRA PIN on the receipt at the point of sale.
7. Maintain a Digital "Compliance Drive"
Thermal receipts fade. KRA audits happen years later.
Action: Scan and store eTIMS invoices immediately. Rename files systematically (e.g., DATE_SUPPLIER_AMOUNT.pdf) and back them up on Google Drive or OneDrive. KRA requires you to keep records for 5 years.
8. Master the "Reverse Invoicing" Threshold
You need to know when you can generate an invoice on behalf of a supplier (Reverse Invoicing) and when you cannot.
Action: Check the supplier's VAT status.
VAT Registered: They must issue the invoice. You cannot reverse invoice them.
Not VAT Registered: You can legally use Reverse Invoicing via eCitizen to capture the expense.
9. Verify Invoices via the QR Code
Fake eTIMS invoices are already circulating.
Action: Equip your accounts team with a QR code scanner or phone. Randomly spot-check incoming invoices. The QR code should take you directly to the KRA verification page, confirming the amount and date match the paper document.
10. Indemnify Your Business in Contracts
Your legal contracts should protect you from supplier negligence.
Action: Add a tax compliance clause to all Service Level Agreements (SLAs): "The Supplier agrees to indemnify the Client for any tax penalties or disallowed expenses arising from the Supplier's failure to issue valid eTIMS documentation."
11. The Pre-2025 "Clean-Up"
Don't carry bad habits into the new financial year.
Action: Review your 2025 supplier list. Identify who gave you trouble with receipts. If they haven't migrated to eTIMS by now, they are a tax risk. Replace them before Jan 1st.
12. Set a Compliance Calendar
Compliance is a cycle, not an event.
Action:
Monthly: VAT & eTIMS Purchase Reconciliation.
Quarterly: Supplier Compliance Review.
Annually: TCC Renewal check.
Summary: Compliance is Mandatory
eTIMS is now the backbone of expense deductibility in Kenya. If it’s not on the server, it didn’t happen.
Do You Need ETIMs Help?
ClearTax Consultancy offers end-to-end eTIMS support, including:
ETIMs Invoicing setup and training.
Staff training on valid documentation.
ETIMs integration with your accounting software
Tax health checks
Frequently Asked Questions: KRA eTIMS & Expense Validation
Q: Does this mean I cannot file my 2025 returns if I don't have eTIMS invoices?
A: You can file, but it will be costly. If you declare expenses (like rent or purchases) without matching eTIMS invoices on the KRA server, the iTax system may automatically disallow them. This adds those amounts back to your profit, meaning you will pay 30% Corporation Tax on expenses you actually incurred but cannot prove digitally.
Q: I am a small consultant/sole proprietor. Does this apply to me?
A: Yes. The eTIMS requirement is universal. Whether you are a freelancer or a manufacturing plant, if you want to deduct business expenses to reduce your tax bill, those expenses must be backed by eTIMS receipts.
Q: Are there any expenses that don't need an eTIMS invoice?
A: Yes. KRA has exempted specific payments where eTIMS is not practical or applicable. These include:
Salaries and wages (Emoluments).
Imports goods & services. eg software subscriptions
Interest on loans and bank fees.
Airline passenger tickets.
Internal accounting adjusments. eg depreciations.
Payments subject to a final Withholding Tax (like dividends).
Q: My supplier is an old "mama mboga" or a Jua Kali artisan without a smartphone. How do I get an etims receipt?
A: You should use Reverse Invoicing (Buyer-Initiated Invoicing).
Log in to eCitizen (KRA Services).
Select "Buyer Initiated Invoice."
Enter their ID or KRA PIN and the transaction details.
The system generates a valid eTIMS receipt for your records.
Note: This is only legal if the supplier is NOT registered for VAT.
Q: How do I know if I am allowed to "Reverse Invoice" a supplier?
A: You cannot Reverse Invoice a supplier who is VAT Registered.
The Check: Before paying, ask for their PIN. Run it on the KRA PIN Checker (free on iTax).
If their obligation says "VAT," demand they issue the invoice.
If their obligation says "Income Tax Only" (and no VAT), you can proceed with Reverse Invoicing.
Q: Can I refuse to pay a supplier until they give me an eTIMS invoice?
A: Yes, and you should. Your company policy should state that a "Valid Tax Invoice" is a prerequisite for payment. Paying without one is essentially volunteering to pay an extra 30% tax on that transaction yourself.
Q: What if I have a pile of manual receipts from early 2025?
A: You are at risk. We recommend you contact those suppliers immediately and ask them to backdate/issue eTIMS invoices for those past transactions before the year ends. If they cannot, you may need to prepare for those expenses to be disallowed.
Q: How do I verify if an eTIMS invoice is fake?
A: Every valid eTIMS slip has a QR Code and a unique Control Unit (CU) Number. Use a free QR scanner on your phone to scan it. It should take you directly to the KRA website verification page showing the same amount, date, and supplier name. If the link goes nowhere or shows different data, it is a fake.
Q: I use QuickBooks/Xero/Odoo/Zoho Books. Do I still need eTIMS?
A: Yes. Your accounting software (ERP) needs to "talk" to KRA. You can use a middleware (like an OSCU or VSCU) to connect your accounting app directly to eTIMS so that every invoice you create in your accounting app is automatically sent to KRA. Contact us at ClearTax if you need this integration.
Book Free ETIMs Consultation Now