eTIMS Receipts Explained For Kenyan Businesses (2026)

What eTIMS actually is

eTIMS is the electronic invoicing system KRA runs under section 23A of the Tax Procedures Act. That section lets the Commissioner establish an electronic system for issuing tax invoices and keeping stock records, and then requires every person carrying on business to issue invoices through it.

The detail sits in the Tax Procedures (Electronic Tax Invoice) Regulations 2024, gazetted as Legal Notice 64 of 2024 and in force since 28 March 2024. Those Regulations revoked an earlier 2023 set, which is why guidance written before mid-2024 is often out of date — including the widely circulated claim that businesses turning over under KES 5 million were exempt. They are not. Regulation 3 applies the rules to "any person carrying on business" unless that person has been exempted under section 23A.

The practical shift is that an invoice is no longer just a document you give a customer. It is a record transmitted to KRA, and from 2026 it is the record KRA checks your return against. If you sell to businesses, your invoice is also the paperwork your customer needs to claim the expense. Getting it wrong costs your customer money, which is why larger buyers now refuse suppliers who cannot issue one.

Who is excluded, and who can apply to be exempt

There is a difference between an excluded transaction and an exempt person, and it matters.

Regulation 10 excludes nine categories of transaction from needing an electronic tax invoice at all: emoluments (salary income taxed under section 5 of the Income Tax Act), imports, investment allowances including internal accounting adjustments, airline passenger ticketing, interest, fees charged by financial institutions, expenses subject to withholding tax that is a final tax, services provided by a non-resident without a permanent establishment in Kenya, and anything else excluded under section 23A. So your bank charges, your loan interest and your staff payroll do not need eTIMS invoices behind them.

Exemption of a person is separate and discretionary. Under regulation 11 the Commissioner may exempt someone by notice in the Gazette, and may revoke that exemption the same way. The Commissioner may also exempt a business whose income for a transaction comes through a payment platform KRA recommends, provided the transaction data still reaches KRA's system. And a business can apply in writing, with reasons, where it already has an alternative automated method of recording and transmitting the data that a relevant authority recommends, or where its transactions fall outside any ministry's or regulator's mandate. None of this is automatic. Until you hold an exemption, assume you are in.

One genuine concession is buried in regulation 4(4): the Commissioner may allow service providers, and businesses not registered for VAT with annual turnover below KES 25 million, to use a simplified system that does not keep stock records. That is a lighter obligation, not an exemption from invoicing.

What a valid eTIMS invoice must show

Regulation 7(1) lists fifteen things. Your invoice must carry your KRA PIN, the time and date of issue, the invoice serial number, the buyer's PIN where the buyer intends to claim the expense or input tax, the total gross amount, the total tax amount where applicable, the item code KRA provides, a brief description of the goods or services, the quantity, the unit of measure, the applicable tax rate, a unique system identifier, a unique invoice identifier, a QR code, and anything else the Commissioner specifies.

Section 23A of the Act separately requires the words "TAX INVOICE" and the name and address of both supplier and purchaser. In practice a compliant eTIMS solution produces all of this for you — the point of knowing the list is to spot an invoice that is not compliant when a supplier hands you one.

Credit and debit notes are covered by regulation 7(2), which requires them to reference the original invoice number. Notably, the Regulations set no deadline for issuing one, so do not assume the six-month VAT credit-note habit applies here without checking your own position.

Which solution fits your business

KRA offers several ways in, and you can be registered on more than one:

• eTIMS Lite (USSD) on the short code *222#, which KRA states is for individuals and sole proprietors. No smartphone needed.
• eTIMS Lite (web), reached through eCitizen, and a Lite mobile app.
• The online portal at etims.kra.go.ke, a browser-based invoicing screen.
• eTIMS Client, downloadable software for Windows and Android that supports multiple branches and several tills.
• System-to-system integration through the Virtual Sales Control Unit (VSCU) or Online Sales Control Unit (OSCU), for businesses with their own POS or ERP and high invoice volumes.
• Reverse invoicing, where a registered buyer generates the invoice on the seller's behalf — built for buyers dealing with many small suppliers, such as farmers delivering produce.

A trader with a duka and a feature phone and a company running three branches on an ERP are solving genuinely different problems, and the honest answer is that the USSD route is adequate for the first and hopeless for the second. Two practical warnings: each solution keeps its own invoice number sequence, and a credit note can only be issued from the solution that produced the original invoice. Mixing tools carelessly creates reconciliation work later. If you are still choosing where to bank the proceeds, our guides to business bank accounts and reading a bank statement are the sensible next step.

The buyer's PIN decides whether an expense counts

This is the single field that causes the most lost money, and it is worth being blunt about.

Regulation 7(1)(d) requires the buyer's PIN only where the buyer intends to claim the expense or input tax. If you buy something for the business and do not give your PIN, the invoice is still valid — but it is not linked to you. The Finance Act 2023 amended section 16 of the Income Tax Act so that, from 1 January 2024, expenditure not supported by an invoice generated from an electronic tax invoice management system is disallowed for income tax, save where an exemption applies under the Tax Procedures Act. Input VAT on a non-compliant invoice is similarly not claimable.

Work the arithmetic once and it stops being abstract. Say a VAT-registered company invoices KES 464,000 including VAT in a month. Stripping out 16% VAT, that is KES 400,000 of taxable value and KES 64,000 of output VAT. It buys KES 232,000 including VAT — KES 200,000 of costs and KES 32,000 of input VAT — so it would normally remit KES 32,000.

Now suppose KES 116,000 of those purchases (KES 100,000 plus KES 16,000 of VAT) came on receipts with no eTIMS invoice and no PIN. That KES 16,000 of input VAT is gone, so the VAT bill rises to KES 48,000. The KES 100,000 of cost is also disallowed, adding KES 100,000 to taxable profit — at the 30% resident company rate, another KES 30,000 of income tax. Total cost of that missing paperwork: KES 46,000 on KES 116,000 of spending. Sole traders face the same VAT effect and pay the profit effect at graduated individual rates instead; you can sanity-check either with our VAT calculator and income tax calculator.

What KRA does with the data from 2026

In a public notice dated 10 November 2025, KRA announced that from 1 January 2026 it validates income and expenses declared in income tax returns for the year 2025 against three data sets: TIMS and eTIMS invoices, withholding income tax records, and customs import records. The validation happens when you submit the return on iTax.

The notice requires declared income and expenses to be supported by a valid electronic tax invoice, transmitted with the buyer's PIN where applicable, subject to the section 23A and Regulation 10 exceptions above. KRA has asked taxpayers to request their annual TIMS/eTIMS income and expense schedules and reconcile them against internal records before filing. For the 2025 year it also allowed valid business expenses without eTIMS support to be uploaded at filing, subject to review afterwards — a transitional concession, not a standing one.

The consequence is that a mismatch between your books and KRA's copy of your invoices is now surfaced automatically rather than during an audit years later. Reconciling monthly is far cheaper than arguing later, and it fits naturally alongside filing your returns on iTax. If you are not yet registered at all, start with getting a KRA PIN.

The penalty: what the law says, and what the internet gets wrong

A great many software-vendor and blog posts state that eTIMS non-compliance carries a penalty of KES 1 million or ten times the tax due, whichever is higher, plus up to three years in prison. That is not what the law says, and repeating it has frightened a lot of small traders unnecessarily.

Regulation 12(1) makes it an offence to fail to comply with any provision of the Regulations, or to tamper with, manipulate or interfere with the system — including uninstalling it or changing the device without telling the Commissioner. Regulation 12(2) then states that a person who commits an offence under the Regulations "shall be liable to the penalty specified under section 86 of the Act".

Section 86 of the Tax Procedures Act is headed "Penalty for failing to comply with electronic tax system". It works in two steps: the Commissioner first requests your reasons for the failure in writing, and a taxpayer who fails to satisfy the Commissioner within fourteen days of that notice is liable to a penalty of one hundred thousand shillings.

So where does the KES 1 million come from? Section 104(1) is the Act's general sanction on conviction of an offence in court — a fine of up to KES 1 million and imprisonment of up to three years, or both. That is a criminal outcome after prosecution, not an administrative penalty that lands with a demand letter. The "ten times the tax" figure appears nowhere in the Act at all. The nearest provision, section 104(3), covers fraud in relation to tax under section 97 and allows a fine of up to KES 10 million or double the tax evaded, whichever is higher, or up to ten years' imprisonment.

Two other real exposures are worth naming, because they are more likely than prosecution. Section 82 penalises failure to keep documents at the higher of 10% of the tax payable or KES 100,000 where no tax is payable. And tampering with the system itself is separately criminal: section 103A covers unauthorised access to a computerised tax system, and section 103B covers knowingly falsifying records in it or damaging it, with a fine of up to KES 800,000 or up to three years, or both.

The blunt summary: the routine cost of ignoring eTIMS is not a headline fine. It is KES 100,000 under section 86, plus disallowed expenses and denied input VAT that usually dwarf it. Penalty amounts do change with each Finance Act, so confirm the current figure with KRA before relying on it.

Outages, closures and the housekeeping nobody reads

Regulation 5 requires you to keep the system running at all times. When you cannot use it — power, network, a dead device — you must notify the Commissioner in writing within twenty-four hours and record sales by whatever other means the Commissioner specifies. When the system comes back, you must enter those sales into it. Twenty-four hours is tight, so know in advance who sends that notification.

Regulation 6 adds duties that are easy to overlook. You must keep the system available at the point of sale, let an authorised officer inspect it, keep it updated, and maintain a system ledger recording every maintenance and software update, with the name and address of whoever did the work. If you intend to stop using a system — changing business model, closing, or any other reason — notify the Commissioner in writing thirty days beforehand; if the closure was unplanned, within seven days after. The Commissioner may then retire the system within thirty days.

Closing a business also triggers stock obligations under regulation 4(3): notify KRA in writing thirty days before closure with a record of current stock, report the quantities if stock is transferred, and account for all relevant taxes. The Regulations set no eTIMS-specific retention period, so the general record-keeping duty in the Tax Procedures Act governs how long you hold the underlying documents — check it rather than guessing.

If eTIMS is your first serious brush with KRA compliance, it will not be your last. Turnover tax governs which return you file, withholding tax determines what customers deduct before paying you, hiring your first employee brings NSSF, SHIF and the housing levy, and rental income tax applies if you let property alongside trading. Getting your payment channels tidy helps too — see paybill vs till vs Pochi la Biashara. If growth needs funding, compare business loans before borrowing, and browse more money guides for the rest.

Frequently asked questions

Is there still a KES 5 million exemption from eTIMS? No. A KES 5 million threshold appeared in draft proposals and was widely reported, but it did not survive into Legal Notice 64 of 2024. Regulation 3 applies the Regulations to any person carrying on business unless exempted under section 23A. KES 5 million remains the VAT registration threshold, which is a different rule about a different tax.

I am not registered for VAT. Do I still need eTIMS? Yes. The obligation follows carrying on business, not VAT status. What you may get is a lighter version: under regulation 4(4) the Commissioner may let non-VAT-registered businesses with turnover below KES 25 million use a simplified system that does not track stock, and eTIMS Lite on *222# exists for individuals and sole proprietors.

Do I have to put my PIN on every purchase? Only where you intend to claim the expense or the input tax — that is the wording of regulation 7(1)(d). For anything genuinely personal, no. For anything you will deduct, always: without your PIN the invoice is not linked to you, and from 1 January 2026 KRA validates your declared expenses against the invoices actually transmitted.

A supplier will not issue an eTIMS invoice. What are my options? Check first whether the transaction is excluded under regulation 10 — interest, bank fees, imports and payments subject to final withholding tax all are, and need no eTIMS invoice. If it is not excluded, the disallowance falls on you, not the supplier, so the commercial answer is usually to price that in or change supplier. Keep the correspondence either way.

What happens if my device breaks mid-month? Notify the Commissioner in writing within twenty-four hours under regulation 5(2), record sales by the alternative means KRA specifies, and enter them into the system once it is working. Do not simply stop invoicing and backfill quietly.

Can I be jailed for not using eTIMS? Prosecution is legally possible — regulation 12 creates an offence and section 104(1) allows up to three years on conviction — but it is not the routine consequence. The administrative penalty the Regulations actually point to is section 86's KES 100,000, and the larger everyday cost is disallowed expenses and denied input VAT.

Reviewed 3 September 2026 against Legal Notice 64 of 2024, sections 23A, 82, 86, 103A, 103B and 104 of the Tax Procedures Act, and KRA's public notice of 10 November 2025. Tax rules and penalty amounts change with each Finance Act — confirm current figures with the KRA before acting. This is general information, not financial advice.