For years, electronic tax invoicing in Kenya felt like something for large companies. The ones with a finance department and a fiscal device at every till.
That has changed. KRA's electronic Tax Invoice Management System, known as eTIMS, now applies to anyone carrying on a business, whether or not they are registered for VAT. A consultant, a hardware shop, a landlord and a school supplier are all in scope.
This is not tax advice, and your accountant should have the final word on your situation. What we can speak to is the practical side: what this asks of your business day to day, and how to stop it becoming one more thing to do by hand.
What eTIMS actually is
At its simplest, eTIMS is a way of issuing invoices that are sent to KRA at the moment you make them.
When you sell something, the invoice is created electronically, transmitted to KRA and given a verification code. Your customer receives an invoice that KRA already knows about.
There are several ways to do it. KRA provides its own free tools for businesses with few transactions, and there are options for connecting your existing sales system directly.
Why it matters even if you are small
Two things have made eTIMS hard to ignore.
The first is your own customers. A business can generally only claim an expense for tax purposes if it is backed by a valid electronic tax invoice. If you cannot issue one, a company that buys from you has a reason to buy from someone who can.
The second is your own expenses. The same rule applies to what you buy. Costs that are not supported by an electronic tax invoice may not be allowed when your profit is worked out, which means paying tax on money you did not really make.
In other words, this now touches both sides of your books.
The hard way and the easy way
There is a hard way to comply, and many businesses are doing it.
They make the sale as they always have, in a receipt book or their usual system. Then, later, someone sits down and types each sale again into a separate eTIMS tool. Two records of the same transaction, entered by hand, at the end of a long day.
It works until it does not. A busy week goes by, the backlog builds and the invoices that reach KRA no longer match what was sold.
The easy way is for the invoice to be the sale. Your point of sale or invoicing system creates the electronic tax invoice as part of completing the transaction. The cashier does nothing extra. The customer leaves with a compliant receipt. Your records and KRA's agree, because they are the same record.
What to ask about your current system
If you already use software to sell or invoice, these are the questions worth putting to whoever supplies it.
- Can it issue eTIMS invoices directly, or do we have to re-enter sales somewhere else?
- What happens when the internet is down? Are invoices queued and sent later?
- Does it capture the buyer's KRA PIN when they need it?
- How are credit notes and returns handled?
- Can I see which invoices were transmitted and which failed?
If the answer to the first question is "re-enter them", it is worth knowing what a proper connection would take.
If you are still on paper
Then this is a good moment to move, because you now need an electronic record of each sale either way.
Doing it properly gives you more than compliance. The same system that issues the tax invoice can track your stock, match your M-Pesa payments and show you what you sold this month. We wrote about that shift in The Spreadsheet That Runs Your Company.
Our business systems are built so that tax invoicing is one step in a sale and not a separate job, whether you run a shop, a restaurant, a school or a petrol station.
Compliance is easiest when nobody has to remember to do it.
The short version
eTIMS is not going away, and it is no longer only for big companies. The businesses that find it painless are the ones where the tax invoice is produced by the same action that records the sale.
If yours is not there yet, start by asking how many times each sale is typed in today. If the answer is more than once, that is the thing to fix. Talk to us if you would like help working out how.
