KRA’s 2026 e-Invoice Crackdown: Your Expenses Without ETIMS Receipts Will Become Taxable Income

The Kenya Revenue Authority has now made it official that, beginning January 1st, 2026, every Kenyan taxpayer filing their returns for the year 2025 must ensure that every shilling of income and every shilling of expense in their tax return is supported by an approved eTIMS or TIMS electronic receipt. This means the era of handwritten receipts, verbal agreements, unrecorded purchases, and informal supplier documentation is finally over. To make this easier to understand, imagine explaining to a Grade 3 pupil that whenever they tell their teacher they bought a pencil for class, the teacher now wants to see the receipt, not just hear the story. That is exactly what KRA is doing: it wants to see the receipts for every business expense so it can confirm that it truly happened and that the supplier properly reported that income as well.

This announcement means that if you, as an individual or business, spend money on anything you want to deduct in your income tax return—such as rent, raw materials, salaries, services, repairs, fuel, stationery, or equipment—you must have a valid eTIMS or TIMS receipt for it. Without that receipt, KRA will treat the amount you spent as if you did not spend it at all. For instance, if you say you spent KSh 300,000 on your workshop tools but have no electronic tax invoice, KRA will add that KSh 300,000 back into your income and then tax you on it. This is the same as a teacher saying: “You claim you used your pocket money on books, but you cannot prove it, so we assume you still have the money.”

The new system works by comparing what you submit in your annual return with information from several data sources. These include TIMS/eTIMS supplier invoices, import records from customs, and withholding tax information from both government and private entities. So if you say you earned KSh 1 million in your business, but your eTIMS receipts show KSh 1.7 million, KRA will use the higher number. If you claim you spent KSh 500,000 on repairs but only KSh 100,000 is backed by eTIMS documents, KRA will disallow the remaining KSh 400,000. Think of it like this: if you say you did homework for seven subjects but the teacher sees only two books signed, the teacher will believe only the two you can prove.

Read Also: KRA Rolls Out eTIMS Lite For All SMEs In Kenya

For example, imagine a small furniture maker in Gikomba who buys timber from informal suppliers who do not issue electronic invoices. For many years, this carpenter has been able to tell KRA that he spent KSh 100,000 on timber and KSh 40,000 on nails, varnish, and glue. But now, in the new system, if these purchases have no electronic receipts, KRA will say: “We cannot see the expenses in the system, so we assume you made KSh 140,000 more profit than you declared,” and then tax him on the full amount. This is a painful reality for thousands of small traders who rely on the jua kali network, making this change one of the most controversial taxation decisions in recent years.

To a normal Kenyan reading this, the biggest shock is that the rule applies even to people who are not VAT-registered. Before, only VAT businesses were required to issue eTIMS receipts. But now even a mama mboga supplying vegetables to a restaurant, a landlord collecting rent, a freelance photographer, a small welding workshop, or a teacher giving tuition services must follow the electronic receipting rules if their clients need to use those expenses in tax returns. Even if you file your individual annual tax return once a year in June, you must still ensure your expenses have eTIMS receipts.

Let’s break it down with rent, something almost every Kenyan relates to. Suppose you run a small office in Ruaka, paying KSh 30,000 monthly to your landlord. You want to deduct that rent as part of your business expenses. Before, your landlord’s handwritten receipt was enough. But from 2026 onwards, if your landlord does not issue an eTIMS rent receipt that includes your PIN, KRA will reject the KSh 360,000 annual rent expense. That means the KSh 360,000 is treated as profit you didn’t spend, and you will be taxed on every shilling of it.

Imagine another example: a shop owner in Nakuru buys cleaning services for KSh 5,000 weekly. The cleaner comes, sweeps, mops, and dusts, then the shopkeeper pays cash. Before, this was normal. After this KRA directive, the cleaner must issue an electronic tax invoice showing the service provided and the buyer’s PIN. If not, the KSh 260,000 yearly cleaning expense cannot be deducted, and the shopkeeper ends up paying tax on it as extra income.

The system is designed to match information, like joining the dots in a children’s puzzle. If you say you bought goods worth KSh 200,000 from Supplier A, KRA will check Supplier A’s eTIMS system to see if they recorded a sale to you. If the supplier never recorded the sale, your expense will not be accepted. This ensures both sides—the buyer and the seller—report the same transaction. This is KRA’s strategy to reduce cheating, under-reporting, and cash-based tax evasion that has cost the country billions.