KRA Gives Businesses More Time Before Full Digital Tax Rules Kick In

KRA eases eTIMS rule for 2025 tax returns,but only for a year
The Kenya Revenue Authority (KRA) has eased a requirement that had unsettled many business owners. As they file their 2025 tax returns ahead of the June 30, 2026 deadline, businesses will now be allowed to claim expenses even where they do not have an electronic tax invoice.Previously, KRA had sought to require every deductible expense to be supported by a receipt generated and transmitted through its Electronic Tax Invoice Management System (eTIMS)

What it means for businesses
For businesses, the immediate benefit is straightforward: filing 2025 returns becomes less burdensome. Many firms had feared that genuine expenses lacking an electronic invoice would be rejected, making their profits appear higher on paper and exposing them to larger tax liabilities. The concession removes that risk for this filing season. However, the relief is temporary. From the 2026 Year of Income onwards, all declared income and expenses must be backed by valid electronic tax invoices generated and transmitted through eTIMS. In effect, KRA has granted businesses additional time to adjust rather than abandoned the requirement altogether.

What it means for KRA and the government
For KRA, the move represents a short term compromise on one of its key revenue collection strategies. eTIMS is more than a filing platform; it is designed to improve tax compliance by capturing transactions in real time and matching declared income with actual business activity.

The system is intended to bring more traders, contractors and informal suppliers into the tax net, helping the government raise revenue without increasing tax rates. Yet adoption remains well below target. By early last month, only about 680,000 businesses had enrolled against a target of 3.2 million.

The temporary waiver therefore reduces the visibility that eTIMS was meant to provide at a time when revenue collection remains under pressure. KRA collected roughly KSh 162 billion less than targeted in the first nine months of the 2025/2026 financial year, forcing the government to rely more heavily on borrowing. While the relief eases compliance pressure on businesses today, it also delays part of the revenue monitoring system that KRA hopes will strengthen collections in the future.