The Finance Act 2023, introduced Section 23A to the Tax Procedures Act, 2015 requiring every person engaged in business to record each sale, issue an invoice and transmit the invoice electronically through a system prescribed by the commissioner (eTIMS). This has caused a major shift in Kenya’s tax compliance landscape.

The introduction of the Electronic Tax Invoice Management System (eTIMS) requires that whether you’re VAT registered or not, eTIMS onboarding is mandatory.

The Act also amended Section 15 of the Income Tax Act (ITA) requiring that effective 1st January 2024, only expenses backed by eTIMS invoices will be deductible when filing annual tax returns. This means that if the invoice is not generated through eTIMS, you cannot claim the expense even if the transaction is 100% legitimate.

How does eTIMS non-compliance affect your Tax Compliance Certificate (TCC)?

In the latest developments, the Commissioner has significantly strengthened the compliance measures. Businesses that have not onboarded on eTIMS risk being denied a Tax Compliance Certificate (TCC), even if they have no tax liability as Tax Compliance Certificate (TCC) approvals are now linked to eTIMS compliance.

To mitigate this risk, businesses should ensure they onboard onto eTIMS to meet this compliance requirement.

Written by Mary Kivuva