The tax landscape in Kenya is about to shift in a pretty big way — and honestly, this time it’s in a direction that feels more structured, more digital, and definitely more transparent. The Kenya Revenue Authority (KRA) is introducing two major reforms aimed at tightening compliance while giving taxpayers a smoother experience: income and expense validation and the new Automated Payment Plan (APP).
Both changes are designed to make tax administration more efficient, fair, and aligned with modern digital systems. Let’s break down what’s coming and what it means for you.
1. Income and Expense Validation Begins January 2026
KRA is officially moving toward a data-driven tax verification model. Starting 1st January 2026, all income and expenses declared in individual and non-individual income tax returns will be validated automatically through the iTax system. This applies to the 2025 year of income.
So, what exactly is income and expense validation?
It’s a digital matching process where KRA cross-checks what you declare against verified data sources, including:
- TIMS/eTIMS tax invoices
- Withholding Income Tax (gross)
- Customs import data
Only valid electronic invoices — properly transmitted and featuring the buyer’s PIN where applicable — will be accepted as legitimate income or expense records.
What does this mean for taxpayers?
- Your tax return will only be considered accurate if your invoices sit in the eTIMS ecosystem.
- Manual audits and verification processes will reduce significantly.
- Errors, mismatches, or unsupported entries will be flagged instantly.
In short: if an income or expense isn’t backed by an eTIMS-supported invoice… it simply won’t count. This reform pushes everyone to clean up their bookkeeping and adopt fully digital invoicing.
2. Introducing the Automated Payment Plan (APP)
KRA knows that not everyone can settle their tax liabilities in a single transaction — especially businesses navigating cash flow dips. To support genuine taxpayers, KRA has launched the Automated Payment Plan (APP).
This system-managed arrangement allows eligible taxpayers to pay their outstanding tax liabilities (including principal, penalties, and interest) in structured instalments.
Eligibility Criteria
To qualify for the APP, you must:
- Have a valid KRA PIN and be fully registered on iTax.
- Have a confirmed tax liability that’s not under dispute or litigation.
- Demonstrate the inability to pay in one lump sum.
- Submit an instalment proposal via iTax or an approved portal.
- Keep the plan within a maximum of six months.
But here’s the catch…
If you default on the agreed schedule, KRA can:
- Terminate the plan
- Revoke your Tax Compliance Certificate
- Initiate enforcement or recovery actions
So while the APP gives breathing room, it still requires discipline.
Why These Reforms Matter
These two initiatives show KRA’s shift toward a smarter tax ecosystem — less paperwork, fewer grey areas, and more accuracy.
With income and expense validation:
- Compliance becomes cleaner and more transparent.
- Fraud and misreporting are harder to pull off.
- Digital invoices become the backbone of financial reporting.
With the APP:
- Genuine taxpayers get flexibility.
- Compliance becomes more achievable.
- Businesses can stay tax-compliant without crippling their cash flow.
Together, the reforms bring a balanced mix of enforcement and empathy — something Kenya’s tax environment has needed for quite a while.
Final Thoughts
As KRA leans deeper into automation, taxpayers will need to adjust their systems, habits, and reporting processes. The key is to embrace eTIMS early, maintain invoice discipline, and stay aware of how the new income and expense validation system works.
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