Why Your Business Can’t Afford To Ignore KRA’s Digital Eye

“ETIMS IS WATCHING YOU!”

QUICK SUMMARY

• eTIMS data, customs records, and withholding tax filings must match your tax returns in 2025.
• Inconsistencies can affect your Tax Compliance Certificate (TCC) and trigger penalties or audits.
• Early reconciliation and proper invoice management can save your business stress, money, and reputation.

If you run a biashara — whether it’s a shop, hardware, wholesale, consultancy, transport, real estate, or import/export — KRA is no longer relying on guesswork. The days of “we will adjust during filing” are slowly disappearing. Welcome to the era of eTIMS.

SO WHAT EXACTLY IS ETIMS?

eTIMS (Electronic Tax Invoice Management System) is KRA’s way of saying:

“Every invoice you issue, we want to see it.”

If you are VAT registered — or required to be — your sales invoices must be generated through an approved eTIMS solution. These invoices are transmitted to KRA in real time or near real time.

So if you declare:

• Sales of KES 5 million in income tax,
• But eTIMS shows invoices worth KES 8 million…

You see the problem!

2025 IS DIFFERENT – WHY YOU SHOULD CARE?

For 2025 tax returns, KRA is cross-checking what you declare against:

• Sales declared in income tax vs eTIMS data
• VAT declared vs eTIMS invoices
• Imports declared vs customs records
• Expenses claimed vs withholding tax records/ eTIMS data

If the system detects inconsistencies, you may:

• Receive automated queries/errors
• Face penalties and interest
• Be flagged for audit
• Miss out on your Tax Compliance Certificate (TCC)

In simple terms: if your numbers don’t talk to each other, KRA will ask questions.

And when KRA asks questions, it is rarely a friendly WhatsApp text!!

CHALLENGES TAXPAYERS ARE FACING WHEN FILING 2025 ANNUAL RETURNS

Many taxpayers are experiencing Auto-generated iTax queries due to the following:

1. a) eTIMS vs Declared Turnover Mismatch

Many businesses are realizing—too late—that:

• Sales declared in income tax do not match eTIMS invoice totals
• VAT returns don’t align with what eTIMS already transmitted to KRA
• Expenses claimed are not matching with the system has

This is happening because:

• Some invoices were issued outside eTIMS
• Expenses (other than those exempted) were never supported by eTIMS invoices
• Some sales were never declared, assuming they would be “adjusted later”
• eTIMS captured gross sales, but returns were filed using net or cash-based figures

1. b) Customs Data vs Turnover Discrepancies

Importers are being flagged because:

• Customs import values suggest higher business activity
• Declared sales or profits are too low compared to imports

KRA now asks:

“You imported goods worth KES X — where are the sales?”

1. c) Discrepancies in Sales declared in VAT (monthly) vs Turnover declared in annual income tax

If:

• VAT shows KES 12M taxable sales for the year
• Income tax return shows KES 8M turnover

The annual return fails validation logic, even if it technically submits.

Why this is happening

• VAT is filed monthly
• VAT is backed by eTIMS invoice data
• Income tax is filed once, and is easier to manipulate

So KRA trusts VAT more than annual figures.

WHAT TO DO FOR 2025 RETURNS

On Friday, 23rd January 2026, KRA held an online forum for taxpayers and gave the way forward for 2025 tax returns and beyond.

1. For the 2025 returns you are filing now in 2026, KRA has given a last chance.

There will be a special line in iTax called something like “Non-eTIMS expenses.”

This means:

• If you had real business expenses in 2025
• But the supplier did not give you an eTIMS invoice
• KRA will still allow you to claim them this time

But hear this clearly:
This is not permanent.
It is a one-off bridge as people move fully to eTIMS.

What to do now
Go through your 2025 expenses carefully.
Use this line wisely.
From next year, this door will be closed.

2. Even though system checks started in January 2026, KRA has been clear:

By the time you file 2026 returns in 2027, there will be very little mercy.

Why?

• The law has been there since 2024
• KRA has now automated enforcement
• “We didn’t know” will no longer work

3. The New Golden Rule for Business “No eTIMS, No Payment”

Going forward:

• Do not pay suppliers unless they give you a proper eTIMS invoice
• Stop paying first and promising to “sort tax later”

WHAT MUST BE DONE GOING FORWARD (NON-NEGOTIABLE)

1. Treat eTIMS as Your Primary Sales Record
2. Every month:

• Reconcile eTIMS invoices vs VAT returns
• Reconcile sales vs income tax projections
• Reconcile imports vs turnover

3. “No eTIMS invoice, no expense claim.”
4. Actively follow up withholding tax credits
5. If there’s a mismatch: Don’t wait for an enforcement letter; Amend, disclose, explain.

DISCLAIMER

This content is provided by Arichum Consulting for general information and awareness purposes only. While every effort has been made to ensure the information is accurate and relevant at the time of publication, tax laws, KRA systems, administrative practices, and interpretations may change without notice.

Readers are encouraged to confirm the current position through official KRA communications and applicable laws, or to seek independent professional advice before taking action based on this information.