Briefing document & Podcast: E-Invoicing and E-Reporting in Kenya

Timeline of Implementation and Grace Periods

• September 2020 – July 2022: Kenya introduced electronic tax invoicing regulations targeting VAT-registered taxpayers. Businesses were required to adopt KRA-approved Tax Invoice Management System (TIMS) electronic tax registers, with an initial one-year transition (Aug 2021 – Jul 2022). The compliance deadline was later extended to 30 November 2022 for all VAT-registered taxpayers. (After this date, issuing VAT invoices through TIMS became mandatory for VAT-registered businesses.) [ey.com] [ey.com], [storecove.com]
• February 2023: KRA rolled out Electronic TIMS (eTIMS), a software-based invoicing platform as an alternative to physical TIMS devices. This move sought to broaden access by allowing invoice issuance via computers, mobile devices, or direct system integration, rather than dedicated hardware. [ey.com]
• September 1, 2023: The e-invoicing mandate was expanded to all businesses in Kenya, including those not registered for VAT. From this date, every person conducting business must generate and transmit their invoices electronically through eTIMS. (KRA extended the requirement beyond VAT payers so that even small or non-VAT-registered businesses use electronic invoices, since any business expense now needs an e-invoice to be tax-deductible.) [kra.go.ke]
• January 1, 2024: New enforcement measures took effect: any business expenditure not supported by a valid electronic tax invoice became non-deductible for income tax purposes. This means companies cannot claim tax deductions for purchases unless the supplier’s invoice was issued through TIMS/eTIMS. This step put additional pressure on all buyers and sellers to comply with e-invoicing. [kra.go.ke]
• Grace Period (up to March 31, 2024): KRA allowed a grace period for non-VAT-registered taxpayers to adapt. Businesses not registered for VAT could onboard to eTIMS by March 31, 2024 without penalties. During this window, KRA did not impose fines for failing to issue e-invoices, to give these taxpayers time to adjust systems and operations. (Notably, VAT-registered taxpayers were already expected to be using TIMS; this grace period chiefly benefited smaller businesses.) Any invoices issued manually during early 2024 had to be captured retrospectively into the eTIMS platform once the business onboarded. [sovos.com], [kra.go.ke] [kra.go.ke]
• March – May 2024: The government refined the legal framework. On 25 March 2024, the Cabinet Secretary issued the Tax Procedures (Electronic Tax Invoice) Regulations, 2024 (Legal Notice No. 64 of 2024), which revoked the 2023 regulations and provided clearer guidance. These were gazetted on 3 May 2024. The 2024 Regulations cement that all persons carrying on business in Kenya must use electronic invoicing, unless exempt under the law. They also detail invoice content, exemptions, and obligations (as discussed below). [ey.com]
• Late 2024 – Early 2025: KRA introduced simplified/pre-populated VAT returns leveraging e-invoice data (see Pre-Filled VAT Returns below for details). By the end of 2024, KRA began auto-filling taxpayers’ VAT return forms with information from TIMS (sales and purchase invoices reported). This was piloted for late 2024 filings and took full effect for returns in early 2025, marking a further step in Kenya’s digital tax journey. [tpa-global.com]

Scope of the Mandate: Transactions and Taxable Persons

• Coverage – “All persons carrying on business”: The e-invoicing obligation in Kenya applies broadly to anyone conducting business in Kenya, regardless of size or VAT registration status. In other words, both VAT-registered and non-VAT-registered businesses must comply by issuing electronic tax invoices via an approved system. (The inclusion of non-VAT businesses ensures that if they later wish to claim business expenses or if their clients claim VAT, those invoices are in KRA’s system.) Only those explicitly exempted by law are out of scope (see Exemptions below). [kra.go.ke], [ey.com] [kra.go.ke]
• Domestic B2B, B2C, and B2G Sales: All standard sales of goods or services within Kenya are subject to the e-invoicing mandate. This includes business-to-business (B2B) sales (where the buyer can later claim input VAT), business-to-consumer (B2C) transactions (consumer sales must still be recorded and invoiced through TIMS), and business-to-government (B2G) supplies (suppliers to government entities must also issue e-invoices, as required by public procurement compliance). In practice, before delivering any invoice to a customer (business or government), the invoice must be electronically generated and cleared through the TIMS platform. [openenvoy.com]
• Cross-Border Transactions: Exports (sales from Kenyan businesses to foreign buyers) are generally within the e-invoicing scope. Even though VAT on exports is often zero-rated, Kenyan sellers are required to issue these invoices electronically through TIMS so that the transactions are reported to KRA (with a 0% VAT rate). There is no exclusion for export sales in the regulations, so a Kenyan exporter must generate a TIMS invoice for goods/services sold abroad, ensuring those invoices contain all required elements (e.g. they would note the buyer’s details and a tax rate of 0%). In contrast, imports (goods or services acquired by a Kenyan business from overseas) are excluded from the electronic invoice mandate. A foreign supplier without a presence in Kenya cannot issue a KRA-compliant e-invoice, so import VAT is handled via customs declarations or reverse-charge mechanisms instead of TIMS. The 2024 Regulations explicitly list “imports” as well as “services provided by a non-resident with no permanent establishment in Kenya” among transactions not required to be invoiced through TIMS. (Such transactions are outside the Kenyan e-invoicing system by nature.) [rsm.global]
• Exempted Transactions: Certain types of transactions are automatically exempt from the e-invoicing requirements due to their nature. According to the regulations, these exemptions include: [rsm.global]
  • Employee remuneration: Emoluments like salaries and wages (payments to employees, not sales of goods/services). [rsm.global]
  • Imports: As noted, imported goods and imported services are exempt (the foreign supplier doesn’t issue a Kenyan e-invoice). [rsm.global]
  • Investment allowances & adjustments: Internal accounting entries such as capital allowance adjustments (non-sale transactions). [rsm.global]
  • Airline tickets: Passenger ticketing by airlines (likely because these may use global ticketing systems and are taxed via other means). [rsm.global]
  • Interest and financial fees: Interest charges and fees by financial institutions (these are often not invoiced in VATable form, or are exempt from VAT). [rsm.global]
  • Final withholding tax items: Expenses on which a final withholding tax is applied (and thus not subject to further VAT invoicing). [rsm.global]
  • Services by non-residents (no PE): Services provided by foreign entities with no PE in Kenya (i.e. overseas service providers). [rsm.global]
  • Other gazetted exemptions: Any other person or transaction explicitly exempted by the Commissioner via a Gazette notice.
    In summary, aside from the above categories, all other sales by Kenyan businesses – mainly domestic sales of goods and services (whether taxable, zero-rated, or exempt supplies under VAT) – must be issued as electronic tax invoices. Established companies in Kenya are in scope. Non-established entities (foreign companies without a local presence) are not directly subject to Kenya’s e-invoicing mandate (they cannot issue Kenyan tax invoices), but Kenyan customers dealing with such suppliers must still comply with normal VAT reporting (e.g. accounting for import VAT) outside the TIMS system. [rsm.global]

E-Invoice Format and Data Requirements

• Structured Format: E-invoices are generated and transmitted in a structured electronic format (XML) that aligns with TIMS requirements. Each invoice’s data is processed by an approved Electronic Tax Register (ETR) or the eTIMS software, which ensures the invoice contains all required fields and security features before it’s sent to the tax authority and the buyer. The system effectively validates, digitally signs, encrypts, and assigns unique codes to each invoice in real-time. [openenvoy.com] [openenvoy.com], [banqup.com]
• Mandatory Content: A valid electronic tax invoice in Kenya must include a comprehensive set of data fields as defined by regulation. Key elements include: [rsm.global], [rsm.global]
  • Supplier identification: the Supplier’s PIN (Personal Identification Number) – i.e. the tax identification of the seller. The invoice must also show the Supplier’s name (registered business name). [rsm.global]
  • Invoice specifics: a unique serial number for the invoice, and the date & time of issuance. (TIMS will also internally assign a Unique Invoice Identifier and a Unique System Identifier to each invoice.) [rsm.global]
  • Buyer details: If the buyer intends to claim the expense or input VAT, the buyer’s PIN must appear on the invoice. (In practice, for B2B sales the purchaser’s tax PIN is included so they can deduct VAT; for final consumers without a PIN, this field can be left blank or marked “Not applicable.”) [rsm.global]
  • Line item details: a brief description of the goods or services sold; the quantity of each item and unit of measure; and the item code for each supply as specified by the Commissioner. (KRA maintains standard product/service codes to categorize supplies.) [rsm.global]
  • Amount and tax details: the total gross amount (total including VAT), the applicable tax rate for each item or line, and the tax amount charged (VAT amount). For VAT-exempt or zero-rated supplies, the rate (0% or “Exempt”) is indicated and tax amount would be zero. The invoice may also show subtotals per rate category. [rsm.global]
  • Unique codes and security features: The invoice must contain a Quick Response (QR) code and typically a digital signature or electronic signature applied by the TIMS device. The QR code (and/or a fiscal signature) allows verification of the invoice’s authenticity by the buyer or tax officers – it encodes key information and confirms the invoice was registered in the KRA system. [rsm.global] [openenvoy.com]
  • Reference to original invoice (for notes): If a Credit Note or Debit Note is issued, it must reference the original invoice number that it amends. This links any adjustments to the initial transaction record in the system. [rsm.global]
  • Other prescribed info: Any other details the Commissioner may require (the law leaves room for KRA to specify additional data if needed). For example, invoices also typically include the business’s address/contact, the device ID or ETR serial number used to issue it, and the invoice type (original, copy, etc.), as provided in KRA’s technical specifications. [rsm.global]
• Generation Process: In practice, businesses have a few options to comply: they can use a certified ETR device connected to their point-of-sale or billing system, or use KRA’s eTIMS software/portal solutions. In all cases, the process is similar – the invoice data is entered (or generated by the POS), the TIMS software/hardware appends the required codes (including a control unit serial number and TIMS invoice number) and signs the data, then returns an approved electronic invoice which can be printed or emailed to the customer. The ETR/eTIMS also automatically transmits the invoice data to KRA’s central system in the required format. [storecove.com], [storecove.com]
• Invoice Format for Buyers: Customers receive the invoice typically as a printed receipt with a QR code or as a PDF document containing the QR code and all details. The underlying data (XML) is what’s sent to KRA. The presence of the QR code on the invoice allows a buyer (or KRA auditor) to scan and verify that the invoice is indeed recorded in KRA’s database.
• Validation: Every invoice is essentially validated in real-time. KRA’s TIMS model is a clearance system – invoices must be generated through an approved system that instantly checks and logs them with the tax authority before (or at the moment) they are issued to the buyer. This ensures authenticity (no fake or altered invoices) and that key fields (like PINs and tax calculations) are correct. If an invoice is not generated through TIMS (for a non-exempt transaction), it is not considered a valid tax invoice for VAT purposes. [openenvoy.com] [kra.go.ke]

Data Transmission to Authorities (E-Reporting) and Timing

• Real-Time Transmission: Under the TIMS framework, invoice data is reported to KRA at the time of issuance. The moment an invoice is generated on the taxpayer’s device or software, the data is sent electronically to KRA’s servers (via internet) and a validation response is received almost instantly. In effect, every invoice is logged with the tax authorities before being finalized. There is no requirement for businesses to separately compile and submit periodic invoice lists, because the system feeds each invoice to KRA continuously. This “clearance” model acts as live e-reporting, ensuring KRA has a transaction-level record in near real-time. [openenvoy.com], [banqup.com]
• Transmission Channel and Format: The data is transmitted through the TIMS online platform or API. Businesses using eTIMS have options: a web portal, a standalone software, or direct system integration (via APIs such as the Virtual or Online Sales Control Units). All methods result in the invoice details being uploaded in the mandated format (XML) to KRA’s central system. In technical terms, invoices are digitally signed by the device and sent as an encrypted payload to KRA’s servers, which then store the data and can send back a validation code or simply rely on the device’s unique identifiers. [kra.go.ke], [kra.go.ke]
• Requirement of Prior Clearance: The law effectively requires that the invoice be transmitted to KRA’s system “in the manner specified” by the Commissioner. In practice, this means before giving the invoice to the buyer, the supplier’s system should have received the necessary approval codes (i.e., the unique invoice ID/QR code after successful transmission). Businesses are expected to ensure connectivity for real-time or near-real-time syncing. KRA highlights that eTIMS can work via various internet-connected devices to facilitate this. If connectivity is momentarily unavailable, invoices may be queued and sent once connection resumes (near-real-time). [rsm.global] [storecove.com] [kra.go.ke], [kra.go.ke]
• Latency and Deadlines: Normally, the reporting is instantaneous, so there is no separate “X days after invoice issuance” allowance. The goal is immediate invoice reporting as sales happen. However, the regulations account for exceptional cases of system downtime: if the taxpayer’s system or the TIMS service is down, the business can continue issuing invoices (perhaps manually or stored offline) but must notify KRA within 24 hours of any system failure. All invoices issued during an outage must then be entered into the electronic system as soon as it’s back up. The law states that once normal operation resumes, those sales recorded by other means should be promptly recorded in eTIMS. This effectively means if an invoice couldn’t be transmitted at the time of sale due to technical issues, it should be reported immediately after the issue is resolved (with no specific day-limit, just “when service returns”). [rsm.global]
• No Separate Summary Reporting: Aside from the real-time individual invoice transmission, Kenya does not require separate periodic e-reporting of invoices. The continuous feed of invoice data to KRA replaces the need for, say, monthly SAF-T files or sales listings. The monthly VAT return is now being pre-populated by KRA using the collected invoice data (see below), which further reduces the need for taxpayers to send any additional reports of transactions.
• Data Receipt and Usage by KRA: Once transmitted, each invoice’s data is stored in KRA’s systems. KRA can cross-check sales and purchase records (e.g. verifying if one taxpayer’s sales appear as another’s purchases). Starting 2024, KRA uses this data to automatically validate VAT declarations – any purchase without a corresponding e-invoice on record will be disallowed in the VAT return. Thus, the real-time e-invoice data feeds directly into compliance enforcement and return preparation. [kra.go.ke], [kra.go.ke]
• E-Reporting for Exempt Cases: For transactions outside the e-invoice system (e.g. imports or non-resident services), businesses report those via the normal VAT return (import VAT through customs entries, etc.). There isn’t a real-time invoice report in those cases, but KRA’s new system does cross-reference import data from customs. The 2024 public notice made clear that import VAT claims will only be allowed if matched with existing customs import declarations. In essence, KRA is ensuring that all credit claims are backed either by an e-invoice or a customs record. [kra.go.ke]

Penalties for Non-Compliance

• Denial of Tax Deductions/Input VAT: As noted, since 2024 any purchase invoices that are not electronic (TIMS-compliant) simply won’t count for tax purposes. Businesses will lose out on input VAT credits or expensing those costs. This is a indirect “penalty” creating a financial incentive to only accept electronic invoices from suppliers. [kra.go.ke]
• Regulatory Offenses: Failing to comply with any provision of the e-invoicing regulations, or interfering with the system (e.g. tampering with the device or using it improperly), is legally an offense. The 2024 Electronic Invoice Regulations specify that a person committing such offense is liable to a penalty of twice the amount of tax due. For example, if a sale was not reported and thus KRA was deprived of KES 10,000 in VAT, the penalty can be KES 20,000. This “double tax” penalty underscores that non-compliance typically relates to underreported tax. It covers general non-compliance as well as acts like uninstalling or altering the ETR without notice. [ey.com], [rsm.global] [rsm.global]
• General Tax Penalties: In addition to the above, Kenya’s Tax Procedures Act imposes broader penalties for tax evasion or failing to maintain proper records. According to guidance, non-compliance with e-invoicing rules could invite fines up to KES 1,000,000 and/or imprisonment up to 3 years upon conviction. In practice, such severe penalties (including jail) would likely apply in cases of deliberate fraud or persistent breach. Minor or first-time breaches might result in warnings or smaller administrative fines, but the law allows heavy punishment. [storecove.com]
• No Penalties during Grace for New Users: As mentioned, KRA temporarily waived penalties for non-VAT businesses until Mar 31, 2024 to facilitate onboarding. After that date, any business not using eTIMS as required could face the standard penalties. [sovos.com]
• Enforcement and Compliance Support: KRA has been active in enforcement but also in support – conducting stakeholder education and offering free software (eTIMS) to lower compliance costs. Still, after deadlines expired, KRA expects full adherence. In press releases, KRA has pledged to support taxpayers in the transition but reminds that complying with electronic invoicing is mandatory under law. [kra.go.ke] [sovos.com], [kra.go.ke]

Archiving Requirements and Retention Period

• Digital Record Retention: Electronic invoices must be archived and preserved for at least five (5) years for VAT/tax purposes. This aligns with Kenya’s Tax Procedures Act, which generally requires taxpayers to keep records (including invoices, ledgers, etc.) for five years from the end of the tax period to which they relate. Even if a business replaces its ETR or changes systems, the data from the old system must be retained for 5 years. [edicomgroup.com], [openenvoy.com] [storecove.com]
• Format of Archiving: The invoices should be kept in digital format with all their details and integrity intact. Since TIMS invoices are electronically signed and contain unique codes, businesses typically will archive the electronic copies (XML or PDF with QR code) as received from the system. This ensures that if audited, the business can produce the original electronic invoice file with its signature/QR for verification.
• Accessibility: Archived e-invoice records must be available for review by authorities. KRA’s system itself keeps a copy of all transmitted invoices, but taxpayers are still expected to maintain their own records. The TIMS devices/software have storage capacity and logs – per regulations, the system must be capable of storing and printing the data on demand. Taxpayers can retrieve past invoices through the eTIMS portal or from their integrated systems. [rsm.global]
• Safeguarding Records: Businesses are expected to ensure the data’s integrity over the retention period. The system logs and security features help with this. It’s advised to keep backup copies of the invoice data. The law also requires keeping a system ledger of maintenance – i.e. records of any time the invoicing system software is updated or serviced – to show that the system remained compliant and data was not corrupted. [ey.com]
• Retention Beyond 5 Years: If there are ongoing tax audits or disputes, records might need to be kept longer. But generally, 5 years is the standard retention limit for VAT invoices in Kenya (unless another law specifies otherwise for certain cases).

Pre-Filled VAT Returns (Recent Development)

• Introduction of Auto-Populated Returns: In December 2024, KRA launched a system to pre-fill the monthly VAT return form for taxpayers based on information already available to KRA. This includes sales output tax and purchase input tax data drawn from TIMS e-invoicing and from customs records. The initiative aims to simplify filing for taxpayers and improve accuracy. [tpa-global.com]
• Timeline: KRA initially announced the simplified, pre-populated VAT return would start with the January 2024 period, but this was adjusted to start with the February 2024 tax period (filed in March 2024). In practice, there was a pilot roll-out: draft pre-filled returns were generated for some taxpayers in late 2024. According to a tax alert, KRA populated the November 2024 VAT returns data in draft (made available by 20 December 2024 for review) as a test, while still requiring a normal self-assessed return for that month. The fully effective date for mandatory use of pre-filled returns was 1 January 2025 onward (meaning the return for January 2025, due by Feb 20, was entirely pre-filled). [kra.go.ke] [tpa-global.com] [tpa-global.com], [tpa-global.com]
• How It Works: Each month, KRA’s iTax system now takes the sales invoices a business issued (as recorded through TIMS) and the purchase invoices received (as recorded through suppliers’ TIMS, matched to the business’s PIN), as well as import VAT data from customs, and automatically calculates the output VAT, input VAT, and net VAT for the return. The taxpayer, when logging into file the VAT return, is presented with a pre-drafted return containing these figures. The taxpayer needs to review and confirm or correct the return before submission. Essentially, filing has become more of a reconciliation/confirmation exercise. [kra.go.ke]
• Impact on Compliance: Under this system, any input VAT claim that is not backed by a TIMS-generated invoice or a corresponding import declaration will not appear on the return. KRA explicitly warned that unsupported input VAT will “not be allowed” in the return. This means if a supplier fails to use eTIMS, their customer’s pre-filled VAT return will not show that input, effectively disallowing the credit. Taxpayers are thus strongly incentivized to ensure all their suppliers comply (and to reject any paper/manual invoices). For output VAT, KRA will also know if a taxpayer tries to under-report, since all their TIMS-issued invoices are already accounted for. [kra.go.ke]
• No Pre-Filled = Manual Filing: For periods or taxpayers not covered by the pre-fill (for example, prior periods or any that had issues), the normal process of self-filing by the 20th of the following month remains. KRA advised taxpayers to file the January 2024 return by 20th Feb 2024 manually (since pre-fill was deferred to Feb data). Once the simplified return kicked in, taxpayers still have the responsibility to check the KRA-prepared return and submit it by the due date (the 20th of the next month). If the data doesn’t match their records, they would need to investigate discrepancies (usually meaning some invoices weren’t transmitted correctly). [kra.go.ke]
• Government Strategy: The pre-populated return is part of KRA’s efforts to leverage digital reporting for efficiency. It mirrors global trends where e-invoicing data is used for “transaction-level reporting” and easing compliance. Similar approaches are noted in countries like Italy (pre-filled VAT ledgers) and others. For Kenya, this was a natural next step after achieving near-universal e-invoice coverage in 2023/24. KRA continues to provide guidance and sensitization to ensure taxpayers adapt to this new filing method. So far, this applies to VAT; other tax types could follow suit in the future using the rich data being collected. [tpa-global.com] [kra.go.ke]

• See also
  • E-Invoicing/Real Time Reporting – What can you find on VATupdate.com
  • Worldwide Upcoming E-Invoicing mandates, implementations and changes – Chronological
  • Country Profiles on E-Invoicing, E-Reporting, E-Transport, SAF-T Mandates, and ViDA Initiatives

• Join the Linkedin Group on Global E-Invoicing/E-Reporting/SAF-T Developments, click HERE