From January 2026, the Kenya Revenue Authority (KRA) now requires every Kenyan taxpayer filing their 2025 tax returns to ensure that every shilling of income and every shilling of expense declared is supported by an approved eTIMS or TIMS electronic receipt.

Handwritten receipts, verbal agreements, and informal supplier notes are no longer acceptable for tax deduction purposes. If an expense cannot be verified electronically, KRA treats it as taxable income.

Impact on Businesses, Individuals & Side Hustles

This policy affects not only VAT-registered companies but also:

• SMEs
• Freelancers
• Landlords
• Professionals
• NGOs
• Churches
• Schools
• Service providers
• Informal traders

A DJ, baker, tutor, plumber, photographer, mama mboga, salon owner, or landlord must issue eTIMS receipts if their clients need to deduct the expense in their returns.

How KRA Now Matches Tax Information

KRA now cross-checks tax returns against:

• eTIMS supplier invoices
• Customs import records
• Withholding tax submissions
• Income declarations

If you declare KSh 1M in income but eTIMS shows KSh 1.7M, KRA will use the higher figure.
If you claim KSh 500,000 in repairs but only KSh 100,000 is supported with eTIMS receipts, the remaining KSh 400,000 becomes taxable income.

Sector Impacts Across the Economy

This compliance shift is now visible across multiple sectors:

✔ Real Estate

Landlords must issue eTIMS rent receipts. Tenants claiming office rent without digital receipts are being rejected.

✔ SMEs & Manufacturing

Supplies from informal networks are now becoming tax liabilities if not electronically receipted.

✔ Transport

Mechanics, spare-part dealers & service garages must issue compliant receipts for boda bodas, matatus, and fleet operators.

✔ Education, Health & NGOs

Schools, clinics, churches, and NGOs are demanding compliant documentation to avoid tax disallowances.

✔ Importers

Customs declarations are now being matched with tax filings. Mismatches trigger audits.

Financial Consequences of Non-Compliance

Businesses with unverified expenses are experiencing:

• Disallowed deductions
• Higher taxable income
• Increased tax liabilities (up to 30% extra)
• Audits and penalties
• Operational cash flow strain

For many SMEs, the inability to defend expenses is becoming a survival issue.

New Supply Chain Behavior

The market has already adjusted:

• Buyers are now asking: “Do you issue eTIMS receipts?”
• Suppliers refusing to comply are losing customers
• Pricing is shifting as informal goods become tax-expensive
• Digital accounting adoption has accelerated

Broader Economic Effects in 2026

This policy is driving:

• Formalization of informal sectors
• Better tax compliance
• More transparent business records
• Potential inflation from compliance-related price increases

If you cannot support the expense with a valid eTIMS receipt, KRA will tax it as income — no exceptions.

Tax compliance is no longer optional, and documentation now carries real financial consequences.

How Juma Auditors Supports Taxpayers in 2026

At Juma Auditors, we continue to assist Kenyans with:

✔ eTIMS onboarding & training
✔ Tax filing & documentation support
✔ Bookkeeping & compliance
✔ SME audit support
✔ Withholding tax reconciliation
✔ Advisory for individuals & corporates

📌 Website: www.jumaauditors.co.ke
📞 Phone: 0725 948 551