The Kenya Revenue Authority (KRA) has recorded Sh800 million in transactions under the new reverse invoicing system, a move aimed at bringing micro and small businesses that have traditionally operated outside the tax net into compliance.
Introduced on December 27, 2024, reverse invoicing allows buyers, instead of suppliers, to generate tax invoices, making it easier for small businesses to participate in the formal tax system.
Hakamba Wangwe, chief manager in charge of the Electronic Tax Invoice Management System (eTIMS) at KRA, said 4,500 transactions have been processed since the system’s rollout.
“So far, 800 buyers or procuring entities have used reverse invoicing to raise eTIMS on behalf of small taxpayers they have dealt with, and they have pushed 4,500 transactions through the system,” she told the Business Daily in an interview.
The system is anchored on amendments introduced by the Finance Act 2023, which updated Section 23 of the Tax Procedures Act, making eTIMS-generated invoices mandatory for all businesses.
The law also changed Section 16 of the Income Tax Act, stating that only eTIMS invoices are valid for claims when calculating tax liabilities. Businesses with an annual turnover below Sh5 million can now have larger buyers issue reverse invoices on their behalf, with verification mechanisms to ensure accuracy.
KRA reported that in the 2024/25 financial year, it collected Sh2.9 billion through tax base expansion—funds from taxpayers previously outside the official tax register.
System integration with tax-hailing apps, supermarkets, and other large business players is further enabling KRA to capture transactions in high-volume environments.
“The other solution in reverse invoicing is the one that caters to the relatively advanced taxpayers who already have automated systems that already capture all transactions that are taking place. If you look at taxi-hailing apps, for example, at the end of every trip you immediately get a receipt showing your bill. We are fiscalising that and immediately recognising it as an eTIMS receipt. This is system-to-system integration,” Wangwe explained.
KRA has also expanded the use of electronic invoicing for income and expense validation, effective January 1, 2026. From the 2025 income year, the authority will rely solely on eTIMS invoices to verify self-declared revenue and determine which expenses can be deducted when calculating income tax.
