What the eTIMS tax codes mean
Every line on an eTIMS invoice carries a tax treatment, and getting it right per item is the difference between a correct invoice and a VAT error. The three you deal with most are standard-rated, where the standard VAT rate applies; zero-rated, which is still a taxable supply but at 0%; and exempt, which sits outside VAT entirely.
The distinction between zero-rated and exempt trips many businesses up, because both mean no VAT is charged but they are treated differently on your return and for input VAT recovery. Mapping each product and service to its correct code once, in your system, means every invoice applies the right treatment automatically. The classifications and the standard rate change, so confirm the current position for your specific products with KRA.
Get this right and it runs quietly in the background of your business. Get it wrong and you risk rejected invoices, disallowed expenses for your customers, and exposure during a KRA review under the Tax Procedures Act. Confirm the current rules and any penalty amounts with KRA, as they change.
Compliance is not extra admin if the system does it for you on every transaction.
How to set tax codes correctly
A practical path for a Kenyan business. Work through it in order.
- 1
List your products and services
Write down what you sell, grouping items that share a tax treatment so you can classify them efficiently.
- 2
Classify each as standard, zero-rated or exempt
Assign each its correct code, confirming the position for anything you are unsure about with KRA or a tax adviser.
- 3
Set the codes in your system once
Map each product to its code in your POS so every invoice applies the right treatment automatically.
- 4
Review when rates or classifications change
Rates and classifications change. Review your mapping when they do so your invoices stay correct.
- 5
Keep reconciled records
Reconcile what you issue and receive as you go, so any reporting and filing summarise records you already hold rather than a month-end reconstruction. KRA can review records going back several years.
- 6
Confirm the current rules with KRA
Rates, thresholds, exemptions and deadlines change. Before relying on a specific figure, confirm the current position at kra.go.ke or with your tax adviser.
Common mistakes to avoid
Confusing zero-rated and exempt
Both mean no VAT charged, but they are treated differently on your return and for input VAT. Classify each correctly, not interchangeably.
Applying one rate to everything
A mixed range needs per-item codes. A blanket rate over or under charges VAT on part of your sales.
Never reviewing the mapping
Rates and classifications change. A mapping set once and forgotten can drift out of date.
Waiting for a deadline before getting compliant
Every uncompliant transaction is a gap you have to explain later. Getting compliant now is cheaper than catching up under pressure.
Relying on a system that cannot work offline
Connectivity is not guaranteed everywhere in Kenya. Use a system that records offline and transmits to KRA when the connection returns, so you never fall out of compliance during an outage.
A shop fixes its VAT mix
A shop in Nakuru sold a mix of standard-rated goods and some items that should have been zero-rated, but it charged the standard rate on everything because that was simpler.
It worked through its product list, classified each item correctly, and set the codes in its system. Now each sale applies the right treatment automatically.
The shop stopped overcharging VAT on the zero-rated items, its invoices became correct per line, and its VAT return splits finally matched its sales.
Trading without eTIMS-compliant tax invoices risks KRA penalties, blocked VAT input claims for your customers, and receipts a business buyer cannot expense.
Veira signs every sale to KRA eTIMS automatically, so each receipt is compliant the moment it prints, with no separate device to reconcile.
How Veira handles this for you
Veira is built for Kenyan businesses. It issues compliant KRA eTIMS invoices automatically on every sale, applies the right tax treatment per item, captures the buyer KRA PIN for business customers, keeps your records reconciled and ready for filing, and reconciles M-Pesa and Pochi payments to each sale.
It runs on a free handheld terminal or the phone you already own, keeps working offline, and runs from KES 2,999 a month with a free terminal and a 30-day money-back guarantee. See how Veira works, or book a free demo.
Frequently asked questions
What are the eTIMS tax codes?
What is the difference between zero-rated and exempt?
Why does the tax code matter on each line?
How do I know the right code for my products?
Does Veira handle tax codes automatically?
Does Veira handle this automatically?
How much does eTIMS-compliant software cost?
eTIMS tax codes comes down to recording the right thing, the right way, through a compliant system, and Veira does exactly that without extra work. See how Veira works, or book a free demo. Always confirm current KRA rules and rates at kra.go.ke, as they can change.