Who needs to comply with eTIMS in Kenya?

The "VAT only" myth

Many small business owners still believe that because they are not VAT-registered, eTIMS does not apply to them. This was true under the older TIMS / ETR system, which targeted VAT-registered taxpayers specifically. It has not been true since 2024.

The 2024 regulations widened the scope to all persons carrying on business, regardless of VAT status. A boda rider issuing service invoices, a salon doing manicures, a freelancer billing a corporate client, a wholesaler in Eastleigh, a small farm selling to a supermarket: all of them need to issue eTIMS invoices.

The distinction matters because business buyers downstream now need an eTIMS invoice to deduct the expense. If a small supplier cannot issue one, the corporate or NGO buyer will eventually switch to a supplier who can.

Who exactly is in scope

The regulations cover every individual or entity carrying on a business activity in Kenya. In practice this means:

• Sole proprietors and self-employed traders (whether or not VAT-registered).
• Partnerships and limited liability partnerships.
• Private and public limited companies.
• Cooperatives, SACCOs, and member-owned bodies that engage in business.
• NGOs and other non-profits, to the extent of any business income they earn.
• Foreign businesses with a Kenyan tax presence.
• Informal sector traders who issue invoices to formal sector buyers.

Buyer-initiated invoicing for small suppliers

KRA recognised that requiring every roadside mama mboga or one-person service to register on eTIMS would be impractical, so the regulations include a buyer-initiated invoicing mechanism for very small suppliers. Under this rule, if a registered business buys from a supplier whose annual turnover is below KES 5 million and who is not registered on eTIMS, the buyer can generate the eTIMS invoice on the supplier's behalf.

This is the route many formal businesses use to keep buying from small suppliers without losing the expense deduction. The buyer issues a self-billed eTIMS invoice naming the supplier, and KRA accepts that as a compliant document for the buyer's tax purposes.

For the small supplier, this is sometimes the only practical way to keep larger customers, because corporate buyers cannot accept a handwritten receipt as a deductible expense anymore.

The narrow exemptions

Legal Notice No. 64 of 2024 lists a small set of exempt supplies, but the list is narrower than people assume. Genuinely exempt categories include things like emoluments (salaries paid to employees), interest and dividends, fees charged by financial institutions in specific contexts, and certain regulated supplies. Most ordinary business sales do not qualify.

If you are unsure whether your activity is exempt, the default assumption should be that it is not. Treating yourself as exempt when you are not is the most expensive interpretation: it leaves your buyers without deductible expenses and exposes you to penalties when KRA queries the transactions.

How KRA enforces this in practice

The penalty for non-compliance under the regulations is up to KES 1 million or 10% of the tax involved, whichever is higher, per the regulations. But the bigger commercial pressure is downstream: from 1 January 2024, expenses paid without an eTIMS invoice are not deductible against income tax, and from January 2026 KRA validates declared income and expenses directly against eTIMS data.

A small supplier without eTIMS therefore loses formal customers, not because their goods are wrong but because the buyer cannot keep them as a deductible expense. Combined with the Tax Compliance Certificate now requiring eTIMS registration, the practical reality is that operating outside eTIMS shuts a business out of most formal trade.

How to find out if you need to register

1. Do you carry on business?. If you sell goods or services and the activity is more than a one-off, you carry on business in tax terms. That includes informal trade, side income, online sales, and consultancy.
2. Are your sales fully exempt under the regulations?. Check the exempt categories in Legal Notice 64/2024. If your supplies are not on that narrow list, you need eTIMS. If you are not sure, assume you do.
3. Pick the right channel. Tiny service businesses can start with eTIMS Lite on Android or iOS. Shops, restaurants and high-volume traders should integrate through OSCU via a certified POS provider so every sale is transmitted automatically.

How Veira handles this

Veira covers every sales channel a Kenyan business uses: B2C cash and M-Pesa sales, B2B invoices that capture the buyer PIN at checkout, and split-bill or table-order flows for restaurants. Each transaction issues a compliant eTIMS invoice automatically, so the question of whether you are in scope stops being one you have to think about per-sale.