Income Tax Filing Changes Driven by eTIMS: What Taxpayers Need to Know


 In a bid to drive compliance efforts following the implementation of eTIMS, KRA has made it even more exhaustive by ensuring compliance for not only VAT but also Income Tax. The authority has reshaped how Income Tax is prepared, declared and validated using eTIMS. All of this is as an effort of KRA to enforce a more data driven and transparent tax system.

Some of these changes are backed by the law and KRA is just enforcing what has already been stipulated. Section 23A(4) of the Tax Procedures Act (Kenya) and Paragraph 10 of the Tax Procedures (Electronic Tax Invoice) Regulations 2024 for instance stipulates how some expenses are not to be validated against Etims. These exclusions include airline passenger ticketing, employment-related expenses such as salaries and wages, interest expenses, and financial institution charges. Additionally, investment allowances and internal accounting adjustments captured in dedicated tax computation fields are not subject to eTIMS validation.

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Expenses subject to final withholding tax are also excluded, as there is no requirement to declare related gross income and expenses. Imported services from non-residents without a permanent establishment in Kenya fall into this category as well. Importantly, these expenses must be declared strictly within their designated fields in the return; otherwise, they risk being flagged for validation against eTIMS data.

The authority has introduced new reporting requirements in the Annual Income Tax Return effective before April 2026. This new reporting system includes the introduction of two additional sheets. This is the Accounting Adjustments Sheet which will capture items such as accruals, provisions, deferred income, prepayments, and work in progress and the Manual/Non-eTIMS Expenses Sheet which will include transactions not supported by eTIMS invoices respectively.

Taxpayers have to provide detailed transaction-level data, alongside supporting documentation where applicable which will further be subject to additional post-filing validations. This move brings an end to the previous system where aggregate figures were sufficient. The increased granularity underscores KRA’s intention to enhance audit trails and minimize discrepancies between accounting records and tax declarations.

The post-filing returns validation exercise will be systematic and the cross-checking of submitted income tax returns against multiple data sources, including eTIMS records, customs systems, and disclosures made in the additional return sheets. This automated review process aims to ensure completeness, consistency, and compliance with tax laws. Any inconsistencies, unsupported claims, or mismatches between declared figures and eTIMS data may trigger compliance queries, desk reviews, or full-scale tax audits.

If you'd like to talk to a tax and finance expert, you can click here to book a free consultation appointment

To support taxpayers in this transition, KRA enhanced its iTax platform with an integrated dashboard bringing ease in the filing VAT and Income Tax. By enabling the generation of a ZIP file containing detailed CSV records of all transactions for VAT and enabling the downloading of auto-populated income tax returns directly from the iTax system with access to basic taxpayer information, withholding tax credits, and instalment tax payments.  Additionally, taxpayers will also be required to download, populate, and upload a dedicated CSV template under the “Income Tax Return Adjustments” section for expenses not captured in eTIMS attaching supporting documents.

For now, tax compliance is just not a year-end exercise but a continuous, data-driven process; one that demands accuracy, consistency, and readiness at all times. Record-keeping practices, classification of expenses, and reconciliation of financial data with eTIMS records is no longer heresy but crucial otherwise could be costly.

For support and advice, contact RWK Africa — your partner in tax compliance.

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