The rollout of the taxman’s compliance platform, eTIMS, is at risk of slow adoption following increasing reports of system downtimes, invoice mismatches and related costs, manufacturers in Kenya have warned.

In a forum bringing together officials from the Kenya Revenue Authority (KRA) and Kenya Association of Manufacturers, company executives also cited a reluctance by suppliers to comply with eTIMS requirements and costly reconciliation process as issues threatening a smooth adoption of the new compliance directive. 

“One of the top concerns from manufacturers is system downtime. When you’re trying to generate an invoice and the system is down, whether it’s network, power, or platform failure, that becomes a tax compliance issue,” explained Thuku wa Thuku, Chief Operations Officer at DigiTax during a workshop organized by the Kenya Association of Manufacturers (KAM).

The Electronic Tax Invoice Management System (eTIMS) is a software application used by the KRA to automate, validate and transmit invoices in real-time. Currently, all business entities, including non-VAT registered ones are required to use eTIMS as part of a bold plan by the taxman to step up compliance.

Stakeholders in the industry said the transition from the earlier Tax Invoice Management System (TIMS) to eTIMS has introduced new technical and administrative burdens for businesses.

These challenges, the manufacturers said, have emerged as the major pain points in the country’s push to reform tax compliance and therefore collections.

For large manufacturers processing thousands of invoices daily, even minor system failures can translate into significant reconciliation costs. 

Already, some companies have resorted to estimating VAT obligations, which is a risky approach as tax reporting increasingly relies on system-validated invoices that are auto-linked to deductible expenses.

The problem is compounded by Kenya’s largely informal supply chains, where many small-scale suppliers lack awareness or technical capacity to generate compliant eTIMS invoices.

“One thing to notice is that Kenya is largely an informal marketplace. The reluctance I’ve seen is due to lack of awareness and, in some cases, not knowing how to use the technology tools to generate compliant invoices,” said Thuku wa Thuku, Chief Operations Officer at DigiTax.

Under the current validation framework, only expenses supported by properly transmitted eTIMS or TIMS invoices are recognised for tax purposes. Any gaps in invoice transmission can, therefore, prevent companies from claiming input VAT or deducting legitimate business expenses, effectively increasing their tax liability.

Thuku noted that nearly three years after rollout, taxpayer awareness remains limited. “Taxpayers are not always aware of the repercussions of failing to comply with eTIMS requirements. You may not be able to claim expenses, meaning you end up paying more taxes because income cannot be offset against expenses,” he said.

Manufacturers also raised concerns over integration bottlenecks between enterprise resource planning systems and tax transmission platforms, alongside limited post-sale technical support from some solution providers.

For many firms, tax compliance has shifted from a routine accounting function to a daily operational process affecting procurement decisions, supplier management and financial reporting.

Additionally, supplier non-compliance within fragmented value chains emerged as another major risk with manufacturers warning that one non-compliant supplier can disrupt an entire compliance chain.

Companies also cited cases of incomplete transmission where sales invoices and credit notes fail to reach KRA systems, creating discrepancies between internal records and tax filings.

High-volume taxpayers face additional pressure from the need to operate multiple TIMS devices, compounding transmission challenges. Limited technical support following the shift to eTIMS has further left some firms struggling to resolve system failures.

Manufacturers also flagged instances where suppliers issue credit notes after payment without notification, triggering reconciliation disputes and exposing businesses to compliance risks.

With tax returns now cross-validated against eTIMS data alongside customs declarations and withholding tax records, inconsistencies are increasingly likely to trigger adjustments, audits or penalties.

Industry players say the challenge will intensify as enforcement tightens under the 2026 validation framework. 

Starting January, 2026, KRA will only recognise expenses supported by properly transmitted TIMS or eTIMS invoices when assessing tax returns. Purchases not validated in real time risk being disallowed for tax purposes, potentially leading to higher tax liabilities and penalties.

According to Thuku, however, the scale of supplier non-compliance remains substantial. “This eventually negatively affects the full realisation of the system,” he said, calling for sensitisation efforts targeting informal suppliers to align entire value chains with the framework.

Despite the challenges, Thuku noted that eTIMS represents a fundamental shift in Kenya’s tax administration model. “eTIMS has moved tax compliance from an annual or monthly exercise to a real-time operational process. Manufacturers can no longer afford manual workarounds or fragmented systems,” he said.

According to KRA, over 500 fuel stations across Kenya have been onboarded onto eTIMS fuel module, marking a major step in tax compliance. 

The taxman says the new system offers end-to-end visibility of petroleum transactions, from importation to retail sale, strengthening compliance and minimizing revenue leakage.

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