The Kenya Revenue Authority (KRA) is advocating for the elimination of the KES 5.0 million eTIMS turnover threshold, asserting it obstructs tax base expansion.
Originally, the eTIMS regulations published as part of the Tax Procedures (Amendment) Act 2024, had exempted resident businesses with an annual turnover below KES 5.0 million from issuing electronic invoices.
The significant decision was made after a round of public participation. By removing burdensome compliance, the threshold was intended to open up contract opportunities with larger businesses for small suppliers.
KRA argues that the exclusion has undermined tax compliance efforts and revenue collection. According to the tax collector, only 41.0% of non-VAT taxpayers have onboarded eTIMS.
The authority firmly believes this policy shift has become a significant hurdle in the crucial efforts to widen the tax net and trace financial flows in the informal economy.
Read: How to Integrate KRA eTIMS API with Inhouse ERPs and Third-Party Softwares
The Commissioner for Large and Medium Taxpayers at KRA, Rispah Simiyu, expressed her frustration with the legislative setback, noting that despite offering “multiple simplified solutions” for small businesses to comply, the exemption has confined smaller enterprises to transacting exclusively with each other rather than integrating them into the formal supply chain.
By 2028, KRA plans to expand its active taxpayer numbers to 12.27 million and increase tax revenue to KES 4.59 trillion. With the informal sector creating 85% of new jobs, the KRA prioritises bringing these businesses into the digital tax system to meet collection goals.
Prior to the exemption, eTIMS helped curb tax evasion, mandating electronic invoices that transparently recorded both small trader sales and large firm expenses. This limited the ability to inflate costs and dodge taxes.
