For nearly all Kenyans, every day seems like tax season nowadays. Just when you think you’ve given everything you can give to Caesar, KRA finds a new way to dip into your pockets.
If you’ve been running a business, collecting rent, or simply trying to claim your legitimate expenses, the rules have changed, and the margins for error have narrowed considerably, thanks to the Electronic Tax Invoice Management System, street name eTIMS.
The New Changes That Came in January
On 7 November 2025, KRA issued a public notice saying that from January 1, 2026, it would begin validating income and expenses declared in both individual and non-individual income tax returns against electronic data sources.
This validation would take place automatically upon submission of the 2025 year of income return via the iTax platform.
This means that every shilling you claim as a business expense now needs a digital paper trail to back it up. If a declared expense does not have a valid eTIMS invoice, KRA will treat that expense as profit in its system.
READ: KRA Will Now Treat Unexplained Bank Deposits as Taxable Income
Basically, every shilling spent without an e-invoice gets added back to your taxable income, inflating your profits and increasing your tax liability.
KRA would begin to validate declared income and expenses automatically against three primary sources: TIMS/eTIMS invoices, gross amounts of withholding income tax, and import records from customs systems.
Goodbye, Side Hustle and Consultation Gigs
If you thought this affected large corporations and VAT-registered businesses, you thought wrong. KRA clarified that salaried individuals must declare all sources of income in a single return, not just their salary.
Freelancers, consultants, farmers, online service providers, landlords, and everyone with an additional income stream are now in the frame.
Here’s something many employed Kenyans either don’t know or have chosen not to think too hard about. PAYE, which is the tax deducted from your salary every month, does not close your tax affairs. It never did. It only accounts for your employment income.
You might think to yourself, “How would KRA even know?”
The simple answer is KRA’s visibility into your financial life is broader than you can imagine. Banks report account activity through the Common Reporting Standard, while platforms like Airbnb and Upwork share income data with the tax authorities.
Tenants claim rent as a deductible business expense, and in doing so, create a paper trail that leads straight back to the landlord.
The cost of getting this wrong isn’t just the tax owed. Unreported income attracts penalties and interest, and an audit years down the line can produce a bill covering multiple years of omissions, compounded and painful.
What felt like a manageable grey area has a way of becoming a very clear-cut liability. The law hasn’t changed, just the ability to enforce it.
What Does This Mean for Landlords?
If you own rental property, this affects you directly. Under the eTIMS framework, rental income is treated as business income, which means the same invoicing rules apply.
If your tenant is a business that wants to deduct their rent as an operating expense, they will need a valid eTIMS invoice from you to support that claim. Without one, their deduction gets disallowed, and you can expect that conversation to land in your inbox soon enough.
KRA has gone a step further for landlords specifically. The authority has rolled out an Electronic Rental Income Tax System, eRITS, which facilitates easier payment of monthly rental income tax and enables management of properties, filing, and payment of rental taxes in a simpler and more convenient way through the eCitizen portal.
READ: How to File and Pay Monthly Rental Income on iTax
Treasury Principal Secretary Dr. Chris Kiptoo acknowledged that despite reducing the rental tax rate from 10% to 7.5% to encourage compliance, the government has been collecting only KES 17 billion annually from rental income tax, against estimates suggesting the potential revenue is at least KES 100 billion annually.
That’s a gap of roughly KES 83 billion, and eRITS is one of the tools KRA is using to close it.
KRA estimates that over 60% of landlords remain outside the formal tax system, and a 2022 audit revealed underreporting levels as high as 75% in some Nairobi neighborhoods. Those numbers explain why rental income has become the new focus of enforcement for KRA.
Kenya’s Tax Net Is Tightening
All of this is unfolding alongside a broader government effort to increase domestic revenue without introducing new taxes, a politically delicate balancing act after the 2024 finance bill protests.
The National Treasury has projected the collection of KES 3.02 trillion in the 2025–2026 financial year, and KRA’s increasing reliance on technology is a core component of that strategy.
READ: Ruto Expects Tax Collected From Landlords to Increase by Up To Sixfold
eTIMS is, at its core, a shift from a trust-based tax system to a data-driven one. The days of submitting a return and hoping that the collecting authority trusts you are over.
KRA will now compare your declared income against eTIMS and withholding data and use the higher figure to identify undeclared income.
For expenses, it will rely on the lower of the amounts claimed by the taxpayer and those appearing in eTIMS purchase records, and any mismatch will result in upward tax adjustments, penalties, interest charges, and possible delays or denial of a Tax Compliance Certificate.
What You Need to Do Now
So, what do you need to do to become tax compliant? Ensure that every expense you intend to claim has a corresponding eTIMS invoice. If your suppliers aren’t issuing them, that’s a conversation worth having because their non-compliance becomes your problem at filing time.
For landlords, register your properties on eRITS via the eCitizen portal and start issuing electronic receipts for rent collected.
Lastly, if you have additional income beyond your salary, declare it all in one return.
READ: KRA Reinstates Nil Returns With Automated Verification System to Catch Tax Cheats
Whether you like it or not, Kenya’s tax system is going digital, comprehensively and without exceptions. The informal receipt, the handwritten acknowledgement, or the cash transaction with no paper trail are all relics of a tax environment that no longer exists.
