LMM Financial Partners

⚠️ BUSINESS OWNERS: KRA Reverse Invoicing Explained Simply

Do you buy goods or services from:
• Fundis
• Casual workers
• Small suppliers
• Anyone who can’t issue an eTIMS invoice?

👉 KRA now requires YOU to create the invoice.

✅ This is called Reverse Invoicing
✅ You raise the invoice through eTIMS
✅ It protects your expense during audits

🚫 M-PESA messages alone are no longer enough
🚫 Cash receipts without eTIMS = tax risk

📌 Remember:
Reverse invoicing helps you support the expense, but you can’t claim VAT on it.

No invoice from supplier? You must generate one.

Stay compliant. Avoid penalties.

Is Rent Income also subject to eTims?The answer is...

Yes — rent is now effectively subject to eTIMS requirements in Kenya under the new tax compliance regime. Here’s what’s new and what it means:

📌 1. Rent Income & eTIMS

The Kenya Revenue Authority (KRA) has made it clear that individuals earning rental income must be onboarded onto eTIMS and issue electronic tax invoices — including for rent — if they want to remain compliant, especially when applying for a Tax Compliance Certificate (TCC).

📌 2. Why Rent Falls Under eTIMS

According to KRA, all persons engaged in business must issue eTIMS electronic tax invoices for transactions related to business income — and this now explicitly includes Monthly Rental Income (MRI).

📌 3. Tax Compliance Certificate (TCC) Requirement

If you earn rental income (e.g., from letting out property), KRA has stated that to be issued a TCC, you must use eTIMS to generate invoices for that rental income.

📌 4. Tax Return Validation (Effective Jan 2026)

From 1 January 2026, KRA will validate income and expenses declared in tax returns against eTIMS-generated data. This means:

Rental income you declare on your return must link to eTIMS invoices in KRA’s system.

Expenses you want to claim (if allowed) also need eTIMS invoices.

📌 5. Exemptions

There are limited exceptions under the Tax Procedures Act and related regulations, but rental income is not generally exempt from eTIMS if you are required to invoice and report it as business income.

💡 Key Takeaway

Yes — rent (as business/rental income) is now covered by eTIMS requirements. If you are collecting rent professionally or regularly (beyond informal personal arrangements), you’ll need to:

Register for eTIMS with your KRA PIN.

Issue eTIMS electronic tax invoices for rent collected.

Ensure those invoices are reflected in your KRA data — especially if you want tax compliance status or to file returns correctly.

Are ETIMS receipts/invoices the same as ETR receipts/invoices
Here is the clear distinction in Kenya’s tax system:

1. ETR Receipts/Invoices (Old System)
ETR = Electronic Tax Register

👍This was the old VAT control system.

How it worked:

You used a physical ETR machine
✅It printed fiscal receipts
✅It only captured basic sales info
✅Data was not fully real-time to KRA

Key limitations:

✅Only worked well for VAT reporting
✅Could be manipulated
✅Could not properly track expenses, inventory, withholding, etc.

2. eTIMS Receipts/Invoices (Current System)
eTIMS = electronic Tax Invoice Management System

This is the new national digital tax infrastructure (and it is compulsory).

eTims does much more than ETR:

🎯Important: From 2024 onward, only eTIMS-generated receipts/invoices are recognized as valid tax expense proof.
🎯If your supplier is still giving you “ETR receipts”, your expense is technically non-deductible.

Why This Matters for Your Business
This is why KRA is silently forcing businesses to:

✅Shift from informal suppliers
✅Stop cash purchases
✅Move to postpaid corporate services
✅Buy only from eTIMS-compliant vendors

🎯Because every expense must now be digitally verifiable.

Bottom line:
ETR was a receipt printer. eTIMS is a full digital tax surveillance and compliance system.

📌 DECEMBER 2025 TAX DEADLINES REMINDER – KENYA 🇰🇪
As we close the year, here’s a quick compliance checklist to help you stay tax-ready and avoid penalties:
🔹 1st Instalment Tax – FY ending Aug 2026
🗓️ Due: 20 Dec 2025
🔹 2nd Instalment Tax – FY ending Jun 2026
🗓️ Due: 20 Dec 2025
🔹 3rd Instalment Tax – FY ending Mar 2026
🗓️ Due: 20 Dec 2025
🔹 4th Instalment Tax – FY ending Dec 2025
🗓️ Due: 20 Dec 2025
🔹 VAT Return & Payment – Nov 2025
🗓️ Due: 20 Dec 2025
🔹 PAYE Return & Payment – Nov 2025
🗓️ Due: 9 Dec 2025
🔹 Balance of Tax – FY ending Aug 2025
🗓️ Due: 30 Dec 2025
🔹 PAYE on Directors’ Bonus – Aug 2025 year-end companies
🗓️ Due: Per issuance date
🔹 Withholding Income Tax & Withholding VAT
🗓️ Due: Within 5 working days from payment
🔹 Advance Tax – FY ending Nov 2026
🗓️ Due this month
🔹 Self-Assessment Tax Return – Jun 2025 year-end companies
🗓️ Due this month
✔️ Stay compliant
✔️ Avoid penalties
✔️ Plan ahead before the holiday break 🎄
💬 Need help with filing or tax support? We’re here for you!
hashtag hashtag hashtag hashtag hashtag hashtag hashtag hashtag hashtag hashtag hashtag hashtag hashtag

🚀 Stay Relevant in Finance: Master This One Skill

In today’s fast-changing business world, finance is no longer just about numbers. Routine tasks are being automated, but one skill remains irreplaceable:

💡 Digital & Data Analytics Literacy

Why it matters:

Automation is taking over repetitive tasks.

Businesses rely on data-driven insights for strategic decisions.

Finance professionals are expected to drive strategy, not just report numbers.

With tools like Power BI, Python, Excel automation, ERP analytics, and AI, finance pros can:
✅ Spot risks early
✅ Improve forecasting accuracy
✅ Guide business strategy
✅ Streamline workflows

Bottom line: Finance professionals who master data analytics don’t just stay relevant — they become indispensable.