💼 KRA Wants End to KES 5M eTIMS Exemption for Better Tax Compliance
The Kenya Revenue Authority (KRA) has proposed removing the KES 5 million eTIMS exemption for resident businesses, stating that it hinders tax collection and weakens efforts to formalize the informal sector. The exemption, introduced through the Tax Procedures (Amendment) Act 2024, currently allows businesses with annual turnover below KES 5 million to operate without generating electronic tax invoices.
📉 Why KRA Opposes the Exemption
KRA argues the exemption has restricted tax net expansion, stating that:
- Only 41% of non-VAT taxpayers have adopted eTIMS
- The current framework encourages exclusively informal trading among small businesses
- It limits visibility of financial flows and reduces oversight in the cash-driven informal economy
📢 “We’ve offered multiple simplified options, but the exemption is holding back integration,” said Rispah Simiyu, Commissioner for Large and Medium Taxpayers.
🧾 What Is eTIMS?
The Electronic Tax Invoice Management System (eTIMS) is a digital platform designed to:
- Track real-time business transactions
- Improve transparency in business-to-business operations
- Limit tax evasion through fake invoicing or inflated expense claims
Before the KES 5M exemption, small and large businesses alike were required to issue e-invoices—creating an integrated, traceable supply chain.
📊 Tax Goals and Informal Sector Focus
KRA’s long-term targets include:
| Target Year | Active Taxpayers | Revenue Goal (KES) |
|---|---|---|
| 2028 | 12.27 million | 4.59 trillion |
With 85% of new jobs created by the informal sector, KRA is focused on digitizing micro and small enterprises to:
- Increase tax contributions
- Improve formal business linkages
- Encourage upward mobility into formal supply chains
🗣️ Concerns Behind the Exemption
When introduced, the KES 5M threshold aimed to:
- Ease compliance for small businesses
- Encourage participation in government tenders and large contracts
- Reduce administrative burdens for low-volume traders
But KRA now believes that the cost of lost visibility and tax leakage outweighs the initial benefits.
⚠️ Without mandatory e-invoicing, small traders are excluded from larger economic ecosystems.
📦 Summary Table: KRA’s Push to Scrap eTIMS Exemption
| Item | Details |
|---|---|
| Exemption Threshold | KES 5.0 million annual turnover |
| eTIMS Requirement | Not mandatory for exempt businesses |
| KRA Concern | Lost visibility, weak compliance, tax evasion |
| Goal | Expand taxpayer base, increase digital tracking |
| Affected Sector | Informal micro and small enterprises |
| KRA Target | KES 4.59T revenue, 12.27M taxpayers by 2028 |
🎯 Final Thoughts on KRA’s eTIMS Reform Push
With KRA wanting to end the KES 5M eTIMS exemption, the push signals a broader agenda to digitize the informal sector, strengthen tax enforcement, and raise national revenues. While the exemption initially aimed to protect small businesses, KRA believes that universal e-invoicing is critical for financial transparency and equitable taxation.
The final decision may significantly reshape Kenya’s tax landscape for SMEs in the years ahead.
