The Kenya Revenue Authority (KRA) will from January 2026 launch a radical digital crackdown on small traders, using real-time data from electronic invoices and customs records to identify tax evaders in one of the agency’s most comprehensive enforcement pushes to date.
In a public notice issued on Friday, the tax authority said it would begin “validating income and expenses declared in both individual and non-individual income tax returns” against three digital data streams: TIMS or eTIMS invoices, withholding income tax records, and import declarations from customs systems.
The validation will apply to returns for the 2025 tax year submitted through KRA’s iTax platform, representing a significant escalation in the authority’s efforts to widen the tax base through technology.
“This is an effort by KRA to enforce the use of eTIMS for all traders in the formal and informal sector,” said Samuel Mwaura, Tax Partner at Grant Thornton Kenya.
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The eTIMS system, which requires real-time transmission of invoices to KRA servers, has become the centerpiece of the authority’s strategy to create an auditable digital trail to curb evasion.
The new push will specifically target nil filers – those who file returns but declare no taxable income – by cross-referencing their declarations against digital transaction records.
“KRA intends to match withholding tax deducted versus income declared as a matching concept. If not matching, it will be flagged and trigger an audit,” Mwaura explained, adding that importers would face particular scrutiny regarding “how much they declare as income.”
The digital offensive comes against a backdrop of persistent revenue shortfalls. Official data shows KRA collected Sh2.257 trillion in the year through June 2025, missing its revised target by Sh47.3 billion – the third consecutive annual shortfall. This has exacerbated fiscal pressure in at a time the public debt has surpassed Sh11.5 trillion.
The expanded enforcement coincides with major restructuring at KRA’s Times Tower headquarters, including recruitment for senior positions such as Deputy Commissioners, as the authority faces mounting pressure to improve collection, particularly from the informal economy where compliance remains low.
However, tax experts warn the aggressive digital push could spark legal challenges and implementation hurdles.
“We are likely to see an increase in litigations since this means expenses not supported by eTIMS will be disallowed no matter them being genuine expenses,” Mwaura cautioned.
“Not all have implemented use of eTIMS in the informal sector yet they offer services – public transport, taxis, bodaboda for instance.”
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The
Kenya Revenue Authority
(KRA) will from January 2026 launch a radical digital crackdown on small traders, using real-time data from electronic invoices and customs records to identify tax evaders in one of the agency’s most comprehensive enforcement pushes to date.
In a public notice issued on Friday, the tax authority said it would begin “validating income and expenses declared in both individual and non-individual income tax returns” against three digital data streams: TIMS or eTIMS invoices, withholding income tax records, and import declarations from customs systems.
The validation will apply to returns for the 2025 tax year submitted through KRA’s iTax platform, representing a significant escalation in the authority’s efforts to widen the tax base through technology.
“This is an effort by
KRA to enforce the use of eTIMS
for all traders in the formal and informal sector,” said Samuel Mwaura, Tax Partner at Grant Thornton Kenya.
Follow The Standard
channel
on WhatsApp
The eTIMS system, which requires real-time transmission of invoices to KRA servers, has become the centerpiece of the authority’s strategy to create an auditable digital trail to curb evasion.
The new push will specifically target nil filers – those who file returns but declare no taxable income – by cross-referencing their declarations against digital transaction records.
“KRA intends to match withholding tax deducted versus income declared as a matching concept. If not matching, it will be flagged and trigger an audit,” Mwaura explained, adding that importers would face particular scrutiny regarding “how much they declare as income.”
The digital offensive comes against a backdrop of persistent revenue shortfalls. Official data shows KRA collected Sh2.257 trillion in the year through June 2025, missing its revised target by Sh47.3 billion – the third consecutive annual shortfall. This has exacerbated fiscal pressure in at a time the public debt has surpassed Sh11.5 trillion.
The expanded enforcement coincides with major restructuring at KRA’s Times Tower headquarters, including recruitment for senior positions such as Deputy Commissioners, as the authority faces mounting pressure to improve collection, particularly from the informal economy where compliance remains low.
However, tax experts warn the aggressive digital push could spark legal challenges and implementation hurdles.
“We are likely to see an increase in litigations since this means expenses not supported by eTIMS will be disallowed no matter them being genuine expenses,” Mwaura cautioned.
“Not all have implemented use of eTIMS in the informal sector yet they offer services – public transport, taxis, bodaboda for instance.”
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By Brian Ngugi