eTIMS when your business is not registered for VAT
Why Kenyan businesses outside VAT must still issue eTIMS invoices, who counts as carrying on business, and what to do if you have not started.
By Achekam · · 4 min read · For Running a business businesses in Kenya
For years, a small Kenyan business below the VAT threshold could reasonably think that tax invoices were someone else's concern. VAT-registered businesses issued them; everyone else wrote receipts. That is no longer how it works.
Since the Finance Act 2023, electronic invoicing through eTIMS applies to people carrying on business whether or not they are registered for VAT. Some small businesses, landlords and organisations may still be waiting because they assume VAT status is the test. This article explains what changed, who it covers, why your customers care, and how to get going.
What the Finance Act 2023 changed
KRA says that under the Finance Act 2023, from 1 September 2023, all persons carrying on business, including those not registered for VAT, must generate and transmit their invoices to KRA through eTIMS. KRA set this out in a public notice dated 17 November 2023.
KRA puts it plainly elsewhere too: all persons engaged in business must onboard eTIMS and issue electronic tax invoices, whether or not they are registered for VAT.
You can read KRA's public notice on onboarding non-VAT taxpayers on eTIMS, which sets out the requirement, the date from which expenses without eTIMS invoices stop being deductible, and where to get help.
Who counts as carrying on business
The phrase is wider than "a shop". KRA lists persons in business as including companies, partnerships, sole proprietors, associations and trusts, and persons with Monthly Rental Income, Turnover Tax or annual income tax obligations.
KRA's list of who must be registered on TIMS or eTIMS adds body corporates, foundations, joint ventures and individuals with income other than employment income. In practice that reaches:
- the sole trader running a salon or a hardware stall;
- a partnership of two consultants;
- a landlord collecting residential rent under the monthly regime;
- a family trust that owns property;
- an association or foundation that sells goods or services;
- a salaried person with a side business.
Exempt suppliers are covered too
A common misunderstanding is that businesses selling VAT-exempt goods or services are outside eTIMS. KRA says otherwise. Its list of those who must onboard expressly includes businesses supplying VAT-exempt goods and services, such as hospitals, schools, tours and travel agents, and NGOs in business.
So a private school that charges fees with no VAT on them still issues its invoices through eTIMS. The invoice simply shows no VAT.
Why your customers care
Even if you feel no pressure from KRA, your customers will. KRA says business expenditure not supported by an eTIMS-generated tax invoice is not deductible for tax purposes, with effect from 1 January 2024. And KRA says that failing to issue eTIMS-compliant invoices denies customers the ability to claim the expense in their income tax returns, and to claim input VAT.
For a supplier to businesses, that is a commercial problem. A company choosing between two suppliers will prefer the one whose invoice it can claim. Some may hold payment until a proper invoice arrives. How buyers look at this is covered in expenses at risk without eTIMS invoices.
Invoicing without VAT in Achekam
If you keep your books in Achekam, your invoices can reflect your VAT status correctly.
A Kenyan business picks a tax code on each invoice line: standard, zero-rated, exempt, out of scope or reverse charge. Only standard lines carry VAT, at the approved rate for the country. This applies once the Kenya country pack is activated under Settings, in Jurisdiction & regulators. A school's fee line coded exempt, or a non-VAT trader's line coded out of scope, carries no VAT.
The heading follows the business's registration on documents made by the server. A business enters its VAT number in Settings under Firm Profile, and those documents are titled Tax Invoice only when a VAT number is set. One known defect to watch: the invoice PDF downloaded or e-mailed from the invoice screen is always headed TAX INVOICE and cites the South African VAT Act, whatever the business's country or VAT number. Until that is fixed, check what a customer actually receives, so a business outside VAT does not send out something that looks like a VAT invoice.
Every issued invoice also lands in the books. Issuing it takes the next number in the sequence and posts it to the ledger as debtors and sales, so your income and your customers' balances are always current.
Achekam does not send invoices to eTIMS itself yet. Until it does, issue the invoice through one of KRA's channels, such as eTIMS Lite or the eTIMS Client, then enter the control-unit invoice number, internal data and receipt signature it returned. A second person confirms those details before Achekam counts the invoice as fiscalised. For the smallest traders, the simplest channel is often eTIMS Lite on eCitizen, USSD and the app.
What to do this month if you have not started
- Accept that it applies. If you carry on business, eTIMS applies whether or not you are registered for VAT.
- Choose a channel. Small traders and sole proprietors can start with eTIMS Lite; others should compare the options.
- Register and onboard with KRA before your next sale to a business customer.
- Work out which transactions need an invoice. See which transactions need eTIMS.
- Tell your regular business customers that eTIMS invoices are coming, and ask for their PINs.
- Ask your own suppliers for eTIMS invoices, so your expenses stay deductible too.
Pick your channel this week and issue one real invoice through it. The first one is the hardest; after that it is routine.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
