The Kenya Revenue Authority has given taxpayers a lifeline. As the June 30, 2026 deadline for filing 2025 income tax returns draws closer, KRA confirmed that businesses may declare valid expenses not backed by eTIMS or TIMS electronic invoices, but the window is narrow and the conditions are firm.
KRA has allowed taxpayers to declare valid business expenses that may not be supported by eTIMS or TIMS invoices. Those expenses may be uploaded during filing and will remain subject to validation by KRA after submission. The authority was equally clear that this is a one-time concession. From the 2026 Year of Income onwards, all declared income and expenses must be supported by valid electronic tax invoices generated and transmitted through eTIMS or TIMS.
Why This Matters Now
This relief did not arrive by accident. It responds to a practical problem that has troubled many businesses throughout the 2025 financial year: a significant portion of Kenya’s economy still runs on informal transactions, and many suppliers either cannot or do not issue eTIMS-compliant receipts.
Despite onboarding over 500,000 taxpayers onto eTIMS by late 2025, compliance remains uneven, particularly among informal and mid-sized businesses. For larger businesses that source goods from small traders, jua kali artisans, or unregistered vendors, this gap created a real filing headache. A small furniture maker in Gikomba who buys timber from informal suppliers who do not issue electronic invoices faced the prospect of losing legitimate deductions entirely.
KRA addressed part of this problem through a technical upgrade to iTax. The updated iTax system upgraded the existing Manual Non-eTIMS CSV upload feature. Taxpayers can now declare informal expenses by uploading structured CSV files, and the system processes these claims instantly upon upload without requiring prior approval from tax officers. Built-in automated error detection scans documents immediately, flagging incorrect entries and guiding users through required fixes.
The Bigger Picture: A Stricter Tax System Takes Hold
This temporary relief sits inside a much larger structural shift in how KRA administers tax compliance. From January 1, 2026, KRA began validating income and expenses declared in income tax returns against TIMS and eTIMS data, withholding tax records, and customs import records.
The implications go beyond a software update. Expenses lacking proper eTIMS documentation will be disallowed, increasing taxable income and risking potential penalties and interest. Put plainly: if a business claims Ksh 500,000 in repairs but only Ksh 100,000 traces back to eTIMS records, KRA disallows the Ksh 400,000 balance and taxes the business on it as income.
Taxpayers most affected include professionals and consultants earning from multiple income streams, small and medium-sized enterprises dealing with informal or partially compliant suppliers, businesses seeking to claim expenses from suppliers unable or unwilling to issue eTIMS invoices, and taxpayers pursuing VAT refunds or reporting tax losses not fully supported by system-generated data.
What Businesses Must Do Before June 30
Filing accurately under the new system demands more than gathering receipts at the last minute. KRA has clarified that businesses can still deduct legitimate expenses even without an eTIMS receipt, but they cannot simply list those expenses and expect KRA to take their word for it. Supporting schedules with supplier PIN numbers must be uploaded to iTax before filing proceeds. If a supplier fails to capture a buyer’s PIN on eTIMS, that expense will be automatically disallowed during the 2026 filing.
KRA has encouraged taxpayers to request eTIMS and TIMS schedules of their annual income and expenses from designated account managers as an early reconciliation step. Doing this before filing, rather than after a return is rejected, protects against avoidable disputes.
For businesses whose accounting systems do not yet talk to eTIMS, the cost of delay compounds fast. Because validation happens at submission, iTax may block or flag returns if figures do not match KRA’s data, exposing taxpayers to late filing penalties. Timing differences between accounting records and eTIMS data also cause mismatches, while gaps in ERP or point-of-sale integrations worsen the problem.
The Penalty for Missing the Deadline
Missing June 30 carries real financial consequences. The late filing penalty stands at Ksh 2,000 for individuals or five percent of the tax due, whichever is higher, with late payment interest accruing at one percent per month on any unpaid balance. Beyond the arithmetic, KRA warned that taxpayers who fail to file returns by June 30, 2026 will be subject to default assessments in accordance with Section 29 of the Tax Procedures Act, Cap 469B.
After June 30, the Grace Period Disappears
The one-time allowance on non-eTIMS expenses closes with the 2025 filing season. What replaces it is a fully automated, real-time validation system with no room for exceptions outside the narrow categories already listed in law.
Early movers gain strategic advantages beyond avoiding penalties: robust compliance infrastructure enables better terms with banks, attracts international partners demanding transparency, and provides certainty in planning cash flows and profits. Conversely, businesses that delay face compounding challenges — retroactive penalties on disallowed expenses and damaged supplier relationships.
