It is a requirement for all persons carrying on business in Kenya, whether registered for VAT or not, to electronically generate their invoices through eTIMS. Furthermore, only expenditures supported by eTIMS-compliant invoices will be allowed as a deduction for income tax purposes.

However, the Tax Procedures (Electronic Tax Invoice) Regulations, 2024 exclude the
following transactions from the requirements of an electronic tax invoice:

Exempted Transactions
1. Emoluments;
2. Imports;
3. Investment allowances including internal accounting adjustments;
4. Airline passenger ticketing;
5. Interest;
6. Fees charged by financial institutions as listed below:

• A bank or financial institution or mortgage finance company licensed and the
  Banking Act (Cap. 488);
• An insurance company licensed under the Insurance Act (Cap. 487);
• The Kenya Reinsurance Corporation established by the Reinsurance Corporation
  Act;
• A building society registered under the Building Societies Act (Cap. 489);
• The National Housing Corporation established under the Housing Act (Cap. 117);
• A co-operative society registered under the Co-operative Societies Act (Cap. 490);
• The Kenya Post Office Savings Bank established by the Kenya Post Office
  Savings Bank Act (Cap. 493B);
• The Agricultural Finance Corporation established by the Agricultural Finance
  Corporation Act (Cap. 323); and
• A person licensed under Part VII of the Hire-purchase Act (Cap. 507)

7. Expenses subject to withholding tax that is a final tax such as rent payment to
non-residents, qualifying interest among other expenses;
8. Services provided by a non-resident person without a permanent establishment
in Kenya; and
9. Any other exclusion as may be provided under section 23A of the Act.

This means that taxpayers will not be required to support such expenditure with invoices generated through eTIMS.

Get in touch with our tax service team for any clarification on eTIMS matters.