Hey fellow Nairobi hustler. Whether you’re running a shop in Eastleigh, managing a mid-sized logistics outfit or juggling freelance gigs from your home office in Westlands, this one’s hitting close to home.

It’s January 28, 2026, and if you haven’t already felt the chill from KRA’s latest move, buckle up. Starting January 1, 2026, the Kenya Revenue Authority kicks off automatic validation of every income and expense you declare in your 2025 year of income tax returns (that’s the returns you’ll file this year via iTax). No more “trust me” on your books – KRA’s system will cross-check everything against digital records in real time.

This isn’t some vague future threat; it’s live now, per KRA’s public notice issued back in early November 2025.

The goal? Boost compliance, cut evasion, and make sure the tax base is accurate.

But for everyday business owners relying on informal suppliers or still digitizing records, it could mean disallowed deductions, higher taxable income, flagged returns, audits or even outright rejection. Let’s break it down plainly so you can protect your cashflow before filing season turns stressful.

From the moment you hit “submit” on your 2025 income tax return (individual or business/non-individual), KRA’s AI-powered system scans your declared figures against three main digital sources:

• TIMS/eTIMS Invoices: Only properly transmitted electronic invoices count. These must come from authorized platforms (eTIMS online, desktop, tablet, or eCitizen) and show your correct KRA PIN as the buyer (or seller where relevant). Reverse invoicing might help in some setups, but the key is compliance.
• Withholding Tax Certificates: Your declared income gets matched to gross amounts reported by payers (e.g., clients who withheld tax on professional fees, rent, or services). Declare the full gross – don’t shortchange yourself thinking withholding covers it all.
• Customs Import Records: If your business imports goods, expenses tied to those will be verified against entry data in KRA’s customs systems.

The rule is simple: Most income and expenses need solid eTIMS backing to be deductible. No valid electronic invoice? KRA treats that expense as profit in their eyes, inflating your taxable income and your bill. Ouch.

The Exceptions: What Doesn’t Need eTIMS Proof?

Not everything gets the strict eTIMS treatment – Section 23A of the Tax Procedures Act (plus the 2024 Electronic Tax Invoice Regulations) carves out relief for certain items:

• Salaries and wages (emoluments)
• Import payments (though customs records still apply)
• Investment allowances
• Interest income
• Airline passenger ticketing
• Payments subject to final withholding tax

These are safe zones, but everything else? Get those digital invoices flowing.

Why This Hurts So Many Businesses Right Now

Real talk: Kenya’s economy runs on informal networks – jua kali suppliers, quick cash deals, mama mboga stalls. Many SMEs buy from vendors who aren’t fully eTIMS-compliant yet (or can’t afford the setup). If you spent Sh700,000 on stock without proper electronic invoices, KRA could add that full amount to your profits, taxing it like income. That’s not evasion; it’s survival mode clashing with digital rules.

Add in the broader context: eTIMS has been mandatory for a while, but enforcement ramps up hard in 2026. Non-compliant suppliers mean higher costs for you. And if your return mismatches KRA’s data? Expect flags, disallowed claims, penalties, interest, or a full audit invite.

The upside? This pushes fairness – cheats get caught faster, honest players face less scrutiny over time. But right now, it’s a scramble.

Your Action Plan: Get Ready Before Filing Hits

Don’t wait for the deadline panic. Here’s a practical checklist to armor up today:

1. Secure Compliant Records for 2025 – Go through every sale and purchase from January to December 2025. Confirm they’re backed by valid TIMS/eTIMS invoices with accurate PINs. Chase suppliers now to fix gaps – better late than disallowed.
2. Request Your Schedules – Contact your KRA account manager (or relationship manager at your Tax Service Office) and ask for your 2025 TIMS/eTIMS income and expense summaries. These are gold – reconcile them against your books ASAP to spot mismatches.
3. Nail Withholding Tax Reporting – Log into iTax and download withholding certificates. Declare the gross amounts shown – remember, withholding is usually just an advance payment (not final tax unless specified).
4. Digitize & Stay Compliant Going Forward – Ensure all 2026 transactions flow through eTIMS properly. Train your team, onboard suppliers, or switch to compliant ones. Tools like eTIMS desktop or mobile make it easier than you think.
5. Seek Help Early – If your supply chain is informal-heavy or numbers are complex, talk to a tax advisor (like the team at Seal Associates) before filing. A little upfront work saves big headaches – and penalties – later.

Bonus: Seal Associates invites your thoughts and feedback on this process – (+254 713 281299 or info@sealassociates.com). Your input could shape tweaks.

The Bottom Line: This Is the New Normal – Adapt Early

KRA’s validation rollout is part of the bigger digital tax push – more transparency, less loopholes, wider base. For compliant businesses already on eTIMS, it’s smooth sailing. For others, it’s a wake-up call to get records tight and suppliers aligned.

With Nairobi’s hustle never slowing, don’t let this catch you off guard. Start reconciling those 2025 books today, request those schedules and build habits for seamless compliance.

It’s not just about avoiding pain – it’s about protecting your margins and keeping your business growing.

Got questions or a specific pain point (like tricky suppliers)? Drop a comment or reach out to Seal Associates for a quick consult. We’re in this together.

Prepared by Godfrey Ndegwa, Seal Associates