June and July are critical months for Kenyan businesses. With half the year gone, many SME owners are taking stock – reviewing sales, expenses and cash flow. But few remember to do a proper mid-year tax health check.

Skipping this step can be expensive. With shorter filing deadlines, automated validations and active amnesty windows in 2026, a mid-year review helps you catch problems early, reduce risks, and avoid nasty surprises in December.

Here are 7 essential things every Kenyan SME should review before the end of H2 2026.

1. Reconcile Your eTIMS and iTax Ledger

Start here. Log into iTax and compare your 2026 transactions with eTIMS data. Look for:

• Unmatched invoices
• Disallowed expenses due to missing electronic records
• Unreported sales

Action: Fix mismatches now. Many businesses discover in December that KRA has added millions back as taxable profit because of poor reconciliation.

2. Check Your VAT Position

Review your input and output VAT carefully. Ask yourself:

• Are all purchases supported by valid eTIMS invoices?
• Have you claimed all eligible input VAT?
• Are you setting aside 16% of every invoice for output VAT?

Businesses that delay VAT reconciliation often face large, unexpected payments when filing. Do a monthly or quarterly VAT health check instead.

3. Assess Outstanding Tax Liabilities

Pull your full iTax ledger and identify any unpaid taxes, penalties or interest. Check:

• Corporate tax
• PAYE
• VAT
• Withholding tax

If you have liabilities up to December 2025, consider applying for the 2026 Tax Amnesty before the window narrows further. Paying the principal now with reduced penalties can save you significantly.

4. Review Your Tax Compliance Certificate (TCC) Status

Many businesses lose tender opportunities or bank facilities because their TCC expired or was blocked due to small unpaid balances. Run a fresh TCC application check and clear any issues immediately.

5. Evaluate Withholding Tax Compliance

Confirm you are correctly withholding and remitting tax on:

• Rental payments
• Professional fees
• New categories like scrap metal sales and gambling winnings (if applicable)
• Payment network fees (20% royalty WHT)

Non-compliance here often triggers post-filing assessments.

6. Project Your 2026 Year-End Tax Liability

Run a provisional tax forecast for the full year. Factor in:

• Current performance
• Expected expenses
• New rules from Finance Bill 2026

This helps you plan cash reserves and avoid last-minute borrowing at high interest rates.

7. Update Your Records and Systems

Use mid-year to:

• Organise supporting documents for all major transactions
• Train staff on eTIMS processes
• Upgrade or streamline your accounting software
• Review contracts with suppliers and customers for better tax efficiency

Real Example from the Ground

A hardware shop owner in Eastleigh did this mid-year check in July 2026. He discovered KSh 2.8 million in expenses lacked proper eTIMS invoices. By switching suppliers and fixing records early, he avoided a much larger tax bill during final filing. Another business found old PAYE arrears and cleared them under the amnesty, saving over KSh 900,000 in penalties.

Small actions in July and August can prevent major problems in November and December.

Recommended Timeline for H2 2026

• July: Full ledger reconciliation + VAT review
• August: Amnesty application (if needed) + provisional tax forecast
• September/October: Systems upgrade and staff training
• November: Final pre-filing health check

Final Thoughts

A mid-year tax health check is not just about avoiding penalties. It’s about taking control of your finances in a tough economy. Businesses that review their position now will enter the final quarter stronger, with better cash flow visibility and fewer surprises.

At Seal Associates, we guide SMEs through structured mid-year tax reviews every year. Our process is practical: we sit with you, analyse your real numbers, highlight risks and create a clear action plan.

If you haven’t done your 2026 mid-year tax review yet, now is the perfect time.

Prepared by Seal Associates Tax Advisory Team