KRA to Validate Income and Expenses Declared in Tax Returns Effective 1 January 2026

The Kenya Revenue Authority (KRA) has issued a public notice announcing that, effective 1 January 2026, all income and expenses declared in individual and non-individual income tax returns will be automatically validated upon submission of the 2025 year of income tax returns.
Validation will be based on data from the following sources:
  • TIMS/eTIMS electronic tax invoices
  • Withholding tax gross amounts
  • Customs import records

Key Requirements
1.    Expense Validation

Only expenses supported by Electronic Tax Information Management System (ETIMS) compliant invoices (with the buyer’s PIN) will be allowable, except for categories exempt under the Tax Procedures Act 2015 and eTIMS Regulations, including:
  • Employee emoluments
  • Imports
  • Interest
  • Investment allowances
  • Airline ticketing
  • Payments subject to final withholding tax
  • Internal accounting adjustments
  • Fees charged by financial institutions
  • Any other expenses exempted by the commissioner through gazettement
2.     Income Validation
Taxpayers must ensure accuracy of:
  • Income subject to withholding tax, and
  • Import related costs from Customs systems
Revenue reported in income tax returns must align with VAT sales declared on a monthly basis.

Implications for Taxpayers

Expenses lacking proper eTIMS documentation will be disallowed, increasing taxable income and risk potential penalties and interest.
Taxpayers must reconcile:
  • Accounting records
  • eTIMS invoices
  • Withholding tax data
  • Customs entries

Expected Challenges

  • Timing differences between accounting periods and eTIMS invoice issuance
  • Inconsistent eTIMS compliance by government entities procuring services
  • System and capacity gaps affecting small traders and start ups
  • Limited supplier awareness of eTIMS obligations
These challenges may increase compliance burdens and elevate the cost of doing business.

Recommended Actions

Taxpayers should begin preparing immediately by:
  • Reconciling eTIMS data with financial/accounting records
  • Undertaking pre-filing validation checks
  • Conducting internal compliance reviews
  • Engaging suppliers and, where necessary, the KRA
  • Seeking tax advisory support to mitigate emerging risks
Conclusion
The Kenya Revenue Authority’s new validation framework marks a significant shift toward tighter, data-driven tax compliance. As the 1 January 2026 implementation date approaches, taxpayers should proactively strengthen their internal processes to ensure full alignment with eTIMS, withholding tax, and customs data. Early preparation will be critical in avoiding disputes, minimising exposure to penalties, and ensuring smooth filing of the 2025 income tax returns. Engaging with tax professionals and maintaining close coordination with suppliers and KRA will position businesses for a seamless transition into the enhanced compliance regime.