eTIMS for Non-VAT Registered Businesses in Kenya: What You Actually Need to Do

The single most common misunderstanding about Kenya’s electronic invoicing regime is that it applies only to businesses registered for VAT. It does not. eTIMS for non-VAT registered businesses is a live obligation: the Finance Act, 2023, operating through the Tax Procedures Act framework and the electronic tax invoice regulations, extended the requirement to all persons carrying on business in Kenya regardless of VAT registration status. If you are on turnover tax, run a small trading business, consult, or provide services below the VAT threshold, this applies to you – and this guide sets out what compliance actually involves, including the exemptions that genuinely exist.

eTIMS for Non-VAT Registered Businesses: Why It Applies to You

Two separate consequences flow from the rules on eTIMS for non-VAT registered businesses, and confusing them causes most of the anxiety. The first is your own obligation: a business carrying on business in Kenya is required to issue electronic tax invoices. The second is your customer’s position, and it is the sharper one commercially – since 1 January 2024, business expenses not supported by an eTIMS invoice are generally not deductible for the buyer, applying the deductibility principle in Section 16 of the Income Tax Act.

That second point is why eTIMS for non-VAT registered businesses became urgent in practice rather than in theory. A small supplier who cannot issue a compliant invoice is a supplier whose business customers cannot claim the expense – so the invoice gets disputed, or the relationship quietly moves to a supplier who can. Compliance here protects revenue, not just standing with KRA.

The Exemptions That Genuinely Exist

The obligation covering eTIMS for non-VAT registered businesses is broad, but it is not unlimited, and knowing the boundaries prevents unnecessary work:

• Buyer-initiated invoicing: where a supplier’s annual turnover is at or below KSh 5 million, the buyer may generate the invoice on the supplier’s behalf. This is the provision that keeps very small suppliers – smallholder farmers, casual suppliers, small service providers – inside the system without each having to run their own eTIMS setup.
• Transactions outside the regime: certain categories sit outside eTIMS altogether, including emoluments and payroll, imports, some financial-institution charges, and airline ticketing. These follow their own documentation rules rather than requiring eTIMS invoices.
• Not an exemption, but often mistaken for one: being below the VAT registration threshold, being on turnover tax, or being a sole proprietor rather than a company. None of these removes the obligation to issue electronic tax invoices.

If your income is rental rather than trading, the treatment follows the rules for that income stream – the firm’s guide to monthly rental income tax in Kenya covers that ground, and a scoping conversation can confirm where your particular activity sits.

Your Two Practical Paths: eTIMS Lite or System Integration

KRA provides more than one way to comply, and for eTIMS for non-VAT registered businesses the choice usually comes down to volume and whether the business runs an accounting system at all.

Path 1: eTIMS Lite

For eligible low-volume taxpayers, eTIMS Lite is the simplest compliant route – available through eCitizen, the *222# USSD code, and the eTIMS mobile app. Invoices are generated directly in KRA’s own channel, with no software integration and no accounting system required. For a sole trader issuing a handful of invoices a month, this is often the right answer, and no partner or licence is needed to use it.

Path 2: eTIMS through your accounting system

Where invoice volumes grow, or where the business already keeps proper books, generating eTIMS invoices from inside the accounting system removes the double work of issuing an invoice in one place and recording it in another. Zoho Books, as a KRA-approved integrator, supports eTIMS for non-VAT registered businesses through the same OSCU integration used by VAT-registered businesses – the guide to Zoho Books eTIMS integration in Kenya covers the activation sequence step by step. The practical gain is not compliance itself (Lite delivers that) but the elimination of a parallel record and the reconciliation gap it creates.

A reasonable rule of thumb for eTIMS for non-VAT registered businesses: if you issue a few invoices a month and keep simple records, start with Lite. If you issue invoices weekly or more, hold stock, have staff raising invoices, or already run accounting software, the integrated path repays itself quickly. The choice is not permanent – businesses commonly begin on Lite and move to integration as they grow.

eTIMS for Non-VAT Registered Businesses in Practice: 5 Steps

• Get the registration right first: a valid KRA PIN with the correct tax obligations registered is the precondition for any eTIMS path. Businesses on turnover tax should confirm their obligations are accurately recorded – the firm’s guide to turnover tax in Kenya sets out that regime.
• Standardise your items and units: descriptions and units of measure must conform to KRA’s classifications. Informal item names – ‘services’, ‘goods’, ‘misc’ – are the most common reason an invoice fails at the point of issue.
• Issue the invoice through the chosen channel every time: an invoice raised outside eTIMS and sent to a business customer is an invoice they may be unable to deduct. Consistency matters more than speed.
• Keep the records: eTIMS invoices form part of the records supporting your return, and the ability to produce them for the retention period KRA enquiries can cover is part of compliance rather than an afterthought.
• Do not re-issue what KRA already has: if an invoice has already been transmitted through one channel, it is not re-transmitted through another – that would duplicate the KRA record.

Choosing the Right Path for eTIMS for Non-VAT Registered Businesses

Three questions settle the choice for most businesses. First, how many invoices do you issue in a typical month – a handful, or dozens? Second, do you keep books already, whether in accounting software or a disciplined spreadsheet? Third, who are your customers – mainly consumers, or mainly businesses that will need a buyer PIN on every invoice?

A business answering “a handful”, “no”, and “consumers” is well served by eTIMS Lite. A business answering “dozens”, “yes”, and “businesses” is already carrying the cost of a parallel record, and system integration is the cheaper path. Everything in between is a scoping conversation – and eTIMS for non-VAT registered businesses is the same obligation on either path; only the channel differs.

If You Are Growing Toward a System

Many businesses reading this are at the point where informal records are starting to cost more than they save. If that is the position, the practical question is not eTIMS alone but whether a proper set of books is now worth having – with invoicing, expenses, VAT readiness for the day registration becomes mandatory, and reporting a bank or funder will ask for.

The guides to Zoho Books in Kenya and Zoho Books pricing in Kenya cover what that looks like and what it costs, and the Zoho Books setup in Kenya page describes a quick-start engagement. There is no obligation to move to a system to be compliant – Lite is a legitimate permanent answer for genuinely small operations.

How FNJ & Associates Can Help

FNJ & Associates advises on eTIMS for non-VAT registered businesses as an ICPAK-registered CPA firm and Authorized Zoho Partner: confirming which path fits your size and obligations, getting KRA registration and item classifications right, setting up eTIMS Lite or full system integration, and training whoever raises invoices. Engagements are affordable, scoped, and quoted upfront – and where the honest answer is that eTIMS Lite is all you need, that is the advice you will get.

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