KRA to Validate Income, Expenses Declared in Income Tax Returns Starting January 2026

In a public notice dated 7 November 2025, the Kenya Revenue Authority (KRA) announced a major shift in how it will handle income tax returns beginning 1 January 2026, all income and expense figures declared in tax returns for the 2025 year of income (for both individual and non-individual taxpayers) will be subject to systematic validation.

What the Notice Says

Here are the key points of the notice:

The validation will apply to returns for the 2025 accounting/income year, filed through the KRA's iTax platform.
Effective date: 1 January 2026.
The exercise covers both individuals and non-individuals (so companies, partnerships, etc.) declaring income tax.
Declared income and expenses must be supported by valid electronic tax invoices, correctly transmitted (including the buyer’s PIN where applicable).
The system will cross-check against three main data sources:
1. Invoices via the eTIMS / TIMS electronic tax invoice systems.
2. Withholding income-tax gross amounts (i.e., what’s been withheld and reported).
3. Import records from customs systems.
It will be an automated validation process embedded in the iTax filing.
Exceptions apply under Section 23A of the Tax Procedures Act, Cap 469B and the Tax Procedures (Electronic Tax Invoice) Regulations, 2024.
Taxpayers are encouraged in advance to request their eTIMS/TIMS schedules from KRA account managers to reconcile and prepare.

Why KRA Is Doing This

From the notice and commentary, the rationale appears to be:

Strengthen compliance: By validating what is declared against digital records, KRA aims to reduce under-reporting of income and over-claiming of expenses.
Leverage digitalization: The move is part of KRA’s broader digital transformation (automated checks, linkages between systems, less manual verification).
Enhance transparency and fairness: Ensuring all taxpayers are measured against the same digital sources helps reduce opportunities for tax avoidance via unsupported claims.
Improve revenue collection: With greater assurance of the accuracy of returns, KRA can reduce time spent on audits and focus resources better.

Implications for Taxpayers

For businesses (including small and medium enterprises) and individuals, the change carries several practical implications:

What you must do

Ensure all income you declare has supporting documentation especially electronic tax invoices (e-invoices) transmitted via eTIMS/TIMS with proper buyer PINs where required.
Ensure all expenses claimed are backed by valid electronic invoices and are properly recorded.
Reconcile your internal records against what KRA’s systems (eTIMS/TIMS, withholding records, import records) will show. This means obtaining from your supplier invoices, ensuring transmission into the system, and matching the amounts.
Be ready for your return submission (via iTax) to trigger automatic validation: discrepancies may lead to notifications, delays, or further scrutiny.
If you have been lax with electronic invoicing (e.g., cash receipts not captured as e-invoices) now is the time to clean up your books.
Contact your KRA account manager early, or request the eTIMS/TIMS schedule of your income/expense flows, to spot mismatches ahead of submission.
Understand that exceptions exist under the law (Section 23A etc), but you must know whether you qualify for those and document accordingly.

Risks and challenges

Taxpayers who have previously declared income or expenses without matching electronic invoices or with mismatches between their books and KRA’s digital records risk rejection or further assessment.
Businesses with poor invoice management (e.g., informal invoices, manual receipts, missing PINs) will have to invest time, systems, or rethink their expense capture processes.
Timing pressure: since the validation kicks in for the 2025 year returns filed in 2026, businesses must act now to prepare (especially if they expected a “normal” filing window).
For firms with complex operations (imports, many suppliers, multiple invoices) the reconciliation may be labor-intensive and reveal gaps in compliance systems.
If KRA’s system finds mismatches, there could be delays in refunds (for those expecting tax credits) or additional enquiries impacting cash-flow, especially for SMEs.

Recommendations:

Here's a suggested checklist you can use to prepare for the upcoming change:

Invoice & e-invoice assessment
- Do all outgoing invoices you issue comply with eTIMS/TIMS and capture buyer PINs where required?
- Do you require all suppliers to issue valid electronic invoices?
- Are there any purchases/expenses that rely on manual/paper invoices only? If so, assess whether exceptions apply or you need to regularise.
Reconciliation of records
- Request from KRA (or via your account manager) the eTIMS/TIMS schedule for your entity for the income year 2025 (or latest available) and reconcile your internal records.
- Match what you declare on iTax with the income/customer invoices captured in eTIMS/TIMS.
- Match expenses: ensure that outgoing supplier invoices you have align with what your suppliers have submitted into eTIMS/TIMS.
Systems & processes
- Update your accounting software or workflows so that issuance of an invoice immediately triggers e-invoice submission (or capture).
- Ensure that staff understand the requirement of capturing buyer PINs (where applicable) on sales invoices.
- Review import records (if applicable) and ensure that customs data, duty/levy declarations, and associated invoices align with the expense you intend to claim.
Document exceptions
- Review whether any of your transactions qualify for the exemptions under Section 23A of the Tax Procedures Act (e.g., transactions below a threshold, where issuance of e-invoice may not apply). Ensure proper documentation for those.
- For small or micro-business clients especially, assess whether the e-invoice requirement fully applies or whether lesser obligations exist.
Communication & training
- Brief management/customers/suppliers about the upcoming change (start date Jan 2026) so that everyone understands the importance of correct PIN capture, e-invoice issuance, and timely submission.
- For SMEs, consider a short training or guideline document on “What KRA will now check and what you must do” emphasizing practical steps.
Risk assessment & contingency
- Identify any current transactions or invoices you are uncertain about (e.g., paper only, no buyer PIN, or missing supplier invoice) and consider how you will handle them (correct now, obtain missing invoices, or assess potential risk).
- Estimate any potential cash-flow impact if your tax filing is delayed or refund is held because of mismatches and plan with your clients accordingly.

Conclusion

The KRA’s 7 November 2025 notice signals a clear shift in tax administration: from mainly voluntary self-reporting towards a data-driven verification model. By linking filed returns to underlying electronic invoices, withholding data and customs/imports, KRA is tightening the compliance environment.

For taxpayers and advisers alike, the message is: prepare now. The changes take effect from 1 January 2026 for the 2025 year of income, so businesses and individuals must align their internal systems, invoice capture, and reporting processes in good time.

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