The Kenya Revenue Authority (KRA) has unveiled one of the most significant shifts in the country’s taxation framework. Your M-Pesa 'Payment Received' buzz is about to double as a tax receipt, as the taxman intensifies it's digitisation efforts to expand the tax base.
The Agency is restructuring its tax collection systems around real-time business transactions, placing digital payments and automated invoicing at the centre of compliance.
Central to this, KRA plans to deepen the use of its electronic Tax Invoice Management System, or eTIMS, by connecting it directly to payment channels such as M-Pesa while replacing large parts of the existing iTax infrastructure. The project is intended to reduce gaps between sales, declaration and payment, particularly among small and medium-sized businesses.
Simply put: KRA is rolling out real-time integration of eTIMS with M-Pesa, banks, and digital wallets, allowing taxes like VAT to be automatically deducted and remitted at the point of transaction.
Under the enhanced system, every sale made via PayBill, Till, or mobile money will instantly generate an electronic tax invoice, map the details to the trader’s KRA ledger, and split the payment 16% VAT to KRA, the rest to the business.
According to Commissioner George Obell, the goal is simple, “Eliminate the lag between invoicing and tax payment” that has fueled under-reporting for years.
How It Works — From Lipa na M-Pesa to eTIMS
Here’s the new flow: A customer pays Sh1,160 for lunch via Till. The payment hits Safaricom’s API, which pings KRA’s eTIMS in real time. The system auto-generates a Payment Registration Number (PRN), creates a compliant e-invoice, and pre-populates the business’s tax return.
For VAT-registered traders, the Sh160 tax is instantly settled to KRA — no monthly filing, no late penalties, no reconciliation headaches. Businesses will transmit invoices via web, mobile app, USSD, or APIs, giving KRA end-to-end transaction visibility.
The reform targets Kenya’s digital economy where mobile money moved Sh8.2 trillion in 2025, much of it previously invisible to the taxman.
Obell projects the overhaul will boost general tax compliance by 16%, helping KRA chase its Ksh3.39 trillion target for FY2025/26.
Privacy vs. Compliance — The Data Debate
KRA insists it’s not after your wallet. "We have no direct access to M-Pesa wallets, unless it is on a case-by-case basis where there is fraud. Our interest is only in the minimal data required for tax assessment.” an official noted.
“We do not want access to your bank account, nor your mobile wallet. It’s about accessing transactional data — not your entire mobile.”
But critics note KRA has tried for a decade to get inside M-Pesa. Treasury’s 2016 bid for warrantless access failed after Safaricom cited the Constitution. A 2024 Finance Bill clause to exempt KRA from data protection laws was shelved after protests. This time, KRA is using invoicing infrastructure, not legislation.
“The same destination is being reached through eTIMS rather than Parliament,” one analyst noted. Data governance and minimisation are now the balancing act.
Winners, Losers, and What’s Next
For SMEs, the pitch is less paperwork, fewer audits Sales data from eTIMS will pre-populate tax returns, cutting errors and compliance costs. For government, it’s instant cash flow: taxes arrive daily, not monthly. For tax evaders, the walls are closing. KRA already compares M-Pesa deposits to declared sales —Collect KES 500K via M-Pesa but report KES 100K? Expect a knock on your digital door.
Failure to issue eTIMS invoices now risks penalties, audits, and loss of tax credits. The rollout follows KRA’s new Automated Payment Plan, letting taxpayers with genuine cashflow issues clear liabilities in instalments over six months.
As Kenya digitizes, the message is clear: every buzz, swipe, and till payment is now a tax event. The question for traders isn’t if KRA will see the sale — it’s whether they’re ready when it does.
The reforms mark a decisive move away from the traditional model of post-declaration enforcement toward real-time, transaction-based tax compliance, an approach that could significantly reshape Kenya’s revenue landscape.
