In the past, tax administrations across the world have increasingly embraced digital solutions to improve compliance, transparency, efficiency and to keep up to date with dynamic digital transformations.
In Kenya, one of the steps toward digital transformation has been the introduction of the Electronic Tax Invoice Management System (eTIMS).
While much has been written and discussed about the technical requirements, compliance obligations and penalties associated with eTIMS compliance, a more curious question is; what will the future of tax filing look like once eTIMS becomes fully embedded in the Kenyan tax ecosystem?
From my perspective, eTIMS may be doing far more than simply digitising invoices. It could be quietly laying the foundation for a new era of real-time, data-driven tax administration where tax filing becomes simpler, faster and perhaps, even partially automated.
Ideally, eTIMS is designed to enable taxpayers to generate and transmit electronic tax invoices to Kenya Revenue Authority (KRA) in real time. Through this system, businesses issue invoices using approved devices or software that automatically relay transaction data to the tax authority.
At the beginning, the objective appeared straightforward: reduce tax evasion, improve VAT accountability and verifiable digital records of business transactions.
Practically, beneath these immediate goals lies a deeper structural shift. With eTIMS, KRA is gradually building a massive digital repository of transactional data across sectors of the economy.
Every invoice generated through eTIMS tells a story, who sold what, when, to whom and at what value. When aggregated, these stories form a powerful dataset capable of transforming the entire tax administration process.
So, what happens when tax authorities already have most of the information needed to determine tax liabilities?
Globally, tax authorities are moving toward data-centric tax systems. In Africa, countries like Egypt, South Africa, Tunisia, and across the Mediterranean, members of the European Union, have increasingly relied on electronic invoicing systems that feed real-time data into tax platforms.
The implications are profound.
Before eTIMS, tax filing was a periodic exercise in which taxpayers calculated the tax liabilities, prepared tax returns and submitted them to the tax authority. In this model, tax authorities relied heavily on self-reporting by the taxpayers.
But when transaction data is already available through systems like eTIMS, the dynamic begins to change. Instead of taxpayers submitting complete information, the tax authority may already possess most of the data required to compute the liability.
This raises an intriguing possibility: could the future of tax filing involve pre-filled tax returns?
Imagine a future scenario where businesses log into their tax portal and find that their tax returns are already populated with most of the required information. This is not an unrealistic scenario.
In fact, KRA implemented the auto-populated VAT return in March 2024 as part of the initiatives toward addressing the VAT compliance gaps and improving the taxpayers filing experience.
Also, in March 2024, KRA required all business to be eTIMS compliance following the extension from the earlier onboarding date of January 1, 2024.
In November 2024, vide a public notice, KRA indicated that all the 2025 income shall be validated through the eTIMS sales data and withholding tax reports. Additionally, the 2025 expenses shall be validated with the eTIMS purchase invoices and import records.
With eTIMS capturing transaction-level data, it becomes technically feasible for KRA to aggregate sales and purchase information automatically. VAT payable and input VAT could be calculated using data already transmitted through the system. Instead of manually compiling invoices, taxpayers might simply review, verify and confirm the return.
From a compliance perspective, this could bring several benefits: reduced administrative burden for businesses, greater accuracy in reported transactions, faster filing processes and lower risk of unintentional errors.
For small and medium-sized enterprises in particular, the time saved on manual reconciliation could be significant. While eTIMS’ immediate purpose is to improve tax compliance, its broader implications may extend far beyond invoicing.
Viewed through a curious lens, eTIMS appears to be laying the groundwork for a future where tax administration is faster, smarter, and more data driven.
If the current trajectory continues, the tax filing process of tomorrow may look quite different from the one businesses know today. Instead of compiling returns from scratch, taxpayers may simply confirm information already captured through digital systems.
In 2025, KRA started sharing the auto populated 2025 data with the taxpayers for purposes of comparing the data with their records before filing the tax returns. The future trajectory of eTIMS remains an evolving story.
Several questions remain: Will all tax returns eventually become fully automated? How will taxpayers be able to validate the expense data considering KRA’s eTIMS data is not reported per the taxpayers' expense line? Could real-time tax assessments become a reality? How will businesses adapt to increasingly data-driven compliance systems? What safeguards will be needed to protect data privacy and system security?
For tax professionals, policymakers and businesses alike, these questions make eTIMS an area worth watching closely. We shall keep watching the developments and hope the eTIMS enhancements will have a win-win situation for both KRA and taxpayers.
The writer is a tax manager at Ichiban Tax & Business Advisory LLP.
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