Engaging Financial Insights

Engaging Financial Content

Explore how-to guides and updates on tax and accounting laws tailored for SMEs.

Types of Taxes Applicable to SMEs

• Turnover Tax (TOT): For businesses with annual revenue between KES 1M and KES 50M, charged at 1% of gross sales (excluding VAT-registered businesses).

• Value Added Tax (VAT): Mandatory registration for businesses with an annual turnover exceeding KES 5M; standard VAT rate is 16%.

• Corporate Income Tax: Companies pay 30% on net profit, while resident SMEs classified as micro-enterprises may qualify for simplified tax regimes.

• Withholding Tax: Applies to professional services, commissions, and other payments at varying rates (3%-20%).

• Excise Duty: Levied on specific goods and services, such as alcohol, tobacco, and mobile money transfers.

Tax Compliance and Filing Requirements

• All businesses must obtain a Personal Identification Number (PIN) from the Kenya Revenue Authority (KRA).

• Monthly VAT returns are due by the 20th of the following month.

• Corporate tax returns must be filed by the 6th month after the end of the financial year.

• Failure to file returns on time attracts penalties and interest.

• Capital Deductions: Businesses can claim deductions on assets such as buildings, machinery, and equipment to lower taxable income.

• Export Processing Zones (EPZ) and Special Economic Zones (SEZ): Offer tax holidays or reduced rates for eligible businesses.

• Affordable Housing Levy: Recent changes require contributions from businesses and employees, affecting payroll costs.

• Training and R&D Deductions: Some expenses related to training staff and research may be tax-deductible.

Tax Incentives and Reliefs for SMEs

🧾 eTIMS 101: A Simple Guide for Kenyan SMEs

What is eTIMS?

eTIMS (Electronic Tax Invoice Management System) is a digital invoicing system introduced by the Kenya Revenue Authority (KRA). It helps businesses generate tax-compliant invoices and submit real-time transaction data directly to KRA.

If you're a VAT-registered business in Kenya, you're required to use eTIMS to issue valid tax invoices. Non-compliance can lead to penalties or disallowance of input VAT claims.

Why eTIMS Matters for Your Business

✅ Ensures VAT compliance
✅ Eliminates manual tax invoice submissions
✅ Reduces audit risk
✅ Builds credibility with corporate clients and government bodies

Who Needs to Comply?

• VAT-registered businesses (mandatory)

• Businesses with an annual turnover above KES 5 million

• SMEs applying for government tenders or corporate contracts

How to Register for eTIMS (Step-by-Step)

1. Visit the KRA iTax Portal
   Go to https://itax.kra.go.ke and log in using your PIN and password.

2. Apply for eTIMS
   Navigate to eTIMS Services under the Registration tab.

3. Select Your Preferred Solution
   Choose between:

   • Online Portal – For manual invoice generation

   • Software Integration (API) – For linking with accounting software

   • Mobile App – For mobile-based invoicing

4. Submit Business Details
   Provide your:

   • Contact details

   • Trading name

   • Type of invoicing system (manual or software)

5. Install or Access eTIMS

   • For online users, you’ll receive login credentials.

   • For software integration, follow the provided API instructions.

   • For mobile, download the KRA eTIMS app from the Play Store.

6. Start Issuing eTIMS-Compliant Invoices
   Include these key details:

   • Buyer’s PIN (optional but helpful)

   • Item description and quantity

   • VAT amount and total payable

   • QR code or unique eTIMS invoice number

Common Mistakes to Avoid

• ❌ Failing to issue eTIMS invoices

• ❌ Using outdated or manual invoice templates

• ❌ Ignoring monthly reconciliations

• ❌ Not training your finance/admin staff

Tips to Stay Compliant

• 🧾 Always issue eTIMS invoices for every taxable transaction

• 🔗 Integrate with accounting software for automation

• 📅 Submit VAT returns on time

• 📚 Keep your finance team trained and updated