Electronic invoicing is not optional, and the penalties for ignoring it have been raised. According to a summary of the Finance Act, 2026, the penalty for non-compliance with the electronic tax system was revised.

What changed

The revised penalty for failing to use or comply with the electronic tax system is the higher of:

  • 5% of the tax due, or
  • KES 100,000 for a company, or KES 10,000 for an individual.

The effective date and the precise wording are in the Act itself, so read the section or ask KRA before you rely on the figures. The point of the change is clear: the penalty has a high minimum for companies, so even a business with little tax to pay faces a large charge.

What counts as non-compliance

The system covers the electronic tax invoicing that businesses use to record their sales, for example eTIMS and electronic tax registers. Typical failings are:

  • Not issuing electronic invoices for sales
  • Issuing invoices that are not transmitted to KRA, or with the wrong details
  • Not connecting the business's sales system to the system as required
  • Tampering with the system

See eTIMS e-invoicing explained for what the system is and who must use it.

An example

A small company that did not issue electronic invoices for a year, with KES 40,000 of tax due on the sales it omitted, would face the higher of 5% of KES 40,000 (KES 2,000) and the KES 100,000 minimum, so KES 100,000. Compare that with the cost of setting up proper invoicing, which is usually modest.

How to stay safe

  1. Register on eTIMS and issue an invoice for every sale; see how to register on iTax first if you do not have an account.
  2. Check each invoice carries the customer PIN where required, the right amounts and the VAT.
  3. Reconcile the invoices to your sales records each month. The free eTIMS sales invoice register lists each invoice, and the daily cash-up sheet checks the day's takings.
  4. Train staff who serve customers.
  5. Fix errors with credit notes, not by deleting; see credit note with VAT.

If you are already behind

Start issuing invoices now, and ask KRA what you can do about the earlier period. Estimating the exposure helps; the KRA penalty calculator and the tax penalty estimator workbook show what late filing and payment cost, and tax amnesty on penalties and interest explains how some penalties can be waived. The tax compliance self-audit checklist finds other gaps.

Customers' side

Customers who need an invoice to claim an expense should ask for an eTIMS invoice; see eTIMS and your expenses.

Stay informed

Penalty rules change with each Finance Act; see how to follow tax changes in Kenya.

Questions businesses ask

Does this apply to a very small business? The system applies to businesses that sell goods or services, with different options for small and large businesses, so ask KRA which route fits yours.

Can I fix mistakes after the invoice has gone to KRA? Use a credit note and issue a new invoice; deleting is not the right way. The credit note with VAT template shows the layout.

What if my internet is down? Keep a record of every sale and follow KRA's guidance on offline operation, then upload the invoices as soon as you can.

Where do I check what applies today? See how to follow tax changes in Kenya.

This summary relies on published summaries of the Act. Confirm the exact provision and date with KRA or the Act itself.