Following the Kenya Revenue Authority’s recent public notices on intensified eTIMS validation and enforcement, businesses are experiencing heightened scrutiny on the validity of tax invoices supporting VAT input claims and income tax deductibility. KRA has reiterated that only invoices generated, transmitted, and validated through eTIMS will be recognized for tax purposes, with non-compliant invoices increasingly being rejected during audits and reconciliations. In this context, Buyer-Initiated Invoicing (BII) has emerged as a critical compliance mechanism, particularly for transactions involving small and informal suppliers who may lack the capacity to issue eTIMS-compliant invoices independently.
Pursuant to Section 23A(3A) of the Tax Procedures Act, which requires a purchaser to issue a tax invoice when the supplier is a “small business” with an annual turnover of not more than KES 5,000,000 or small-scale farmer, the Kenya Revenue Authority (KRA) introduced Buyer-Initiated Invoicing, commonly referred to as Reverse Invoicing.
This system is designed to integrate small businesses into the formal tax ecosystem while simplifying compliance for both suppliers and purchasers, ensuring that all transactions are accurately captured in the eTIMS system.
What Is Reverse Invoicing?
Reverse Invoicing enables a buyer to generate an eTIMS-compliant invoice on behalf of a small supplier whose turnover does not exceed KES 5 million. Once generated, the invoice is approved by the supplier through the eCitizen portal or USSD (*222#) and is recorded in KRA’s eTIMS as if issued directly by the supplier.
This approach ensures that both buyers and small suppliers meet eTIMS compliance requirements, facilitates valid VAT input claims for purchasers, and alleviates administrative and technical challenges for small businesses.
Step-by-Step Guidelines for Raising Invoices
A) Single Invoice Creation
- Buyer logs into eCitizen (ecitizen.kra.go.ke) using a valid KRA PIN.
- Navigate to Invoicing → Reverse Invoicing.
- Enter supplier details (KRA PIN, name, ID, mobile), item description, unit price, quantity, discounts, and payment details.
- Preview and finalize the invoice (saved as a draft until supplier approval).
- Once approved, the invoice status appears under Completed, and invoices can be downloaded or printed.
B) Batch Invoice Upload
- Buyers may upload a CSV template containing multiple transactions.
- The system flags errors (red), duplicates (yellow), and valid entries (green) for correction prior to submission.
- Submitted invoices are reflected under the Completed section with their approval status. Supplier Approval
Suppliers receive notifications and may approve or reject invoices via eCitizen or USSD (*222#). Buyers are notified in real time once the supplier acts, completing the eTIMS recording.
Practical Implications, Compliance, and Tax Considerations
Reverse Invoicing significantly reduces the compliance burden for small suppliers by transferring the invoicing responsibility to the buyer. Small businesses, such as small kiosks, supermarkets, beauty shops, and local farmers, gain streamlined access to formal markets without the need for costly invoicing systems or complex eTIMS navigation.
From a tax compliance standpoint, VAT liability remains with the supplier; Reverse Invoicing does not transfer this obligation to the buyer. All invoices must comply with eTIMS requirements, including accurate supplier and buyer PINs, item details, and QR codes, to avoid disputes, audit interventions, or penalties. Buyers are responsible for managing administrative tasks, such as tracking supplier approval, entering transactional data accurately, and reconciling invoices with their accounting systems.
This system applies to suppliers with annual turnover not exceeding KES 5 million, who may not be VAT registered and therefore do not have eTIMS devices. Once a small supplier voluntarily registers for VAT, they receive an eTIMS device and can issue invoices themselves, making Reverse Invoicing unnecessary.
Reverse Invoicing targets small suppliers who are below the VAT threshold, such as small kiosks, supermarkets, beauty shops, and local farmers, many of whom do not voluntarily register for VAT due to the administrative burden of monthly filings. Businesses receiving supplies from these suppliers should implement processes to raise eTIMS-compliant invoices on their behalf
While Keldine LLP does not raise invoices on behalf of suppliers, we provide training, guidance, and process reviews to help businesses undertake Reverse Invoicing correctly. This includes:
- Training staff on BII procedures and proper eTIMS data entry
- Advising on correct documentation and record-keeping to ensure audit readiness • Reviewing systems and processes to streamline compliance and reduce administrative burden • Providing ongoing support and guidance to minimize the risk of KRA disputes or penalties
Conclusion
Reverse Invoicing has become a central component of Kenya’s digital tax compliance framework. It is critical for SME participation in the formal economy and ensures that procurements from small suppliers are fully eTIMS-compliant.
The system protects VAT and income tax deductibility for buyers while alleviating compliance challenges for small suppliers. Businesses are encouraged to adopt Reverse Invoicing promptly to enhance transparency, operational efficiency, and regulatory compliance across their procurement processes.
Disclaimer:
The information provided in this article is based on the facts, assumptions, and sources available at the time of publication. We have assumed that these facts and assumptions are correct, complete, and accurate. The guidance presented reflects current law and administrative practices, as well as prevailing judicial interpretations, as of the publication date. Any changes in the facts, assumptions, law, or interpretations (including retroactive changes) may affect the relevance or accuracy of the information provided. This article does not constitute binding advice and should not be relied upon as a substitute for professional tax or legal advice. Readers are encouraged to seek professional guidance for their specific circumstances.
Contact Information
For any questions or further clarification on this topic, please feel free to contact our team: Joseph Owande at jowande@keldinellp.com or Faith Mungai at fmungai@keldinellp.com.