Kenya’s transition to electronic tax administration is now an operational reality for businesses. As the Electronic Tax Invoice Management System (eTIMS) becomes embedded in commerce, one of its most consequential features is reverse invoicing.
Reverse invoicing is emerging as a central policy tool in Kenya’s attempt to reconcile formal taxation with the realities of a largely informal economy.
It allows the buyer to issue a tax invoice for goods or services received. The shift responds to a structural challenge that has constrained tax compliance.
A huge share of Kenya’s supply base is made up of small traders, farmers and micro-enterprises that lack the financial systems, technology and accounting practices required under the conventional tax framework.
This has been a problem for larger taxpayers. Expenses incurred from informal suppliers often cannot be supported by compliant documentation, leaving firms exposed when claiming deductions or input VAT.
Reverse invoicing enables buyers to generate eTIMS-compliant invoices, bringing previously undocumented transactions into the tax net.
It was introduced through the Tax Procedures (Amendment) Act, 2024. Rather than forcing informal suppliers into immediate full compliance, the government is using larger more structured taxpayers as anchors for documentation and reporting.
However, implementation has revealed challenges. Reverse invoicing cannot occur without the supplier’s agreement. Many small traders do not understand the implications of allowing buyers to generate invoices on their behalf. This can generate mistrust, confusion and unexpected tax exposure for uninformed suppliers.
The second challenge is transmission reliability. Delays, mismatches and system synchronisation gaps continue to create uncertainty, even where traders have acted correctly.
Tax reform is no longer driven solely by legislation. Reverse invoicing achieves its objectives when supported by systems that automate invoice generation, securely transmit data to KRA and provide businesses with real-time visibility over their compliance position.
Kenya’s eTIMS is about redesigning how economic activity is recorded, recognised and taxed. It sits at the heart of that redesign, quietly transforming compliance from a regulatory burden into a shared national infrastructure.
