The Kenya Revenue Authority (KRA) and Safaricom are in preliminary talks to enable M-Pesa to issue electronic tax invoices on behalf of small businesses. This move aims to make it easier for micro traders to supply big companies with goods and services. Under the electronic tax invoice management system (eTIMS), Safaricom will generate receipts on behalf of small traders receiving payments via M-Pesa tills and paybills.
The proposed system will allow Safaricom to forward the invoices to the KRA, providing the taxman with greater visibility of transactions, especially among small traders outside the tax bracket. This is expected to help weed out tax evaders and boost revenue by billions of shillings. Big firms have been dropping small traders without the ability to generate eTIMS as their suppliers in the push to be compliant with the law.
The law demands that all suppliers, irrespective of their size, must issue an electronic invoice to show proof of sales, which will also reflect at the KRA as an expense for the big firms buying goods and services. The KRA official told the National Assembly Committee on Finance and National Planning that Safaricom would like to carry out reverse invoicing on behalf of merchants, and these discussions have begun with the telecoms operator.
The eTIMS system requires businesses to file receipts or invoices with the KRA as proof of expenses, aiming to widen the tax base as big companies report to the authority small firms that act as their suppliers. Small traders lacking sophistication have struggled to do business with larger entities who require electronic invoices. Reverse invoicing stands as a buffer currently, where large-scale buyers can generate invoices on behalf of sellers.
In the year to March 2026, Safaricom disclosed a total of 3.1 million merchants in the M-Pesa ecosystem, a 71.4 percent growth year over year from 1.8 million previously. The merchants comprised 2.1 million traders receiving payments through the Pochi la Biashara wallet and one million traders on Lipa na M-Pesa, covering both paybills and till number settlements.
Small and medium-sized businesses are the backbone of Kenya’s economy, generating the bulk of jobs in an environment where the formal sector is struggling to create employment for thousands of graduates. The informal sector accounted for 85 percent of all jobs created last year at 717,000 jobs compared to 102,000 created in the formal sector. Businesses whose annual sales are less than Sh5 million fall outside the bulk of corporate taxes.
The KRA continues to strive for solutions to help small traders raise tax invoices, with the taxman now eyeing similar collaborations with players in the tea, sugar and coffee value chains which feature many small farmers as suppliers. The taxman says it already has a deal in place with the East African Tea Trade Association (EATTA) where the association would raise invoices on behalf of small-scale farmers who supply leaf to the Mombasa auction.
Key points
- The proposed system aims to help small traders comply with electronic tax invoicing requirements.
- The collaboration between KRA and Safaricom is expected to boost revenue and curb tax evasion.
- The eTIMS system requires businesses to file receipts or invoices with the KRA as proof of expenses.
