Executive summary

The Kenya Revenue Authority (KRA) has introduced several system (iTax) enhancements aimed at strengthening tax compliance and improving accuracy in return filings. Key changes include stricter eligibility requirements for obtaining Tax Compliance Certificates (TCCs), the introduction of a workflow for Overpayment Adjustment Vouchers (OAV) and Installment Adjustment Vouchers (IAV), which now require KRA approval before they can be applied to tax liabilities, and the rollout of an Automated Payment Plan (APP) to allow eligible taxpayers to settle confirmed tax liabilities in installments of up to six months.

Additionally, the KRA will implement validation of income and expenses declared in tax returns, effective 1 January 2026, by cross-checking data with the Tax Invoice Management System (TIMS)/eTIMS, withholding tax (WHT) certificates and customs import records. These changes are expected to streamline compliance, improve data integrity and enhance taxpayer accountability.

Detailed analysis

TCC enhancements

The KRA has introduced enhanced eligibility requirements for obtaining a TCC, mandating that taxpayers (1) register on eTIMS or TIMS if they run a business, (2) file tax returns on or before the due date for all applicable tax obligations and (3) make payment of tax (either in full or under an approved payment plan) by the due date. Additionally, taxpayers are required to settle all outstanding tax liabilities and or apply for a payment plan, which once approved will enable the taxpayer to continue with the self-service process of applying for the TCC. Lastly, the taxpayer must be Value Added Tax (VAT) compliant.

Approval process for Overpayment and Installment Adjustment Vouchers

The iTax system now provides a workflow for OAVs and IAVs, both of which require approval by a compliance officer at the taxpayer's Tax Service Office (TSO). For OAVs, taxpayers apply via the "Refund or Offset Overpaid Taxes" menu and, upon approval, the voucher can offset existing or future liabilities for all obligations except Pay As You Earn (PAYE), VAT and WHT. For IAVs, taxpayers apply through the "Installment Adjustment Voucher" menu and, upon approval, the voucher can be used only to offset future installment payments during the payment registration process. In both cases, taxpayers are notified of approval or rejection through their registered iTax email.

Automated Payment Plan mechanism

The KRA has introduced a new APP mechanism. This system-driven solution enables eligible taxpayers to settle outstanding tax liabilities in installments. To qualify for the APP, taxpayers must meet the following conditions: (1) possess a valid KRA PIN and be fully compliant with iTax registration and profile; (2) have a confirmed tax liability in the KRA system that is not subject to active litigation; (3) demonstrate genuine inability or impracticality to settle the full liability in a single payment; and (4) submit a proposed installment schedule via iTax and ensure the installment period does not exceed six months.

Validation of income and expenses in the income tax returns

The KRA is enhancing the income tax return templates to incorporate validation of income and expenses. This enhancement is expected to take effect from 1 January 2026, and the KRA will begin validating income and expenses declared in both individual and non-individual income tax returns against the following data sources: TIMS/eTIMS, WHT certificates and import records. This validation will take place upon submission of the 2025 year of income/accounting period return via the iTax platform.

Impact of the iTax enhancements

The iTax enhancements have the following effects:

• Impose stricter compliance requirements for TCC issuance, meaning taxpayers must meet enhanced conditions before obtaining a TCC
• Limit the usability of adjustment vouchers, as OAV and IAV now require KRA approval before they can be applied, which may delay their use and increase cashflow pressure for taxpayers
• Provide through the APP a structured avenue for taxpayers with genuine financial constraints to settle outstanding liabilities in installments of up to six months
• Increase scrutiny on income tax return filings through upcoming validation of income and expense declarations against TIMS/eTIMS data, WHT certificates and customs records

Next steps for taxpayers

Taxpayers should assess their readiness for the enhanced TCC requirements by: (1) ensuring timely filing, eTIMS compliance and resolution of outstanding liabilities; (2) adjusting internal processes to align with the restricted use of adjustment vouchers; (3) evaluating the suitability of the APP for managing existing tax debts; and (4) proactively reconciling income and expense records with TIMS/eTIMS data, WHT certificates and customs import information in preparation for the 2026 validation framework.