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When KRA's records do not match yours, what happens?
Kenya's tax administration is becoming increasingly data-driven.
With the expansion of eTIMS, KRA is no longer dependent solely on what a taxpayer reports in a tax return. Electronic invoice data can be used to verify declared sales, purchases and expenses, making the accuracy of a taxpayer's underlying records increasingly important.
The Finance Act, 2026 has taken this further by expanding the information the Commissioner may rely upon when making tax assessments, including eTIMS data and other information lawfully available to KRA. The Act also provides for the generation of pre-populated tax returns using information already available to the Commissioner.
The new reality.
Your tax return → KRA's electronic records → Comparison → Possible discrepancy → Verification → Assessment
A difference does not necessarily mean that the taxpayer has evaded tax.
There may be legitimate explanations: timing differences, cancelled transactions, returns of goods, disbursements, agency transactions, system errors or incorrect information attributed to the taxpayer.
The important issue is therefore whether the taxpayer can explain and substantiate the difference.
What if KRA's figures do not match yours?
KRA may seek supporting records and explanations before raising or confirming an assessment. KRA itself recognises that taxpayers should be given an opportunity to respond to identified gaps before an assessment or demand is issued.
If an assessment is eventually raised, the taxpayer is not without a remedy.
The taxpayer may object to the assessment and, where the dispute remains unresolved, pursue an appeal before the Tax Appeals Tribunal.
The critical point is evidence. Under section 56 of the Tax Procedures Act, the taxpayer bears the burden of proving that a tax decision is incorrect. This means that a taxpayer challenging an assessment based on electronic data should not rely merely on saying “KRA's figures are wrong.” The discrepancy needs to be demonstrated through proper records and reconciliation.
What are the courts saying and the recent legal developments.
Recent Tax Appeals Tribunal decisions show just how important reconciliation has become. In Mu-Bei Stainless and Toughend Glass Ltd v Kenya Revenue Authority [2026] KETAT 205, KRA relied on eTIMS data to identify an alleged under-declaration of sales. The Tribunal considered the taxpayer's explanations but ultimately found that the taxpayer had failed to adequately reconcile the eTIMS figures with its VAT declarations and supporting transaction records.
The lesson is straightforward:
A discrepancy is a problem; an unexplained discrepancy is a much bigger problem.
The Tribunal has also demonstrated that electronic records do not automatically make KRA's position unanswerable. In Silver Building Works and General Suppliers Ltd v Kenya Revenue Authority [2026] KETAT 201, the Tribunal considered the taxpayer's failure to provide eTIMS records, tax invoices, supplier confirmations and other supporting documents in determining whether the assessments had been displaced.
But what if the problem is in the electronic system?
The Finance Act, 2026 recognises that electronic systems can themselves generate errors.
Section 89 of the Tax Procedures Act was amended to provide relief where penalties or interest arise from errors or malfunctions in an electronic tax system. The 2026 reforms also introduced a mechanism allowing the Commissioner to waive qualifying penalties and interest arising from electronic-system errors, subject to the statutory conditions and threshold.
This is important because digital compliance does not mean that every electronic record is automatically infallible.
What should businesses do?
Businesses should treat eTIMS records as part of their core tax records and regularly reconcile them against:
Sales records | Purchase records | Bank records | VAT returns | Income tax returns | Accounting records
Where a discrepancy appears, it should be investigated and documented before it becomes a tax dispute.
The Takeaway.
eTIMS has changed the question from “What did the taxpayer declare?” to “Does the taxpayer's declaration agree with the data available to KRA?”
That does not mean every mismatch creates a tax liability.
It does mean that businesses need to be able to explain, reconcile and substantiate their figures.
For taxpayers who receive a KRA verification request or assessment based on electronic data, early professional review can be critical particularly where the discrepancy arises from legitimate commercial transactions, timing differences, system errors or incorrect data.
In the era of digital tax administration, good tax compliance is no longer just about filing returns. It is about making sure that your records tell the same story as your electronic tax data.
