💡 Introduction
Since the rollout of eTIMS and the Auto-Populated VAT Return in 2024, VAT reconciliation has become one of the most critical compliance tasks for Kenyan businesses.
In 2025, the Kenya Revenue Authority (KRA) uses data matching between eTIMS and iTax to automatically verify every sale and purchase declared in VAT returns.
This guide — built from KRA’s official VAT Auto-Populated Return FAQs and Kenyan tax laws — walks you through:
✅ How eTIMS data integrates with iTax,
✅ How to reconcile your figures,
✅ Common mismatches and penalties,
✅ And best practices for staying compliant under the Finance Act 2025.
🧾 1. Why Reconciliation Matters
The goal of reconciliation is to ensure your VAT return on iTax matches your eTIMS invoice data.
KRA’s systems now automatically flag differences between what you transmit and what you file.
- If sales or purchases don’t match, input VAT may be blocked.
- Persistent mismatches may trigger desk audits or penalties under Section 85 of the Tax Procedures Act (Cap. 469B).
In short — if it’s not on eTIMS, it won’t count for VAT.
⚙️ 2. Understanding eTIMS vs. the Auto-Populated VAT Return
| System | Purpose | What It Captures | Who Controls It |
|---|---|---|---|
| eTIMS | Digital invoicing & reporting | Every individual sales/purchase invoice | Taxpayer (via eTIMS device/software) |
| Auto-Populated VAT Return | iTax declaration | Aggregated eTIMS data per month | KRA via iTax |
🧩 3. Legal Foundation
- Section 17 – VAT Act 2013 (Revised 2024): Governs valid input VAT claims (within 6 months).
- Section 43 – VAT Act: Mandates electronic record-keeping and invoice transmission.
- Finance Act 2025: Expands eTIMS coverage and enforces automatic VAT matching.
- KRA FAQ): Clarifies rules for sales, purchases, and import VAT in the auto-populated return.
🧮 4. Step-by-Step Reconciliation Process
Step 1: Download eTIMS Data
Log in to your eTIMS portal → Export monthly CSV files for:
- Sales (output tax)
- Purchases (input tax)
- Credit notes
Step 2: Open the Auto-Populated VAT Return
On iTax, open your VAT return for the same month. You’ll notice:
- Sales from transmitted eTIMS/TIMS invoices are prefilled.
- Purchases are drawn from suppliers’ transmissions.
- Imports and Digital Service Invoices are auto-imported from ICMS system
Step 3: Compare Totals
Match eTIMS totals to iTax values for:
- Total sales per category
- Total purchases
- Credit notes
If any invoice is missing, check if it was untransmitted or from a non-compliant supplier.
Step 4: Handle Untransmitted Invoices
If your eTIMS device was offline, you must:
- Manually declare sales under the “Lump-Sum Sales” field.
- Ensure the invoice is transmitted once connection is restored.
Step 5: Manage Credit Notes
Declare all credit notes in both:
- Section B – Output VAT
- Section F – Input VAT
Credit notes are valid for six months from the invoice date
Step 6: Verify Imports
Confirm all ICMS entries are:
- Paid and marked “settled” or “removed”
- Filed under your PIN
- Not claimed before
Otherwise, contact your clearing agent to update status.
Step 7: Resolve Supplier Issues
If a supplier’s PIN is in the VAT Special Table, KRA blocks input VAT automatically.
- Ask the supplier to regularize compliance or reactivation
Step 8: Save Evidence
Keep:
- CSV files (eTIMS & VAT)
- Supplier invoices
- Payment proofs
- ICMS entries
KRA may demand supporting records during VAT refund or audit reviews.
⚠️ 5. Common Reconciliation Differences
| Issue | Cause | Fix |
|---|---|---|
| Missing sales | eTIMS not transmitted | Use “Lump Sum Sales” & transmit later |
| Missing purchases | Supplier failed to transmit | Request reissue |
| Credit notes missing | Supplier not filed | Ensure both declare within same period |
| Import VAT missing | ICMS entry not settled | Follow up with Customs |
| Invalid supplier PIN | Deactivated VAT status | Supplier must reactivate |
🔍 6. KRA Audit Triggers in 2025
KRA systems flag:
- Purchases exceeding supplier sales data
- Continuous negative VAT positions
- Refund claims from unmatched inputs
- Unjustified “Lump Sum Sales” usage
- Failure to transmit within the tax period
✅ 7. Best Practices
- Reconcile monthly — not annually.
- Always verify supplier PINs before purchase.
- Use KRA’s Invoice Checker before filing.
- Claim input VAT only from compliant, active suppliers.
- Keep backup CSVs and invoices for at least five years (per Section 43 VAT Act).
🧠 8. FAQs
Q1: Can I edit pre-filled fields in iTax?
A: No. Fields like PIN, invoice number, and taxable value are locked by KRA.
Q2: Can I claim purchases from a dormant supplier?
A: No. Only reactivated suppliers are valid for input VAT claims.
Q3: My eTIMS device was offline — what now?
A: Declare manually in Lump Sum Sales, but transmit the invoices ASAP.
Q4: What’s the claim limit?
A: Input VAT must be claimed within 6 months of the transaction month.
🏁 Conclusion
Reconciliation isn’t just a formality — it’s now a core compliance requirement.
KRA’s digital systems leave no room for guesswork:
“If it’s not in eTIMS, it’s not in your VAT return.”
By maintaining accurate, real-time reconciliation, you not only avoid penalties but also build a reliable audit trail for refunds and tax clearance certificates.