The Kenya Revenue Authority (KRA) and Safaricom are in talks to allow M-Pesa to issue electronic tax invoices on behalf of small businesses, making it easier for micro traders to supply big companies with goods and services.
The telecoms operator is expected to generate the receipts under the electronic tax invoice management system (eTIMS) on behalf of small traders receiving payments via M-Pesa tills and paybills.
The talks are at the preliminary stage. Safaricom is expected to generate eTIMS and forward the invoice to the KRA, providing the taxman with wider visibility of transactions, especially among small traders outside the tax bracket.
This will help weed out tax evaders and boost revenue by billions of shillings, part of a raft of measures to repair Kenya’s public coffers. 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.
It also provided an additional obligation on the big firms to generate the eTIMS on behalf of small businesses, in what is technically called reverse invoicing.
“Safaricom would like to carry out reverse invoicing on behalf of merchants, and these are discussions that we have begun with the telecoms operator,” a KRA official told the National Assembly Committee on Finance and National Planning on Tuesday.
“The solution would enable Safaricom to transmit invoices at the end of the day. This approach has worked very well with supermarkets where invoices generated during the day are sent to us at night.”
The eTIMS system, which requires businesses to file receipts or invoices with the KRA as proof of expenses, is aimed at widening the tax base as big companies report to the authority small firms that act as their suppliers.
It also helps curb the practice where big firms inflate their sales and narrow profits in the push to pay lower taxes.
Small traders lacking in sophistication have struggled to do business with larger entities who require electronic invoices, which allow the corporates to claim business expenses like utilities, office supplies, repairs and maintenance.
Reverse invoicing stands as the buffer currently, where large-scale buyers can generate invoices on behalf of sellers through an existing billing system that interfaces with eTIMS.
The raising of electronic invoices through M-Pesa implies that the headache of generating the receipts would now lie outside both the small traders and the large buyers.
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 which, covers 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, including being spared registration for value added tax (VAT).
Analysts at PwC had cautioned that small businesses would run into headwinds in dealing with other businesses’ eTIMS compliance hurdles.
eTIMS is a software solution that provides taxpayers with options for a simple, convenient and flexible approach to electronic invoicing.
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.
“There are many small farmers who supply factories with cane, coffee and tea. We are currently implementing reverse invoicing with sugar factories before moving to the tea and coffee sectors,” added the KRA official.
The KRA’s shift to looking at M-Pesa business payments as electronic invoicing points to the taxman’s growing focus on mobile money as a platform to monitor and enforce tax compliance.
In October 2024, a senior economic adviser to President William Ruto, disclosed that mobile money paybill and till number accounts would be converted into electronic tax registers to weed out tax evaders and boost revenues to the tune of billions.
The adviser pointed to the disparity between the estimated 200,000 firms that have electronic tax registers (ETRs) and two million businesses using paybills as payment points.
Earlier this year, the KRA said it had opened a crackdown on small traders who change their M-Pesa till/paybill numbers to evade taxes.
The taxman detected widespread cases of traders frequently switching payment channels to avoid leaving a consistent transaction trail.
