The Buyer-Initiated Invoicing Revolution: Mastering Kenya’s Reverse Invoicing Mandate

Imagine it’s 5:00 AM at your distribution center. A fleet of trucks arrive, loaded with fresh produce from small-scale farmers across the country. Your shelves stay stocked, your customers are happy, and the supply chain is moving. But there’s a hidden friction point: most of these suppliers don’t issue eTIMS-compliant invoices. For some time now, since the introduction of eTIMS, this has meant a massive headache for finance teams- either losing out on tax deductions, or spending countless hours chasing informal traders for paperwork they aren’t equipped to provide.

The game has changed. With the introduction of Reverse Invoicing, the Kenya Revenue Authority (KRA) has handed the “pen” to the buyer. You are no longer just a recipient of invoices; you are the architect of your own tax compliance.

Let’s dive in.

Definition of reverse invoicing.

In the traditional tax model, the seller issues the invoice. Reverse Invoicing flips this script. It is a tax-compliance mechanism where the purchaser (the retailer) generates the tax invoice on behalf of the supplier for goods or services received.

Essentially, the responsibility for generating the eTIMS-compliant document shifts from the seller to the buyer. This ensures that the transaction is captured in the KRA system immediately, regardless of the supplier’s technological capacity.

The purpose and function of reverse invoicing

Reverse invoicing was introduced to address practical challenges faced by small businesses, traders, and small-scale farmers, many of whom:

• are not financially or technologically savvy;

• are unable or unwilling to use eTIMS directly;

• may struggle with formal tax-related documentation; and

• operate informally despite being part of the value chain for larger businesses.

Because these small suppliers often fail to issue compliant invoices, larger taxpayers who purchase from them face challenges when claiming allowable deductions or input tax.

How does reverse invoicing apply in the context of eTIMS.

Reverse invoicing in Kenya was introduced through the Tax Procedures (Amendment) Act, 2024, effective 27 December 2024. Based on the above law, the following conditions are required when issuing invoice through the reverse invoicing mechanism:

1. the supplier has a turnover of less than 5 million;

2. the supplier is not exempt from eTIMS;

3. the expense requires to be supported by eTIMS; and

4. the invoice for accounting and tax-deduction purposes.

Practical details and scenarios

The following are the key challenges when implementing reverse invoicing:

1. Consent – the reverse invoicing mechanism requires the supplier’s consent. If the supplier does not consent or understand the magnitude of the tax implications, it might result in several tax liabilities on uninformed taxpayers.

2. Transmission issues – various supplies under eTIMS do not reflect in a timely and accurate manner in the eTIMS accounts for the various taxpayers.

Bottom Line

Reverse invoicing is more than a tax update; it is an operational pivot. It empowers retailers to take control of their tax health rather than being at the mercy of their smallest suppliers’ technical abilities. By mastering this “Buyer-Led” approach, you secure your deductions, formalize your supply chain, and ensure that your business remains resilient in an increasingly digital tax landscape.

Got more questions about reverse invoicing? Contact us at info@namiri.tech/ 0112685368