Manufacturers flag eTIMS compliance gaps, warn of rising tax risks

The Kenya Association of Manufacturers (KAM) has raised concerns over persistent technical and logistical hurdles facing the implementation of the electronic Tax Invoice Management System (eTIMS). During a high-level industry seminar hosted in partnership with DigiTax in Nairobi, stakeholders warned that these compliance gaps are exposing businesses to significant tax risks.

The manufacturing sector, which serves as a cornerstone of Kenya’s infrastructure and economic landscape, is currently navigating a complex transition toward digitized tax reporting. While the Kenya Revenue Authority (KRA) intends for eTIMS to streamline VAT collection, the reality on the factory floor remains complicated by system downtime and integration difficulties.

Industrialists noted that limited awareness among small and medium-scale suppliers is undermining the integrity of the supply chain. Because eTIMS requires every entity in the value chain to generate electronic invoices, any break in the link can lead to the disallowance of input VAT claims, effectively increasing the cost of production for compliant manufacturers.

The seminar highlighted that many firms are still struggling with the technical requirements of the system, which demands real-time or near-real-time transmission of invoice data to the KRA. For large-scale manufacturing operations with high transaction volumes, any lag in system response can lead to administrative bottlenecks and potential penalties for non-compliance.

Experts at the forum emphasized that the transition to a fully automated tax environment requires more than just software updates. It necessitates a comprehensive understanding of the legal frameworks governing electronic invoicing. Without this clarity, many businesses find themselves at risk of audits and back-tax assessments due to minor technical errors in their filings.

The partnership between KAM and DigiTax aims to bridge these gaps by providing technical support and advocacy. Representatives from DigiTax noted that while the goal of a transparent tax system is beneficial for the economy, the transition period must account for the diverse technological capabilities of different players within the industry.

In the context of the wider construction and manufacturing supply chains, these tax challenges have a direct impact on project costs. As raw materials like cement, steel, and electrical components move from factories to construction sites, the seamless flow of eTIMS data is essential to keep project accounting accurate and to avoid unforeseen fiscal liabilities.

Industry leaders urged the tax authority to consider more flexible implementation timelines and to provide more robust support for businesses currently facing system-related difficulties. They argued that a collaborative approach between the private sector and the government is the only way to ensure that the move toward a digital tax regime does not stifle industrial growth.

As the deadline for full compliance approaches, the manufacturing sector remains under pressure to align its internal accounting processes with the KRA’s digital infrastructure. The outcome of these discussions in Nairobi will likely influence how tax policy is applied to the broader industrial and infrastructure sectors in the coming months.