1. Introduction: What Has Changed?
The Kenya Revenue Authority (KRA) has introduced significant updates to the iTax Income Tax Return filing process. Effective for accounting periods ending in 2025 and returns filed from January 1, 2026, these changes represent a major shift from traditional self-declaration to a more robust, system-verified compliance model.
The primary objectives of these updates are to:
- Improve Accuracy: Reduce errors in tax return submissions.
- Strengthen Compliance: Integrate data from eTIMS/TIMS and Customs systems.
- Automate Filing: Increase the use of prefilled data to simplify the process for taxpayers.
2. Who Is Affected?
These changes are comprehensive and apply to a wide range of taxpayers, including:
- Individual Taxpayers: Specifically those filing beyond simple employment-only returns.
- Non-Individual Taxpayers: Companies and corporate entities.
- Partnerships: Including IT2P filers.
- Specific Form Filers: Users of IT2C, ITR, and ITNR forms.
Important Requirement: Taxpayers MUST now download the latest autopopulated Excel return from iTax using the dedicated "Download Autopopulated ITR/ITNR/IT2C/IT2P Return" link.
3. Autoprefilled Data: What KRA Now Fills Automatically
KRA is leveraging integrated systems to pre-populate significant portions of your return, reducing manual entry and potential errors.
| Category | Data Automatically Prefilled |
|---|---|
| Basic Information | KRA PIN, Return period dates, Business type/subtype. |
| Partnerships | Partner names, PINs, and profit/loss sharing ratios. |
| Tax Credits | Instalment Tax (PRN numbers/amounts), Withholding Tax (Income & Rent), and Advance Tax payments. |
4. Income Validation: How KRA Checks Your Sales
KRA now validates your declared income against system-generated records. Your declared income is compared against the higher of:
- eTIMS/TIMS sales invoices issued during the period.
- Gross income from withholding tax certificates.
The Golden Rule: You may declare higher income than system records, but you may not declare lower income without triggering a flag for correction.
5. Expense Validation: Proving What You Spent
Locally incurred expenses are now primarily validated using supplier-generated TIMS/eTIMS invoices. If your claimed expenses exceed the eligible invoice support captured under your PIN, the return will be flagged.
Expenses Exempt from eTIMS Validation
Certain legitimate expenses are excluded from this specific validation but must be declared in their designated fields:
- Operational: Salaries (emoluments), interest expenses, and bank fees.
- International: Imported goods and services (validated via ICMS).
- Accounting: Capital allowances, depreciation, bad debts, and exchange gains/losses.
6. New Manual Expense & Adjustment Options
Recognizing that some genuine business expenses may not have electronic invoices, KRA has introduced a manual adjustment menu:
- Manual & Non-eTIMS Invoices: Accessible via the "Income Tax Return Adjustments" menu. Requires a prescribed CSV template with supplier details and scanned PDF support (max 10MB).
- Accounting & Accrual Adjustments: For deferred income, prepayments, or inventory adjustments. This requires full financial statements and, crucially, an Auditor's PIN and ICPAK Number.
7. Practical Taxpayer Checklist
To ensure a smooth filing experience in 2026, follow this checklist:
Conclusion: Think "Reconcile and Prove"
The bottom line for 2026 is that KRA is moving toward a "system-verified" tax environment. Success now depends on proper reconciliation, correct invoice usage, and strong documentation.
"Declare what you earned, prove what you spent, and reconcile everything."