KRA pushes simplified tax tools to bring more MSMEs into the tax net

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The Kenya Revenue Authority (KRA) says it wants more micro, small and medium enterprises (MSMEs) in the tax net, and that it plans to get them there with simpler tools rather than heavier enforcement. Senior KRA officials made the case at the 7th MSMEs Conference and Expo in Nairobi, where they pointed to a simplified payroll tool for small employers, eTIMS Lite invoicing on a basic phone and a new option to pay Turnover Tax daily.

The conference, organised by Nation Media Group with the State Department for MSMEs Development, was held at Loita Hall in Sarit Centre on 13 March 2026, according to the State Department’s events page.

KRA says informality needs a rethink

KRA Board chairman Ndiritu Muriithi told the conference that the growth of online trade means many businesses no longer have a shop or office, which makes older ideas of what counts as a formal business outdated.

“Many businesses today operate online. Requiring them to have a physical location may no longer be practical because they can be everywhere and nowhere at the same time. As a tax administration, we must rethink how we engage with such enterprises,” he said, as reported by Aptantech.

Muriithi said most taxpayers are willing to comply once they understand what they owe and have simple tools to pay it, although he acknowledged that a small group deliberately avoids paying.

Small businesses carry little of the tax load

George Obell, KRA’s Commissioner for Micro and Small Taxpayers, said MSMEs are central to growth and jobs but contribute a relatively modest share of tax revenue. That gap, he said, puts pressure on a small group of compliant taxpayers.

“Expanding participation in the tax system is not only a fiscal priority but also an issue of fairness and shared responsibility among all economic participants, including MSMEs,” Obell said.

He added that tax administration will rely more on technology, partnership and persuasion than on coercion.

The tools KRA is pushing

Simplified Payroll Tool

Obell singled out the Simplified Payroll Tool, which is meant for businesses with only a handful of workers. It lets them run payroll and meet their employer tax obligations without hiring an accountant.

“When a business employs three or five people, asking them to hire another accountant to manage payroll can be expensive. That is why we have rolled out simplified tools to support them,” he said.

The tool builds on KRA’s simplified PAYE return. In a public notice dated 23 June 2025, KRA said employers would file using a simplified Excel PAYE return from 1 July 2025, covering PAYE, the Affordable Housing Levy, the NITA levy and other payroll deductions. PAYE is due by the 9th of the month after the salaries are paid. You can estimate what a worker takes home with our tax calculators.

eTIMS Lite on USSD and the web

All businesses, including informal traders, must issue electronic invoices through the electronic Tax Invoice Management System (eTIMS). For traders who are not registered for VAT, KRA offers eTIMS Lite, which works through the USSD code *222# on any phone and through the web portal at ecitizen.kra.go.ke. KRA has also said it will consider reverse invoicing, where a seller authorises the buyer to issue invoices on their behalf, for groups such as farmers who struggle to use the standard tools.

Invoices matter to buyers too. Since 2024, business expenses that are not backed by a valid eTIMS invoice can be disallowed when KRA checks income tax returns. Our explainer on eTIMS expense validation covers how that works.

Daily Turnover Tax payments

Earlier in March, at a taxpayer forum in Kisii, Obell announced that eligible small traders would be allowed to pay Turnover Tax (TOT) daily instead of in one monthly lump sum, the Kenya News Agency reported. KRA said the change is meant to ease cash flow for traders who earn and spend money day by day.

According to KRA’s TOT page, Turnover Tax applies to residents whose gross sales are more than KSh 1 million but not more than KSh 25 million a year. It is charged at 1.5% of gross sales, with no deduction for expenses, and it is a final tax. The monthly return and payment are due by the 20th of the following month. Rental income, professional and management fees and income already taxed at source are excluded. A TOT taxpayer selling VAT-able goods with turnover of KSh 5 million or more must also register for VAT.

What it means for a small business

For a kiosk, salon or online seller, KRA’s message is that compliance should now cost less time and money than before. In practice, a small business owner can:

• Get a KRA PIN and register the business name, which our guide on reserving a business name on eCitizen walks through.
• Issue invoices with eTIMS Lite on *222# or the eCitizen web portal if not registered for VAT.
• Pay Turnover Tax daily where eligible, or monthly by the 20th.
• Use the simplified payroll tool and PAYE return for a small team.

If you get locked out of iTax while doing any of this, our guide to resetting a KRA iTax password helps.

KRA has framed the changes as part of a shift towards voluntary compliance. Obell said the authority would keep using forums such as the MSME conference to understand how small businesses actually operate and to design tools with them, rather than for them.

Frequently asked questions

What is the KRA Simplified Payroll Tool?

It is a KRA tool for small employers with a few workers that lets them process payroll and meet PAYE and related obligations without hiring an accountant.

How do I use eTIMS Lite?

Non-VAT registered traders can issue invoices by dialling *222# on any phone or by logging in to the web portal at ecitizen.kra.go.ke.

Can I pay Turnover Tax daily?

Yes. KRA said in March 2026 that eligible taxpayers may remit Turnover Tax daily. The monthly return is still due by the 20th of the following month.

Who pays Turnover Tax in Kenya?

Resident businesses with gross annual sales above KSh 1 million and up to KSh 25 million. The rate is 1.5% of gross sales.