Invoice Template (Invoices)

An Invoice Template (Invoices) in Kenya itemises a sale and confirms the payment owed or received between the parties.

The Kenya Revenue Authority, operating under the Kenya Revenue Authority Act Cap. 469, has progressively tightened invoice compliance requirements as part of its broader effort to reduce VAT fraud and broaden the tax base. The Finance Act 2023 introduced the electronic invoicing requirement under the Tax Procedures Act No. 29 of 2015, mandating that all VAT-registered taxpayers with annual turnover above KES 5 million adopt the KRA-approved Tax Invoice Management System (TIMS) or the equivalent electronic tax register (ETR) by September 2022. TIMS-generated invoices carry a unique QR code that allows the KRA to verify the invoice on the iTax platform in real time.

Beyond VAT compliance, a properly structured Kenya Invoice also serves as evidence of a debt obligation enforceable under the Law of Contract Act Cap. 23. When a supplier files a suit in the High Court of Kenya, the Magistrate's Court, or the Small Claims Court under the Small Claims Court Act No. 2 of 2016 to recover an unpaid invoice, the invoice is the primary documentary evidence of the amount owed. Courts have consistently held that an undisputed invoice, combined with proof of delivery of goods or services, is sufficient to ground a summary judgment application under Order 36 of the Civil Procedure Rules 2010.

Forms-legal.com provides a Kenya Invoice Template that meets all KRA requirements for both VAT-registered and non-VAT-registered suppliers, including fields for KRA PIN, ETR/TIMS reference, withholding tax deductions, and M-Pesa payment details — reflecting the realities of how payments are made and received by Kenyan businesses of all sizes. Under Kenya law, Section 3 of the Companies Act 2015 (No. 17 of 2015) and Section 15 of the Employment Act 2007 (No. 11 of 2007) govern the core requirements for this type of document.

The legal framework governing the Invoice Template in Kenya draws on several key statutes and regulatory bodies. Under the Central Bank of Kenya Act (Cap. 491), the Central Bank of Kenya (CBK) regulates banking. The Capital Markets Authority (CMA) regulates securities under the Capital Markets Act (Cap. 485A). Section 84 of the Bills of Exchange Act (Cap. 27) governs promissory notes. The Kenya Revenue Authority (KRA) administers tax obligations. The Microfinance Act No. 19 of 2006 regulates microfinance institutions. The Hire Purchase Act (Cap. 507) governs credit sale agreements. Parties executing a Invoice Template in Kenya should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Value Added Tax Act No. 35 of 2013 sets the foundational requirements.

A Kenya Invoice Template is needed in virtually every commercial transaction, and the specific requirements vary depending on the nature of the supplier and the transaction.

First, every VAT-registered business in Kenya must issue a tax invoice for each taxable supply of goods or services. Section 17 of the Value Added Tax Act No. 35 of 2013 makes this mandatory, and failure to issue a compliant tax invoice is an offence under the VAT Act carrying a penalty of KES 100,000 or two years' imprisonment. Businesses that cross the VAT registration threshold of KES 5 million annual turnover under section 5 of the VAT Act must register with the KRA and begin issuing compliant tax invoices from the effective date of registration.

Second, non-VAT-registered businesses — including sole traders, small and medium enterprises below the VAT threshold, and registered partnerships under the Partnership Act Cap. 29 — also need a professional invoice template to document their transactions, support their income declarations on iTax, and collect payments from their customers. The KRA's requirement for all taxpayers to file annual returns under the Income Tax Act Cap. 470 means that income must be traceable to issued invoices.

Third, businesses that are subject to withholding tax — professional services providers, consultants, contractors, and suppliers to large organisations and government bodies — receive payments net of withholding tax deducted by the customer under section 35 of the Income Tax Act Cap. 470. A properly structured invoice must show the gross amount, the withholding tax rate and amount, and the net amount payable, so that the supplier can claim credit for withholding tax suffered when filing their annual income tax return.

Fourth, exporters of goods and services from Kenya need a compliant export invoice to support claims for VAT zero-rating under section 21 of the Value Added Tax Act No. 35 of 2013. Export invoices must reference the export documentation — the customs entry, Bill of Lading or airway bill — to substantiate the zero-rating claim.

Fifth, businesses supplying public sector organisations — national government ministries, county governments, state agencies, and parastatals — must issue invoices that meet the Public Procurement and Asset Disposal Act No. 33 of 2015 requirements, which mandate that all supplier invoices carry a valid Local Purchase Order or contract reference number before the payment process can commence.

A legally compliant Kenya Invoice must contain the following essential elements as prescribed by the Value Added Tax Act No. 35 of 2013, the VAT Regulations 2017, and the Tax Procedures Act No. 29 of 2015.

**Supplier Details.** The invoice must show the supplier's full legal name or trading name, physical address, telephone number, email address, and KRA Personal Identification Number (PIN). For VAT-registered suppliers, the VAT registration certificate number and effective date of VAT registration must also appear. These requirements are mandatory under regulation 3 of the VAT Regulations 2017 (Legal Notice No. 29 of 2017).

**Customer Details.** The invoice must show the customer's name and address. Where the customer is VAT-registered, their KRA PIN should be included so that the customer can claim input tax credit on the VAT charged. For business-to-business supplies, section 17(2) of the VAT Act No. 35 of 2013 requires the customer's PIN to appear on the tax invoice.

**Invoice Number and Date.** Each invoice must carry a unique sequential invoice number and the date of issue. The date of the invoice determines the VAT period in which the output tax is reported — typically the calendar month in which the tax point arises under section 12 of the VAT Act No. 35 of 2013. Sequential numbering allows the KRA to detect gaps in invoice sequences that may indicate unreported sales.

**Description of Goods or Services.** The invoice must describe each item of goods or services supplied with sufficient detail to allow the customer and the KRA to classify the supply for VAT purposes. A description such as 'professional services' is generally insufficient — specificity such as 'audit services for the financial year ended 31 December 2024' is required. The quantity, unit of measure, and unit price must be stated separately for each line item.

**VAT Calculation.** For VAT-registered suppliers, the invoice must show the taxable value (net amount before VAT), the VAT rate applicable to each line — 16% for standard-rated, 0% for zero-rated or exempt — and the VAT amount in Kenya Shillings. The gross invoice amount (inclusive of VAT) must equal the taxable value plus the VAT amount. Forms-legal.com's Kenya Invoice Template automatically calculates VAT based on the applicable rate selected.

**ETR/TIMS Reference.** All VAT-registered businesses are required to issue invoices through a KRA-approved Electronic Tax Register (ETR) or the Tax Invoice Management System (TIMS) as mandated by the Finance Act 2023 and the Tax Procedures (Electronic Tax Invoice) Regulations 2020. TIMS-generated invoices carry a unique QR code, ETR serial number, and electronic signature that the KRA can verify on iTax. Non-compliance attracts a penalty of KES 1,000,000 under the Tax Procedures Act No. 29 of 2015.

**Withholding Tax Notation.** Where the customer is required to withhold tax on the payment under section 35 of the Income Tax Act Cap. 470 — applicable to professional services, management fees, rent, royalties, and other scheduled payments — the invoice should note the applicable withholding tax rate and the net amount payable after deduction. Common withholding tax rates are 5% for resident professional services, 3% for resident contractors, and 20% for non-resident management fees. The customer issues a withholding tax certificate (WHT certificate) via iTax upon making payment, and this certificate allows the supplier to offset the withheld tax against their annual income tax liability.

**Payment Terms and Bank Details.** The invoice must state the payment due date, acceptable payment methods — bank transfer, M-Pesa Paybill, RTGS, or cheque — and the full bank account details for electronic transfers: bank name, branch, account name, account number, and SWIFT code for international transfers. M-Pesa Paybill business numbers should be included given their prevalence in Kenyan commerce under the National Payment System Act No. 39 of 2011 administered by the Central Bank of Kenya.

**Late Payment Interest.** The Law of Contract Act Cap. 23 and the general law of contract in Kenya permit suppliers to charge interest on overdue invoices provided the rate is stated in the invoice or in the underlying contract. A rate of 1.5–2% per month is commercially standard in Kenya. Forms-legal.com recommends including a late payment clause on every invoice to preserve this right without requiring a separate demand.

**Retention and Record-Keeping.** The Tax Procedures Act No. 29 of 2015 requires all taxpayers to retain accounting records — including copies of all issued and received invoices — for a minimum of five years from the end of the relevant tax period. Digital storage in a KRA-approved format is permitted, provided the records are readily retrievable for inspection by the KRA.