Safaricom M-Pesa in Talks with KRA on Tax Invoicing Plan

In Short

Safaricom, through M-Pesa, is in discussions with the Kenya Revenue Authority (KRA) on a proposal that would let the telecom generate electronic tax invoices for merchants.

The idea is that invoices could be created on behalf of businesses that receive payments through M-Pesa tills and paybills, and then transmitted to KRA.

What Happened: How M-Pesa Reverse Invoicing Could Work

A KRA official told the National Assembly’s Finance and National Planning Committee that Safaricom had proposed “reverse invoicing” for merchants.

Reverse invoicing is a process where invoices are generated on behalf of suppliers, instead of suppliers creating and issuing them themselves.

Under the proposed arrangement, Safaricom would generate eTIMS invoices for merchants receiving payments through M-Pesa tills and paybills, then transmit the records to KRA. The official said one option discussed is end of day transmission of invoices to KRA, similar to a process the authority already uses with supermarkets.

KRA also told lawmakers that it intends to use financial information linked to merchant till numbers and Pochi la Biashara accounts to identify income that businesses may not be declaring in their tax returns.

Why It Matters: Compliance For Small Merchants And More Visibility For KRA

KRA’s discussions put M-Pesa’s merchant network at the centre of its push for electronic invoicing and more visibility into business transactions.

The article says reverse invoicing is intended to solve a practical problem, small suppliers can struggle to produce electronic tax invoices. Larger businesses need compliant invoices to support expense claims, and smaller businesses can face difficulties supplying them without the required records.

KRA has pursued similar arrangements elsewhere. It has worked with the East African Tea Trade Association on invoicing small scale farmers supplying tea to auction, and it has also been implementing reverse invoicing with sugar factories, and planning similar arrangements for tea and coffee supply chains.