Safaricom wants to exclude M-PESA from the eTIMS requirements.

Safaricom is seeking amendments to the Income Tax Act to exempt M-PESA transaction fees from the Kenya Revenue Authority (KRA)’s electronic Invoice Management System (eTIMS), arguing that generating paperwork for millions of daily transactions is burdensome. The telecom giant suggests that M-PESA transaction charges be classified as deductible expenses to alleviate the burden on users of producing vast numbers of electronically generated invoices on eTIMS.

A deductible expense reduces taxable income, thereby decreasing the amount of taxes owed. “M-PESA services such as cash withdrawals, sending e-money, and purchasing prepaid airtime attract transaction fees. The volume of such transactions reaches millions daily,” Safaricom stated in its submission to the National Assembly’s Finance and Planning Committee regarding the Finance Bill 2024.

“In a month, the M-PESA platform processes approximately 200 million transactions. Generating electronic tax invoices for each transaction would require seamless integration of systems between Safaricom and the Kenya Revenue Authority,” the company added.

The Finance Act 2023 amended Section 16 of the Income Tax Act to require that, starting January 1, 2024, only expenses supported by eTIMS invoices would be considered deductible. Safaricom disclosed that for the 12 months ending March 2024, the value of M-PESA transactions averaged Sh110.25 billion daily.

Safaricom also argues that mobile money transaction fees should be treated like other financial services fees and exempt from eTIMS invoicing requirements. The company warned that failing to exempt M-PESA transactions from mandatory eTIMS invoices could hinder crowdfunding efforts for charitable causes in Kenya.

“The requirement to issue electronic tax invoices applies to businesses in Kenya. However, most charitable organizations do not generate income and are not required to issue electronic tax invoices. Potential donors might avoid contributing to such organizations as they are not incentivized through income tax deductions,” Safaricom told the committee.

The Finance Bill 2024 proposes stricter eTIMS implementation, including a steep penalty of Sh2.0 million per month for failing to integrate systems with eTIMS for generating electronic invoices.