Accra:Kenya Revenue Authority A tax fraud scheme involving fake electronic invoices worth Sh4 billion has been uncovered by the Kenya Revenue Authority (KRA). A total of 42 individuals and companies are now facing prosecution for fictitious transactions amounting to Sh33.8 billion.
According to Kenya News Agency, investigations revealed a network of 72 related entities that generated false invoices between 2020 and 2025, facilitating illegal Value Added Tax (VAT) claims. The entities transmitted 62,869 invoices with a combined value of Sh33.83 billion through the electronic Tax Invoice Management System (eTIMS), resulting in a corresponding VAT of Sh5.37 billion.
Taxpayers claimed to have purchased goods and services worth Sh25.07 billion from these entities, leading to input VAT claims of approximately Sh3.996 billion. KRA described the scheme as a ‘missing trader scheme’, where shell entities issue invoices without genuine business transactions, allowing other taxpayers to claim improper tax deductions.
The investigation found several entities had not filed VAT or income tax returns, lacked Pay As You Earn (PAYE) obligations, and could not be traced to their registered business premises despite the substantial turnover attributed to them. Evidence indicated that some companies existed primarily to generate invoices without supplying goods or services.
Digital forensic investigations linked these entities through electronic devices, telephone numbers, and individuals involved. Suspected internal collusion involving KRA staff profiles was flagged, and cases are undergoing internal and legal processes.
KRA has forwarded 57 inquiry files to the Office of the Director of Public Prosecutions (ODPP), which approved the prosecution of 42 individuals, companies, and directors. Six suspects have been arrested and are expected to face charges of tax fraud and aiding others in committing tax law offences.
Businesses have been warned against using fictitious invoices for illegitimate input VAT claims, facing potential criminal and civil penalties. KRA is disallowing unsupported input VAT claims, recovering resulting liabilities, reversing fraudulent eTIMS transmissions, and disabling implicated devices.
The authority is using data analytics, digital forensics, financial investigations, and inter-agency cooperation to identify fraudulent transactions and recover lost revenue. Taxpayers involved in the fraudulent arrangements are urged to regularize their tax affairs. The public is encouraged to report information on fictitious VAT invoices through KRA’s iWhistle platform or by calling designated hotline numbers, with assurances of anonymity for informants.
The crackdown aims to protect compliant taxpayers, safeguard government revenue, and preserve the tax system’s integrity.
