The Kenya Revenue Authority (KRA) has uncovered a Sh4 billion tax fraud scheme involving fake electronic invoices, with 42 individuals and companies now facing prosecution over fictitious transactions worth Sh33.8 billion.
The taxman says investigations exposed a network of 72 related entities that generated false invoices between 2020 and 2025 to facilitate illegal Value Added Tax (VAT) claims.
In a statement released to the media on Thursday, KRA said the entities transmitted 62,869 invoices through the electronic Tax Invoice Management System (eTIMS), with a combined value of Sh33.83 billion and a corresponding VAT of Sh5.37 billion.
Taxpayers who purported to have purchased goods and services from the entities declared purchases worth Sh25.07 billion, resulting in input VAT claims of about Sh3.996 billion.
According to KRA, the racket is known as ‘a missing trader scheme’, where shell entities issue invoices without genuine business transactions, enabling other taxpayers to claim tax deductions they are not entitled to.
Investigations established that several of the entities had not filed VAT or income tax returns, had no Pay As You Earn (PAYE) obligations and could not be traced to their registered business premises despite the huge turnover attributed to them.
“Evidence indicated that some companies existed primarily to generate invoices without corresponding supplies of goods or services,” KRA said.
The authority said digital forensic investigations linked the entities through electronic devices, telephone numbers and individuals involved in generating and transmitting the invoices.
Investigators also flagged suspected internal collusion involving use of KRA staff profiles, and the cases are undergoing internal and legal processes.
KRA said it has forwarded 57 inquiry files to the Office of the Director of Public Prosecutions (ODPP), which has approved prosecution of 42 individuals, companies and company directors.
Six suspects have already been arrested and are expected to be charged with tax fraud and aiding another person to commit an offence under tax law.
The authority warned businesses against knowingly buying or using fictitious invoices to support illegitimate input VAT claims, saying offenders face both criminal and civil sanctions.
It said it has started disallowing unsupported input VAT claims, recovering resulting liabilities, reversing fraudulent eTIMS transmissions and disabling implicated eTIMS devices.
KRA said it is deploying data analytics, digital forensics, financial investigations and inter-agency cooperation to identify fraudulent transactions and recover lost revenue.
The authority urged taxpayers who may have benefited from, or fallen victim to the fraudulent arrangements to come forward and regularise their tax affairs.
It also appealed to members of the public with information on the generation, sale or use of fictitious VAT invoices to report through its iWhistle platform https://iwhistle.kra.go.ke or by calling 020 4 999 999 or 0711 099 999.
The tax agency assured informants that they will remain anonymous.
“The crackdown is part of efforts to protect compliant taxpayers, safeguard government revenue and preserve the integrity of the tax system,” KRA said.
By Chris Mahandara
