By Mandere Onyinkwa
The Kenya Revenue Authority (KRA) has uncovered a suspected tax fraud scheme involving fictitious electronic invoices worth KSh 33.83 billion, with businesses using the invoices to claim nearly KSh 4 billion in fraudulent input Value Added Tax (VAT).
In a statement, KRA said investigations by its Investigations and Enforcement Department established that 72 related entities were used to perpetrate the fraud between 2020 and 2025 through a scheme commonly known as a “Missing Trader Scheme”.
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The entities transmitted 62,869 electronic invoices through the electronic Tax Invoice Management System (eTIMS), with a combined value of KSh 33.83 billion and corresponding VAT of KSh 5.37 billion.
However, taxpayers claiming to have purchased goods and services from the entities declared purchases worth approximately KSh 25.07 billion, resulting in input VAT claims of about KSh 3.996 billion.
Investigators found that several of the entities had filed nil VAT returns or failed to file tax returns altogether, had no Pay As You Earn (PAYE) obligations and could not be traced at their registered business premises despite reporting substantial transactions.
According to KRA, the findings suggested that some entities existed primarily to generate invoices without conducting genuine business activities.
Digital forensic investigations also established links between the entities, electronic devices, telephone numbers and individuals suspected of generating and transmitting the invoices.
The investigation further identified suspected cases of internal facilitation involving KRA staff profiles, which the authority said were being handled through appropriate internal and legal processes.
KRA has forwarded 57 inquiry files to the Office of the Director of Public Prosecutions (ODPP), which has approved the prosecution of 42 individuals, companies and company directors.
Six suspects have already been arrested and are expected to face charges, including fraud in relation to tax and aiding another person to commit an offence under tax law, among other offences.
Intelligence
The authority warned businesses against knowingly purchasing or using fictitious invoices to support illegitimate input VAT claims, saying they could face criminal prosecution and civil penalties.
KRA said it was deploying eTIMS intelligence, advanced data analytics, digital forensics, financial investigations and inter-agency cooperation to identify suspected fraud networks, establish beneficiaries and facilitators, and recover lost revenue.
It has also begun disallowing unsupported input VAT claims, recovering the resulting tax liabilities, reversing fraudulent eTIMS transmissions and disabling relevant eTIMS devices and tax obligations in accordance with the law.
The authority urged taxpayers who may have benefited from or fallen victim to the fraudulent arrangements to come forward and regularise their tax affairs.
KRA said the enforcement measures were intended to protect compliant taxpayers, safeguard government revenue and preserve the integrity of the country’s tax system.
Members of the public and businesses with information about individuals or companies involved in generating, selling, purchasing or using fictitious VAT invoices have been urged to report the cases to the authority.
KRA said information supplied by informants would be treated confidentially and their identities kept anonymous.
