- KRA uncovers a major VAT fraud scheme involving fictitious invoices worth billions of shillings.
- Investigations reveal links between businesses, individuals and possible internal facilitation.
- Taxpayers using fake invoices face prosecution as KRA moves to recover lost revenue.
The Kenya Revenue Authority (KRA), through its Investigations and Enforcement Department, has uncovered a sophisticated tax fraud scheme commonly known as the “Missing Trader Scheme.” It involved fictitious electronic invoices used to facilitate fraudulent input Value Added Tax (VAT) claims.
KRA has submitted 37 inquiry files to the Office of the Director of Public Prosecutions (ODPP) for review and appropriate action. Its investigations established that 72 related entities were used to perpetrate the scheme between 2020 and 2025.
In a statement, the tax man said the entities transmitted 62,869 electronic invoices through the electronic Tax Invoice Management System (eTIMS). The invoices were valued at approximately Ksh 33.83 billion, with corresponding VAT of Ksh 5.37 billion.
Further investigations revealed that taxpayers purporting to have purchased goods and services from the identified entities subsequently declared purchases worth approximately Ksh 25.07 billion. This resulted in input VAT claims amounting to approximately Ksh 3.996 billion.
Investigations also established significant indicators that the entities generating the invoices did not undertake genuine business activities. Several were nil filers or did not file VAT returns at all. They did not file income tax returns and had no Pay As You Earn (PAYE) obligations. Despite the scale of transactions attributed to them, they could not be physically located at their registered business premises.
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Evidence further indicated that some entities appeared to exist primarily to generate invoices without corresponding underlying transactions. KRA’s digital forensic analysis identified linkages between taxpayer entities, electronic devices, telephone numbers and individuals associated with the generation and transmission of the invoices.
The investigation also identified instances of internal facilitation involving KRA staff profiles, which are being subjected to appropriate internal and legal processes.
Following completion of investigations, KRA forwarded 57 inquiry files to the Director of Public Prosecutions, who approved the prosecution of 42 individuals, companies and company directors. Six suspects have already been apprehended and are expected to face charges including fraud in relation to tax and aiding another person to commit an offence under a tax law, among other offences.
KRA wishes to advise businesses that knowingly purchase, accept or use fictitious invoices to support illegitimate input VAT claims that they are not merely beneficiaries of a tax arrangement. They are also participants in tax fraud and therefore liable to criminal and civil sanctions as prescribed in the law.
KRA is deploying eTIMS intelligence, data analytics, digital forensics, financial investigations and inter-agency cooperation to identify artificial transactions. It is also tracing the beneficiaries and facilitators behind fraudulent VAT arrangements and working to recover revenue lost through such schemes.
The Authority has commenced action to disallow unsupported input VAT claims, recover resulting tax liabilities, reverse fraudulent eTIMS transmissions and disable relevant eTIMS devices and tax obligations, in accordance with the law. KRA encourages taxpayers who are beneficiaries or victims of the fraudulent VAT arrangements to come forward and regularise their tax affairs.
Moreover, the Authority will continue to take firm enforcement action against deliberate tax evasion and fraudulent manipulation of tax systems. KRA is committed to protecting compliant taxpayers, safeguarding Government revenue and maintaining the integrity of Kenya’s tax system.
KRA is also appealing to members of the public, taxpayers and businesses with information concerning persons, companies or networks involved in the generation, sale, purchase or use of fictitious VAT invoices to come forward and share such information with the Authority. All information received shall be kept confidential, and the identity of the informant kept 100 per cent anonymous.
By Fredrick Odiero
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