The taxman has unmasked a fraud scheme involving the use of fake invoices by traders the filing of fake Value Added Tax claims amounting to KES4 billion.

According to KRA, the scheme which ran between 2020 and 2025 saw a total of 72 business entities transmit 62,869 electronic invoices via the electronic tax invoice management system (eTIMS) valued at about KES33.8 billion.

Already, KRA has submitted thirty-seven (37) inquiry files to the Office of the Director of Public Prosecutions (ODPP) for review and appropriate action.

The taxman said the entities were generating the invoices did not undertake genuine business activities.

KRA said several were nil or non-filers for VAT, did not file income tax returns, had no PAYE obligations and, despite the scale of transactions attributed to them, could not be physically located at their registered business premises. 

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 but are also participants in tax fraud and therefore liable to criminal and civil sanctions as prescribed in the law.

Currently, KRA is deploying eTIMS intelligence, data analytics, digital forensics, financial investigations and inter-agency cooperation to identify artificial transactions, trace the beneficiaries and facilitators behind fraudulent VAT arrangements and recover revenue lost through such schemes.

The Authority noted that it 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.

[email protected]