The Kenya Revenue Authority (KRA) has moved to recover taxes linked to suspected fraudulent purchases worth Sh25.07 billion after uncovering a network of 72 entities allegedly used to generate fictitious electronic invoices.
The taxman said the transactions enabled businesses to claim approximately Sh3.996 billion in input value-added tax (VAT) deductions, prompting investigations into the taxpayers who allegedly used the invoices to reduce their tax liabilities.
In a statement issued on Thursday, October 15, 2026, KRA said the scheme operated between 2020 and 2025 through the electronic Tax Invoice Management System (eTIMS), which recorded 62,869 invoices valued at Sh33.83 billion.
The invoices carried corresponding VAT of Sh5.37 billion, according to the authority.
KRA said it had begun disallowing unsupported input VAT claims, recovering resulting tax liabilities and reversing fraudulent eTIMS transmissions as part of efforts to protect government revenue.
The authority also warned businesses that knowingly use fictitious invoices could face criminal and civil sanctions, stressing that buyers who claim tax deductions using false documentation could be held accountable alongside those generating the invoices.
“Taxpayers who knowingly purchase, accept or use fictitious invoices to support illegitimate input VAT claims are not merely beneficiaries of a tax arrangement but are also participants in tax fraud,” KRA said.
The investigations identified 72 related entities allegedly involved in generating the invoices. KRA said several displayed indicators of having no genuine business operations despite the value of transactions attributed to them.
Some entities filed nil or no VAT returns, failed to submit income tax returns and had no Pay As You Earn (PAYE) obligations. Investigators also failed to locate some businesses at their registered premises.
The authority said digital forensic analysis had established connections among taxpayer entities, electronic devices, telephone numbers and individuals associated with the generation and transmission of the invoices.
Investigators also identified suspected internal facilitation involving KRA staff profiles. The authority said the cases were undergoing internal and legal processes.
The alleged scheme, commonly referred to as a Missing Trader Scheme, involves the use of entities that issue invoices without genuine underlying transactions, allowing other businesses to claim tax deductions they may not be entitled to.
KRA said 57 inquiry files had been forwarded to the Office of the Director of Public Prosecutions (ODPP), which 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.
The authority did not disclose the identities of the suspects or provide a breakdown of the amounts allegedly claimed by individual businesses.
KRA said it was deploying data analytics, digital forensics, financial investigations and cooperation with other agencies to identify beneficiaries and facilitators of the suspected fraud.
It also urged taxpayers who may have benefited from or been affected by the arrangements to come forward and regularise their tax affairs.
The authority called on businesses and members of the public with information about the generation, sale, purchase or use of fictitious VAT invoices to report it, promising to protect informants' identities.
The investigation highlights the tax authority's efforts to scrutinise electronic invoicing records and verify whether declared purchases correspond to genuine supplies of goods and services.
KRA said the enforcement measures were aimed at recovering lost revenue, protecting compliant taxpayers and maintaining the integrity of the country's tax system.