KRA Uncovers KSh4 Billion VAT Fraud in Missing Trader Scheme

The Kenya Revenue Authority (KRA) has uncovered a tax fraud scheme involving fictitious electronic invoices worth KSh33.83 billion, which were allegedly used to claim nearly KSh4 billion in fraudulent Value Added Tax (VAT) refunds.

In a press release dated October 15, 2026, KRA said investigations established that 72 related entities were used to generate fake invoices between 2020 and 2025 through the electronic Tax Invoice Management System (eTIMS).

The entities transmitted 62,869 invoices valued at approximately KSh33.83 billion, with a corresponding VAT amount of KSh5.37 billion.

Taxpayers claiming to have purchased goods and services from the entities subsequently declared purchases worth KSh25.07 billion, resulting in input VAT claims amounting to approximately KSh3.996 billion.

KRA described the arrangement as a “Missing Trader Scheme”, in which fictitious invoices are used to facilitate illegitimate input VAT claims.

The authority said investigations found that several of the entities did not appear to conduct genuine business activities. Some were non-filers or filed nil VAT returns, failed to submit income tax returns and had no Pay As You Earn (PAYE) obligations.

Despite the substantial transactions attributed to them, some entities could not be located at their registered business premises, with evidence suggesting that certain companies existed primarily to generate invoices without corresponding transactions.

Six suspects apprehended

KRA said its digital forensic investigations identified links between taxpayer entities, electronic devices, telephone numbers and individuals associated with the generation and transmission of the invoices.

Investigators also identified instances of possible internal facilitation involving KRA staff profiles, which the authority said were undergoing appropriate internal and legal processes.

According to the authority, 57 inquiry files were forwarded to the Office of the Director of Public Prosecutions (ODPP). The DPP 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 tax law, among other offences.

KRA moves to recover taxes

The authority said it had 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.

KRA warned businesses against knowingly purchasing, accepting or using fictitious invoices to support illegitimate VAT claims, saying such conduct could expose them to criminal and civil sanctions.

It added that it was using eTIMS intelligence, data analytics, digital forensics, financial investigations and cooperation with other agencies to identify artificial transactions, trace beneficiaries and facilitators, and recover revenue lost through fraudulent arrangements.

KRA also urged taxpayers who may have benefited from or fallen victim to the fraudulent arrangements to come forward and regularise their tax affairs.

The authority appealed to members of the public and businesses with information about the generation, sale, purchase or use of fictitious VAT invoices to report the matter.

Reports can be submitted through the KRA whistleblowing portal at https://iwhistle.kra.go.ke/welcome/ or by calling 020 4 999 999 or 0711 099 999. KRA said information received would be treated confidentially and informants’ identities kept anonymous.