KRA Recorded 16% Growth in VAT Collection in May 2025
The Kenya Revenue Authority (KRA) recorded a 16% increase in VAT collections, topping Kshs. 32.141 billion as at the close of May 2025.
The performance has been attributed to a wide raft of measures implemented during the month of April to enhance compliance and seal loopholes that have been exploited to perpetrate tax fraud.
The Large and Medium Taxpayers (LMT) Department, where majority of the beneficiaries are domiciled, recorded a 13% growth in VAT, surpassing the target by over Kshs. 1 billion. The Micro and Small Taxpayers (MST) Department registered a 24% growth, surpassing the VAT target by Kshs. 110 million.
Among the measures that KRA has put in place include:
1. Special Table Actions
Since August 2022, KRA has implemented the VAT Special Table within the iTax system as a compliance enforcement tool designed to address VAT compliance challenges.
The Special Table restricts other taxpayers from claiming input tax credits from the taxpayers on special table, and from filing unless they are cleared. This helps in curbing frauds, reducing PIN abuse and protecting compliant taxpayers.
As a result of this measure, the following key actions have been taken:
a) Deregistration of Inactive Taxpayers: 20,981 inactive taxpayers have been identified for deregistration to clean the register.
b) Disruption of Fraudulent Chains: 7,719 suspected “Missing Trader’ scheme enablers have been placed on the Special Table, restricting input tax claims from these entities and disrupting fraudulent chains from May 2025 and beyond.
2. VAT Registration Controls
KRA has established a multi-departmental VAT Task Force to further investigate the schemes and recommend corrective actions.
KRA has tightened the VAT Guidelines relating to the addition of VAT obligations by reducing the number of officers authorised to approve VAT registrations from 645 to 170, minimising opportunities for fraudulent VAT registrations.
3. Vetting and Eligibility
o Establishment of Vetting Panels: A dedicated VAT obligation vetting panel has been instituted at each Tax Service Office (TSO), led by the Regional Head of Tax Base Expansion (TBE), to assess all applications for VAT obligation addition.
o Mandatory In-Person Verification: Eligibility for VAT registration is confirmed only after a compulsory physical interview at a KRA office and approval by the vetting team, ensuring applicants and agents are physically verified.
4. Enhanced Monitoring and Accountability
o Ongoing Oversight: Post-approval, Account Managers are tasked with ongoing monitoring of eTIMS/TIMS invoice transmissions, with immediate action required upon detection of inconsistencies.
o Restricted Approval Rights: Approval rights for VAT obligation have been restricted to specific officers to reinforce accountability.
o Revised Documentary Requirements: Applications may include comprehensive documentation to confirm business legitimacy and traceability, such as county licenses, business permits, agent appointments, and proof of physical or online operations.
5. System and Process Improvements (Proposed and ongoing)
o iTax System Upgrades: iTax system enhancement to include a VAT obligation checklist, two-level task separation (verification and approval), and automatic notifications for application rejections is ongoing.
o Cross-Agency Integration: Integration with other government databases (e.g. Business Registration Service, Identity Data Management) is underway to enable real-time validation of business and owner details.
o Data Capture Improvements: Improved registration data capturing, beneficial owners and compliance status.
o Automated Verification Tools: Automated system checks and third-party document authentication to reduce manual verification.
o Director Screening: Risk flags for directors associated with non-compliant entities.
6. Risk-Based Vetting
o Applications are risk-assessed based on tax compliance history, business activity, and sector vulnerability to VAT fraud.
o High-risk sectors and newly registered or inactive PINs undergo more stringent scrutiny.
7. Enforcement and Compliance Actions
o Special Table and eTIMS Suspension: Non-compliant cases are placed in a VAT Special Table with eTIMS suspension as an enforcement measure.
o Physical Inspections: Planned physical site visits to business premises within the first year of VAT obligation addition, prioritized by risk indicators.
It is noteworthy that the VAT burden is currently being shouldered by only 22% of the VAT registered taxpayers, with the rest either being credit filers (52%) or Nil/zero filers (26%). This imbalance showcases the importance of the ongoing measures, designed not only to improve VAT revenue but also to:
KRA has reaffirmed its commitment to enhancing tax compliance through deeper taxpayer engagement, stricter vetting, robust monitoring, continuous oversight, and system-driven enforcement to ensure that only legitimate, compliant businesses are granted VAT obligations in order to maximising the effectiveness of these measures.
