KRA uncovers Sh33.8 billion fake invoices in Sh4 billion VAT fraud scheme
The Kenya Revenue Authority (KRA) has uncovered a suspected Sh4 billion Value Added Tax (VAT) fraud scheme involving fictitious electronic invoices valued at Sh33.83 billion, in a major crackdown on tax evasion.
The scheme, commonly known as the “Missing Trader Scheme,” allegedly involved 72 related entities that generated thousands of electronic tax invoices without corresponding genuine business transactions between 2020 and 2025.
KRA said the entities transmitted 62,869 invoices through the electronic Tax Invoice Management System (eTIMS), with a combined value of Sh33.83 billion and corresponding VAT of Sh5.37 billion.
Investigations further established that taxpayers claiming to have purchased goods and services from the identified entities declared purchases worth approximately Sh25.07 billion, resulting in fraudulent input VAT claims amounting to Sh3.996 billion.
The authority has forwarded inquiry files to the Office of the Director of Public Prosecutions (ODPP) for review and prosecution.
42 individuals and companies face prosecution
KRA said the investigations identified 72 entities suspected of participating in the scheme, with evidence suggesting that some existed primarily to generate fictitious invoices for use in claiming input VAT refunds or deductions.
Several of the entities allegedly failed to file VAT and income tax returns, had no Pay As You Earn (PAYE) obligations and could not be traced to their registered business premises despite the substantial transactions attributed to them.
Digital forensic investigations also established links between taxpayer entities, electronic devices, telephone numbers and individuals suspected of generating and transmitting the invoices.
The investigation further uncovered possible internal facilitation involving KRA staff profiles, with the authority saying the matter was undergoing appropriate internal and legal processes.
Following the investigations, the Director of Public Prosecutions approved charges against 42 individuals, companies and company directors. Six suspects have already been arrested and are expected to face charges, including tax-related fraud and aiding another person to commit an offence under tax law.
The authority has commenced measures to disallow unsupported input VAT claims, recover resulting tax liabilities, reverse fraudulent eTIMS transmissions and disable implicated eTIMS devices and tax obligations in accordance with the law.
KRA said it was deploying data analytics, digital forensics, financial investigations and inter-agency cooperation to identify artificial transactions, trace beneficiaries and facilitators, and recover revenue lost through fraudulent tax arrangements.
The authority warned businesses against knowingly purchasing, accepting or using fictitious invoices to support illegitimate input VAT claims, saying such conduct could attract criminal and civil sanctions.
It urged taxpayers who may have benefited from or fallen victim to the fraudulent arrangements to voluntarily come forward and regularise their tax affairs.
KRA has appealed to members of the public, taxpayers and businesses with information about individuals, companies or networks involved in generating, selling, purchasing or using fictitious VAT invoices to report the matter.
The authority said information provided by whistleblowers would be treated confidentially and their identities kept anonymous.
Reports can be submitted through the KRA whistleblowing portal at https://iwhistle.kra.go.ke/welcome/ or by calling 020 4 999999 or 0711 099 999 for guidance.
KRA said the crackdown was aimed at protecting compliant taxpayers, safeguarding government revenue and preserving the integrity of Kenya’s tax system.
