NAIROBI, 15th October 2026 -The Kenya Revenue Authority (KRA) has busted a sophisticated Sh4 billion Value Added Tax (VAT) fraud scheme, known as the ‘Missing Trader Scheme’, involving fictitious electronic invoices.
In a statement issued Wednesday, KRA said its Investigations and Enforcement Department established that 72 related entities were used to perpetrate the fraud between 2020 and 2025.
According to the Authority, the entities transmitted 62,869 electronic invoices through the electronic Tax Invoice Management System (eTIMS) valued at approximately Sh33.83 billion, with corresponding VAT of Sh5.37 billion.
Further investigations revealed that taxpayers purporting to have purchased goods and services from the identified entities subsequently declared purchases worth about Sh25.07 billion, resulting in fraudulent input VAT claims amounting to Sh3.996 billion.
KRA established that the entities generating the invoices did not undertake genuine business activities. 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 existed 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 Office of the Director of Public Prosecutions (ODPP), which 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 has warned 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 participants in tax fraud and therefore liable to criminal and civil sanctions as prescribed by law.
The Authority said it is deploying eTIMS intelligence, data analytics, digital forensics, financial investigations and inter-agency cooperation to identify artificial transactions, trace beneficiaries and facilitators behind fraudulent VAT arrangements and recover lost revenue.
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.
KRA is encouraging taxpayers who are beneficiaries or victims of the fraudulent VAT arrangements to come forward and regularise their tax affairs, noting that it will continue to take firm enforcement action against deliberate tax evasion and fraudulent manipulation of tax systems.
The Authority has appealed to members of the public, taxpayers and businesses with information concerning persons, companies or networks involved in the generation, sale, purchase or use of fictitious VAT invoices to share such information with the Authority, assuring that all information received shall be kept confidential and the identity of informants kept 100% anonymous.
