The Kenya Revenue Authority (KRA) said a scheme that used fictitious electronic invoices between 2020 and 2025 generated almost KSh4 billion in fraudulent value-added tax (VAT) claims.

Forensic investigators identified 62,869 invoices created on KRA’s electronic Tax Invoice Management System (eTIMS) by three fraudsters, involving 72 companies; one report put the total invoice value at about KSh42 billion while KRA’s own figures state KSh33.83 billion.

The invoices claimed purchases of goods worth KSh25.07 billion and VAT of KSh5.37 billion, resulting in input-VAT claims of roughly KSh3.996 billion (approximately KSh3.99 billion in another account).

The three fraudsters charged an average commission of 1.5 per cent on each invoice, meaning a KSh100 million invoice earned them a commission of KSh1.5 million.

Digital forensic analysis linked the invoices to telephone numbers and mobile devices of the perpetrators and showed that many invoicing firms had no genuine business activity, with some physical addresses non-existent and some listed directors unaware of their inclusion.

Investigators also uncovered instances where KRA staff facilitated the fraudulent transactions.

The Office of the Director of Public Prosecutions (ODPP) approved the prosecution of an initial batch of suspects – Business Daily cites 37 people while Capital Business reports 42 individuals and companies – and six suspects have been arrested.

Mohamed Abdul M’maka, KRA Commissioner for Investigations & Enforcement, warned that companies knowingly using fictitious invoices to claim input VAT will face criminal and civil sanctions.

KRA is deploying eTIMS intelligence, data analytics, digital forensics, financial investigations and inter-agency cooperation to identify artificial transactions, trace beneficiaries and recover lost revenue.

To curb future fraud, KRA introduced georeferencing technology that locks electronic invoices to specific locations and is developing a system to capture and track stock levels to ensure invoice data matches actual goods.

The scandal emerges as KRA reported a KSh58.2 billion revenue shortfall in the first quarter of the 2026/27 financial year, although ordinary revenue grew 14.4 per cent to KSh655.8 billion, up from KSh573.5 billion a year earlier.