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, with six suspects apprehended and facing possible prosecution.

In a press release dated October 15, 2026, KRA said investigations had identified 72 related entities allegedly used in the scheme, between 2020 and 2025.

The entities transmitted 62,869 electronic invoices through the electronic Tax Invoice Management System (eTIMS), with a corresponding VAT value of Sh5.37 billion.

According to KRA, taxpayers who claimed to have purchased goods and services from the entities subsequently declared purchases worth approximately Sh25.07 billion, resulting in input VAT claims of about Sh3.996 billion.

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The authority said its investigations found indicators that the entities generating the invoices had not undertaken genuine business activities.

Several were reportedly non-filers or filed nil VAT returns, failed to submit income tax returns and had no Pay As You Earn (PAYE) obligations.

KRA also said some entities could not be physically located at their registered business premises despite the scale of transactions attributed to them.

“Evidence further indicated that some entities appeared to exist primarily to generate invoices without corresponding underlying transactions,” the authority said.

Digital forensic analysis reportedly established links 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 the authority said were being subjected to appropriate internal and legal processes.

KRA said it had 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.

The authority warned businesses against knowingly purchasing or using fictitious invoices to support illegitimate input VAT claims, saying they could face criminal and civil sanctions under the law.

KRA has also commenced measures to disallow unsupported input VAT claims, recover resulting tax liabilities, reverse fraudulent eTIMS transmissions and disable relevant eTIMS devices and tax obligations.

The authority said it was using data analytics, digital forensics, financial investigations and inter-agency cooperation to identify artificial transactions, trace beneficiaries and recover lost revenue.

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

It has also appealed to members of the public and businesses with information about the generation, sale, purchase or use of fictitious VAT invoices to report it to the authority, assuring informants that their identities would remain confidential and anonymous.