Businesses have gone to court seeking to overturn a Kenya Revenue Authority (KRA) decision that has barred them from filing returns, as the firms grapple with a near paralysis of operations.
Lawyers representing the 5,030 companies that were placed on the Value Added Tax (VAT) Special Table last month filed the petition at the High Court yesterday, with the case being certified as urgent and set to be mentioned on June 9, 2025.
The KRA last month placed the businesses on the VAT Special Table on grounds of a fraudulent VAT scheme, a decision that has since made it impossible to make transactions, file returns or present claims for refunds.
The taxman says the fraudulent VAT scheme denies the exchequer collections of an estimated Sh2.5 billion every month, prompting the crackdown that has since elicited an uproar from the businesses.
VAT Special Table is an administrative process where VAT registered taxpayers are blocked from filing VAT returns. Firms are placed on this log due to factors such as failure to file returns for six months and filing nil returns for six months or more despite having input tax claims made against them.
“That pending the hearing and determination of the main petition, the Honourable Court be pleased to issue an interim order of injunction restraining the 1st respondent from enforcing and or applying the administrative designation known as VAT Special Table,” the lawyers led by Peter Opiyo said in the petition.
They hold that KRA’s decision is illegal and has denied the businesses the right to a fair administrative process.
“This matter coming up under certificate of urgency by way of Notice of Motion dated 26/5/2025 before Honourable Justice JK Ng’arng’ar in chambers and upon perusal of the application, it is hereby ordered that,” the High Court in Bomet says in orders issued following filing of the petition.
The list of businesses put on the Special Table shows that the KRA flagged a majority of them for suspicious sales and purchases that have no corresponding sales and also sales worth over Sh500,000 with no VAT payment.
The KRA said it will monitor activities of the firms including invoice transactions and undertake case-by-case reviews to determine the ones to be removed from the table.
The taxman says VAT collection has been declining due to fraud such as the notorious ‘Missing Trader Scheme’ where fictitious invoices are issued to portray a business transaction where no goods or services were supplied.
Under the fraudulent scheme, payments are falsified and then used to make claims for input VAT from the taxman, bleeding the Exchequer billions of shillings.
An internal memo by KRA on tax compliance by micro and small taxpayers says that dishonest traders are transmitting invoices via electronic Tax Invoice Management System or the Tax Invoice Management System, but either fail to declare these transactions or do not remit the VAT owed.
