The Kenya Revenue Authority (KRA) is deploying a technology that locks electronic tax invoices to specific locations to curb fraud estimated at up to Sh30 billion annually.
The taxman has piloted georeferencing policy whereby the electronic invoices generated on electronic tax invoice management system (eTIMS) are assigned precise geographic coordinates to the locations associated with them, such as a service location or a seller’s address.
The KRA said that georeferencing would help it deal with a surge in fictitious invoices, even as taxpayers rushed to comply with income and expense validation for 2025.
“Almost every month, we are dealing with between Sh2 billion and Sh2.5 billion worth of the equivalent of Value Added Tax in fictitious invoices. Unfortunately, we have a group of taxpayers who lie to reduce their tax liability by using fake invoices,” KRA Commissioner for Micro and Small Taxpayers, George Obell, told Business Daily in an interview.
“Geolocation of the places where the invoices are being issued is very important and is done in other countries. This is what will point out where this invoice fraud is happening. All this could simply be happening in the same location,” he added.
Several countries, such as Germany, Switzerland, Brazil, and the Netherlands, already deploy georeferencing policies in taxation in areas such as land, infrastructure billing, and property valuation, among others.
The KRA said that it is conducting income and expenditure validation for all taxpayers covering the period between January and December 2025, implying all self-declared revenue and expenditure data must be corroborated by alternative data such as eTIMS invoices, withholding tax certificates, and import documents.
It is this requirement of income and expenses validation that the KRA says has now triggered a rush among taxpayers to secure eTIMS invoices to back up their expenses seeking to reduce their tax liability.
Section 16(1, c) of the Income Tax Act provides that only those expenses supported by eTIMS invoices can be claimed while computing one’s income tax obligation.
The KRA states that despite introducing the Special Table to help combat this fraud, fictitious invoices remain a headache, and hence the decision to pursue the georeferencing of invoices.
The Special Table is an administrative procedure that restricts the filing of tax returns for non-compliance.
Firms placed on the Special Table are effectively locked out of filing VAT returns, while compliant businesses tend to avoid transacting with them because they cannot claim input VAT or offset VAT paid on purchases against output tax.
“Right now, we have about 100,000 taxpayers who are in the category of the Special Table, about 80,000 of whom we placed there two years ago, and they have never come forward to seek to regularise their status,” Mr Obell said.
“These are the so-called ‘Missing Trader’ who issue invoices without having supplied goods or services, and suddenly we have all these input claims that cannot be supported by income declarations. You can guess why they are there without coming forward. If we don’t emphasise on control and enforcement of this, revenue collection will just decline,” he added.
The Special Table is designed to block claims from nil and non-filers for VAT, as well as from a list of suspected missing traders based on previous audits and intelligence received. A taxpayer listed on the ‘Special Table’ can only be removed by a Tax Service Office of the KRA.
The Special Table mainly contains ‘missing traders’, non-filers or taxpayers who have not filed returns for six months; nil filers or taxpayers who have filed nil returns for six months or more but have input tax claims made against them; VAT registered taxpayers who have not complied with the VAT electronic tax invoice regulations; and taxpayers who have filed returns and not made payments for six months and all efforts have been made to collect the debt but cannot be traced.
To further strengthen the efforts to catch persons engaging in eTIMS invoice fraud, the KRA said that it is also working on enabling the eTIMS portal to capture and track one’s stock of goods so as to ensure that eTIMS invoices issued align with one’s stock levels.
“We will soon have a Stock Management Module within eTIMS, which will help the Kenya Revenue Authority to ensure that they can only supply what is in their stock. It is a tracker, and that is what we are working on now to make sure that it is ready to go live,” Mr Obell said.
“All we need to do is to ensure that we have coded all products and services before taking them live. There are companies that are on the Special Table, and they make no attempt to come and engage in how to regularise. They simply dump that KRA PIN, get another one, and start afresh.”
The taxman, he said, has also set its sights on eTIMS invoice fraud at fuel stations.
“We are seeing a lot of transactions that are Business-to-Customer being converted to Business-to-Business so that someone can make that claim. It literally means that if you have consumers who have been fueling without asking for invoices, the fuel station can aggregate all that and issue one invoice to a business, which then wrongly claims that expenses that should be attributable to individual consumers,” Mr Obell said.
The KRA said that some of the cases involving people caught generating fictitious invoices have been forwarded to the Director of Public Prosecutions.
