KRA Urges Businesses to Strengthen Supplier Due Diligence Following High Court Ruling On Missing-Trader Scheme

The Kenya Revenue Authority (KRA) is urging businesses to enhance their due diligence processes and engage only with credible suppliers, following a recent High Court decision that reinforces national efforts to curb the missing-trader scheme.

Speaking at a leadership forum, Commissioner General Humphrey Wattanga noted that missing-trader schemes undermine fair taxation by enabling fictitious invoicing, inflated costs, and other fraudulent practices. “Our goal is to facilitate compliance by equipping businesses with the tools, information, and access they need to comply confidently, while protecting them from the risks of engaging with non-existent or fraudulent entities,” he said.

The High Court in Nairobi recently upheld a tax assessment of Kshs 773,054,888 in the case of Commissioner of Domestic Taxes vs Dinesh Construction Limited, after KRA demonstrated the existence of a missing-trader fraud scheme. The company failed to provide delivery notes, transport records, or evidence of goods movement. The Court reaffirmed that although a taxpayer may initially meet the burden of proof by producing an invoice, this burden shifts back to the taxpayer once the Commissioner raises credible doubts. In such circumstances, an invoice alone is insufficient; taxpayers must provide competent, verifiable evidence of actual supply as requested by KRA.

The ruling strengthens taxpayers’ statutory obligation to maintain proper records and supports KRA’s data-driven approach to detecting and combating complex tax fraud schemes. KRA is advising all taxpayers to maintain a complete and verifiable paper trail for every transaction. This includes keeping proper records, documents, and evidence in the prescribed format, as well as issuing and transmitting electronic tax invoices to accurately determine tax liability.

Taxpayers are further reminded of their legal obligation to conduct due diligence on their suppliers, as input VAT claims and income tax deductions will only be allowed for transactions involving verified, compliant suppliers.

KRA urges all taxpayers to remain vigilant and ensure compliance with the tax laws. For assistance, taxpayers can contact KRA via the call centre (+254 711 099 999/WhatsApp), social media, USSD *222#, the website (www.kra.go.ke), or the nearest KRA office.

KRA remains committed to supporting taxpayers, strengthening the integrity of the tax system, and fostering a fair, transparent, and competitive business environment.

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