By Sandra Blessings
The Director of Public Prosecutions (DPP) has approved charges against five individuals and twelve companies linked to an alleged scheme to defraud the Government of approximately Kshs. 3.9 billion in Value Added Tax (VAT).
The decision to charge followed a joint investigation and a comprehensive review of 70 inquiry files conducted by the Office of the Director of Public Prosecutions (ODPP) in collaboration with the Kenya Revenue Authority (KRA).
The investigations revealed that a network of companies, commonly referred to as “missing traders,” was used to generate fictitious transactions and electronic tax invoices.
These fraudulent invoices were subsequently used by other businesses to unlawfully claim VAT refunds or reduce their tax liability, despite no genuine purchases having been made.
The five individuals identified in the investigations were Henry Ateka Nyabwari, James Ojiambo Nyengenye, Amisi Zamda, Frank Nyabwari and Hesbon Onyoni.
They were alleged to have been involved in registering 70 companies that were instrumental in executing the scheme.
“Upon review of the files, the DPP approved prosecution in the 36 cases involving transactions valued at approximately Sh. 3.22 billion, resulting in an alleged VAT loss of about Sh. 518 million,” read the statement.
Of these, seven have been prioritised for immediate prosecution, with a VAT implication of about Sh. 17 million. The cases involve various companies, including Renova Limited, Larigi Enterprises, Njemtar Agencies, Jeflar Construction Company, Namtek Transporters Company Limited, Jawari General Supplies and Tekaza Investment & General Supplies.
“The remaining files will be registered in court in due course, and the suspects involved therein will be charged accordingly.
The ODPP reaffirms its unwavering commitment to combating economic and financial crimes, including sophisticated tax fraud schemes, and to protecting public revenue,” read the statement.
Background
Kenya’s tax authority uncovered a Value Added Tax fraud involving fictitious electronic invoices worth about KES 42 billion ($323 million / £247 million) over five years, exposing the Exchequer to about KES 4 billion ($30.8 million / £23.5 million) in fake claims.
Forensic investigators said three fraudsters created accounts on the Kenya Revenue Authority’s electronic business invoicing platform, eTIMS, through which 62,869 fake invoices were generated.
The false invoices were used to claim VAT refunds from the taxman between 2020 and 2025.
A total of 72 companies used the scheme, with conspirators claiming to have purchased goods worth KES 25.07 billion ($192.8 million / £147.5 million), with corresponding VAT of KES 5.37 billion ($41.3 million / £31.6 million), resulting in VAT claims of about KES 3.99 billion ($30.7 million / £23.5 million).
The three charged a commission averaging 1.5% on the value of each invoice generated. A fake invoice for KES 100 million ($769,000) in sales, for example, earned them KES 1.5 million ($11,500).
A digital forensic analysis exposed the scam after investigators established links between the firms claiming VAT and the telephone numbers and mobile devices of the three fraudsters.
The probe also established that several of the firms generating invoices did not have genuine business activity, and some did not exist physically.
“In most instances, the physical addresses provided by the VAT claims firms did not exist, and even in some cases, some of the listed officials and directors were not aware that their identities had been added in the ownership information,” an investigator said.
“In fact, the entities generating the invoices did not undertake genuine business activities. Several were nil or non-filers for VAT, did not file income tax returns, had no pay-as-you-earn obligations despite the scale of transactions attributed to them,” the detective added.
Investigators also identified multiple instances where some KRA staff facilitated the fraudulent transactions.
Most of the firms caught in the scam operate in key economic sectors, including construction and electrical and electronics.
The probe triggered a swoop, with the Office of the Director of Public Prosecutions approving the prosecution of an initial batch of 37 people, including the three masterminds.
