DPP Approves Charges in KRA’s KSh3.9 Billion VAT Fraud Case

DPP Approves Charges in KRA’s KSh3.9 Billion VAT Fraud Case

The Director of Public Prosecutions (DPP) has approved charges against five individuals and 12 companies linked to an alleged Value Added Tax (VAT) fraud scheme involving billions of shillings in transactions.

In a statement dated Thursday, October 15, the Office of the Director of Public Prosecutions (ODPP) said the alleged scheme involved fictitious transactions and electronic tax invoices used to help businesses unlawfully claim VAT refunds or reduce their tax liabilities.

The decision followed a joint review by the ODPP and the Kenya Revenue Authority (KRA) of 70 inquiry files submitted for prosecution. Investigators suspect the network used companies known as “missing traders” to generate invoices for transactions that never took place.

The invoices were allegedly used by other businesses to claim tax benefits without making genuine purchases, potentially depriving the government of revenue.

“The 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 ODPP stated.

The case highlights the government’s efforts to strengthen tax compliance and pursue businesses suspected of exploiting electronic invoicing systems to evade tax obligations.

DPP Approves Prosecution in 36 Cases

According to the ODPP, prosecution has been approved in 36 cases involving transactions valued at approximately KSh3.22 billion.

The alleged tax loss associated with these cases is estimated at KSh518 million, although the figures represent allegations that will be subject to the legal process.

Of the 36 cases, six have been prioritised for immediate prosecution. The ODPP said these cases involve a combined VAT implication of approximately KSh17 million.

The remaining files are expected to be registered in court at a later stage.

The approval of charges marks a significant step in the investigation, but it does not amount to a finding of guilt against the individuals or companies involved. Prosecutors will be required to present evidence in court to support the allegations.

Five Individuals Linked to Company Network

Investigators have also linked the five individuals to the alleged registration of 70 companies suspected of playing a role in the scheme.

The companies were allegedly used to facilitate the generation and circulation of electronic tax invoices associated with transactions that investigators believe were fictitious.

However, the ODPP’s statement did not immediately clarify the specific alleged liability attributable to each of the 12 companies facing charges or explain the individual roles of all five suspects.

The distinction between the 70 companies identified during the inquiry and the 12 companies named for prosecution remains important as the cases proceed.

Further details about the accused persons, the individual charges and the evidence against each company are expected to emerge through the court process.

KRA Steps Up Fight Against VAT Fraud

The case comes as KRA continues efforts to improve tax collection, monitor business transactions and address irregularities in VAT claims.

VAT is a consumption tax collected on taxable goods and services. Businesses generally account for VAT charged on sales and may claim eligible input VAT incurred on purchases, subject to legal requirements.

Fraudulent invoices can undermine this system by creating the appearance of legitimate purchases, allowing businesses to claim deductions or refunds they are not entitled to receive.

The use of electronic tax invoices is intended to improve transparency and help authorities verify transactions. However, investigators can still face challenges when companies are allegedly established or used to facilitate fictitious trading.

By reviewing the inquiry files jointly, the ODPP and KRA aim to move the alleged fraud cases from investigation to prosecution.

Court Proceedings Expected to Follow

The immediate priority is to register the selected cases in court and begin the legal process. The other approved files are expected to follow as preparations continue.

The prosecutions could help establish how the alleged invoice network operated, which companies benefited and whether the suspected transactions resulted in unlawful VAT claims.

For now, the five individuals and the companies remain accused parties, and the allegations must be proved in court. The outcome will depend on the evidence presented and the determination made through the judicial process.

ALSO READ: IEBC Summons UDA Secretary-General Hassan Omar Over Dead Voter Remarks

DPP Approves Charges in KRA’s KSh3.9 Billion VAT Fraud Case