The Kenya Revenue Authority (KRA) is implementing a technology that restricts electronic tax invoices to specific locations in an effort to prevent fraud, which is estimated to cost up to Sh30 billion each year. The tax authority has introduced a georeferencing policy where electronic invoices created through the electronic Tax Invoice Management System (eTIMS) are assigned exact geographic coordinates corresponding to their associated locations, such as a service location or a seller’s address. The KRA mentioned that georeferencing will assist in addressing the increase in fake invoices, even as taxpayers rush to meet income and expense validation requirements for 2025. “Every month, we deal with between Sh2 billion and Sh2.5 billion worth of fake Value Added Tax. Unfortunately, some taxpayers lie to reduce their tax liability by using false invoices,” said KRA Commissioner for Micro and Small Taxpayers, George Obell, in an interview with Business Daily. “Geolocation of the places where the invoices are issued is very important and is practiced in other countries. This will help identify where invoice fraud is occurring. All this could be happening in the same location,” he added. Several countries, including Germany, Switzerland, Brazil, and the Netherlands, already use georeferencing policies in taxation for areas like land, infrastructure billing, and property valuation. The KRA stated that it is conducting income and expenditure validation for all taxpayers covering the period from January to December 2025, meaning all self-declared revenue and expenses must be supported by alternative data such as eTIMS invoices, withholding tax certificates, and import documents. This requirement for income and expense validation has led to a rush among taxpayers to obtain eTIMS invoices to support their expenses in an attempt to lower their tax liability. Section 16(1, c) of the Income Tax Act states that only expenses backed by eTIMS invoices can be claimed when calculating one’s income tax obligation. The KRA mentioned that despite introducing the Special Table to combat this fraud, fictitious invoices remain a challenge, leading to the decision to implement georeferencing on invoices. Read: How a new fraud wave slowed VAT collections The Special Table is an administrative process that limits the filing of tax returns for non-compliance. Firms listed on the Special Table are effectively prevented from filing VAT returns, while compliant businesses tend to avoid transactions with them because they cannot claim input VAT or offset VAT paid on purchases against output tax. “Currently, we have about 100,000 taxpayers on the Special Table, with 80,000 of them placed there two years ago and never coming forward to regularize 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 emphasize control and enforcement, 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 includes ‘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 efforts to catch those involved in eTIMS invoice fraud, the KRA said it is also working on enabling the eTIMS portal to capture and track a taxpayer’s stock of goods to ensure that eTIMS invoices issued align with their stock levels. “We will soon have a Stock Management Module within eTIMS, which will help the Kenya Revenue Authority 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.→ jamboko@ke.nationmedia.com Provided by SyndiGate Media Inc. (Syndigate.info).
