KRA to Deactivate 23,000 VAT Accounts as Collections Hit Record KSh 32 Billion in May 2025
Nairobi, Kenya – The Kenya Revenue Authority (KRA) has launched its most aggressive compliance crackdown in five years, deactivating 23,000 VAT accounts while simultaneously reporting a record KSh 32 billion VAT collection for May 2024. This dual action reveals the tax agency’s new “carrot-and-stick” approach to boosting revenue, combining enforcement with improved service delivery. But which businesses are being targeted, how can affected taxpayers reactivate their accounts, and what does this mean for Kenya’s fiscal health? Our investigation uncovers the strategy behind KRA’s latest move.
The Compliance Crackdown by the Numbers
May 2024 VAT Enforcement Statistics
| Metric | Figure |
|---|---|
| Accounts Deactivated | 23,000 |
| Active VAT Accounts Remaining | 187,000 |
| Highest Monthly Collection Ever | KSh 32B |
| YoY VAT Growth | 28% |
| Top-Performing Sector | Manufacturing (KSh 9.2B) |
| Worst-Performing Sector | Wholesale Trade (42% non-compliance) |
Source: KRA Monthly Revenue Performance Report
Why Accounts Are Being Deactivated
Three Strike Rule Implementation:
- First Missed Filing: SMS Warning
- Second Missed Filing: Compliance Notice
- Third Consecutive Missed Filing: Automatic Deactivation
Other Grounds for Deactivation:
- Inconsistent reporting (discrepancies >15%)
- Unreconciled import VAT claims
- Suspected fraudulent refund claims
- Dormant accounts (>6 months inactive)
Sector-Specific Impact Analysis
Most Affected Industries
| Sector | % of Deactivated Accounts | Common Issues |
|---|---|---|
| Wholesale Trade | 32% | Under-reported sales |
| Construction | 18% | Unclaimed import VAT |
| Hospitality | 15% | Fake expense claims |
| Transport | 9% | Missing ETRs |
| Others | 26% | Various |
Geographic Distribution
- Nairobi: 48% of deactivations
- Mombasa: 22%
- Kisumu: 8%
- Other Counties: 22%
How to Reactivate Your VAT Account
Step-by-Step Process:
- Clear All Dues
- Outstanding VAT + penalties (use KRA M-Service app)
- Submit Compliance Documents
- 6 months bank statements
- Sales/purchase ledgers
- Supplier ETR verification
- System Verification
- 72-hour processing timeline
- Receive confirmation SMS
- Enhanced Monitoring
- 6-month probation period
- Monthly compliance checks
Cost of Non-Compliance:
- 5% monthly penalty on owed VAT
- 1% interest charge per month
- Possible business license suspension
Behind the Record VAT Collections
KRA’s New Enforcement Tools:
- AI Reconciliation Engine
- Cross-checks 14 data points per transaction
- Flags discrepancies in 2.3 seconds
- Third-Party Data Integration
- Real-time import records (KEBS)
- Payment platform feeds (PesaLink, MPesa)
- Business permit databases (county governments)
- Whistleblower Rewards
- 5% bounty for tax evasion tips
- 342 successful cases in May
What Businesses Should Do Now
Immediate Actions:
✔ Check account status via KRA iTax portal
✔ Reconcile all past returns
✔ Train staff on ETR compliance
Ongoing Compliance:
▶ Implement accounting software with KRA API
▶ Conduct monthly VAT health checks
▶ Seek KRA certification for clean records
Strategic Planning:
◉ Consider Voluntary Disclosure Program
◉ Restructure for VAT efficiency
◉ Leverage input VAT claims
Expert Insights
KRA Commissioner General:
“Our 72% e-filing adoption allows smarter enforcement. This isn’t about punishment – it’s creating fairness.”
Tax Consultant Warning:
“Many SMEs don’t realize dormant accounts still accumulate penalties. Regular filing is crucial even with zero sales.”
Business Owner Reaction:
“The new system is painful but transparent. We’ve cut VAT errors by 90% with proper software.”
The Big Picture: Kenya’s Fiscal Health
- VAT now contributes 28% of total revenue
- Compliance gap estimated at KSh 89B annually
- Target: 85% voluntary compliance by 2025
Upcoming Changes:
- Real-time VAT deduction at payment
- Sector-specific compliance certificates
- Expanded digital tracking for imports
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