When most people hear the word fraud, they think of intentional deceit or criminal tax evasion. But under Kenyan tax law, the term encompasses a much broader range of conduct — including mistakes and oversights that arise from poor documentation.

At The Filing Room, we’ve seen how easily well-meaning businesses can face significant exposure simply because they lack proper records. This article explains what “fraud” can mean in the eyes of the Kenya Revenue Authority (KRA) — and how strong recordkeeping is your best defence.

What does the law say?

The Tax Procedures Act (TPA), 2015 governs how KRA assesses, investigates, and enforces tax obligations in Kenya. While the standard rule requires taxpayers to keep records for five years, there is a key exception: if fraud, gross negligence, or willful misrepresentation is suspected, KRA may review your records going back indefinitely.

But what does that mean in practice?

“Fraud” in tax law doesn’t only refer to deliberate deception. It may also include:

  • Understating income

  • Overclaiming deductions or VAT refunds

  • Failing to declare taxable income

  • Keeping incomplete or misleading records

  • Failing to produce documents when requested

These actions — even when unintentional — can be interpreted as fraudulent if they result in tax underpayment.

Real-World examples of Tax ‘Fraud’ Triggers

Many Kenyan businesses unknowingly create exposure by:

  • Discarding documents after five years without considering risk

  • Using unregistered suppliers and failing to retain proof of transactions

  • Making tax filings that cannot be substantiated with records

  • Losing key files due to poor storage practices or disorganisation

Even if there was no intention to deceive, the inability to provide records may be taken as a sign of willful non-compliance.

The consequences of being found fraudulent

The penalties for fraud under the TPA are significant:

  • A 200% penalty on the tax evaded

  • 1% interest per month, compounded

  • No statute of limitations — KRA can assess back as far as they choose

  • Potential reputational and legal damage

And importantly, the burden of proof lies with the taxpayer. If you cannot produce documentation to defend your tax position, you may be assumed to be at fault.

How recordkeeping protects you

Good records are more than an administrative task — they are legal evidence.

Maintaining clear, accurate, and accessible records proves that your business has acted in good faith, followed tax rules, and can stand up to scrutiny. If ever audited or accused of misrepresentation, comprehensive documentation may be the difference between a resolved query and a multimillion-shilling penalty.

Key records to retain include:

  • Tax returns and KRA assessments

  • Sales invoices and purchase receipts

  • Bank statements and payment confirmations

  • Contracts and correspondence

  • Payroll records

  • Audit findings and professional advice

While the law only requires five years, we recommend keeping core tax and financial documents well beyond this, especially for high-value transactions or disputed periods.

How The Filing Room supports your compliance

At The Filing Room, we help organisations reduce their risk by creating strong, defensible records systems. Our services include:

Secure Off-Site Storage — Controlled environments with barcoding, CCTV, and fire protection
Digitisation & Indexing — Scanned records with searchable metadata and audit trails
Scan-on-Demand — Rapid digital retrieval without removing original files from storage
Records Consultancy — Helping you build retention schedules and documentation strategies that protect against audit risk

We work with banks, law firms, insurers, and NGOs across Kenya to ensure their records are organised, compliant, and ready for scrutiny.

Final thoughts

In tax compliance, perception matters. Without proper documentation, even minor discrepancies can look like fraud. And under Kenyan law, that carries real — and lasting — consequences.

By taking recordkeeping seriously, you not only meet legal obligations, but also defend your organisation’s reputation, finances, and future.

Need to review your records retention practices?
Contact The Filing Room for a consultation:

info@filingroomkenya.com
📞 +254 20 2663263
🌐 filingroomkenya.com