KRA tightens noose on rogue importers with new rules

Sometime in July, the Kenya Revenue Authority (KRA) introduced a new requirement that all imports into the country be accompanied by a certificate of origin (CoO). Such a certificate, said KRA in the July 9, 2025 notice, should be issued by a competent authority from the country of export.

It is just one of the many efforts by KRA to curb revenue leakages through cross-border trade. Importers now have a week left to get their documents in order, according to the notice whose grace period expires at the end of the month.

“In order to facilitate clearance of goods under this new requirement, the authority gives a limited window until September 30, 2025, to allow importers time to secure the required documents while ensuring a smooth shift to full compliance,” reads the notice.

Revenue leakages through cross-border trade have been a major challenge for the taxman.

A few days ago, KRA said it flagged a potential loss of Sh123 million in taxes due to irregular clearance of 161 containers of rice at one of the container freight stations (CFS) in Mombasa between August 1 and 23.

“However, the anomaly was detected through routine audit checks, prompting immediate and decisive action by the authority. KRA has since recovered the full amount of revenue that was at risk of loss,” the taxman said on September 5, adding that the Ethics and Anti-Corruption Commission (EACC)  and the Directorate of Criminal Investigations (DCI) are investigating the case.

A new study from the National Taxpayers Association (NTA) in partnership with Oxfam shows that Kenya loses Sh79 billion annually due to trade misinvoicing. This is when the value of imports to the country does not match what the exporting market records, partly showing why KRA introduced the CoO requirement.

The CoO, said KRA in the notice, will only be considered valid if it contains the name and address of the exporter, the name and address of the importer, the port of origin, an accurate description of the goods, the quality of the goods, the country of origin and the destination.

“The Act (Tax Procedures Act) provides penal consequences for noncompliance, which shall lead to seizure or forfeiture of goods to the Commissioner or an authorised officer,” the notice further states.

According to the NTA and Oxfam study titled Study to Establish the Size of Illicit Financial Flows in Kenya, for the last nine years, up to 2023, an estimated import value of Sh711.2 billion could not be matched against the exporting countries.

“It is only in the year 2016 that mirror values presented a minimal variation with only a Sh1.5 billion difference,” reads the study published September 18, 2025. Of the top 10 countries Kenya imports from, China holds the largest variance of $69.7 billion (Sh8.4 trillion) in raw data, which represents 97.3 per cent cumulatively over the last 12 years.

China is followed by India with $32.2 billion (Sh3.9 trillion) and the United Arab Emirates with $11.8 billion (Sh1.4 trillion).

“The US presented a rather different trend where the value declared as exports to Kenya is actually overstated on the Kenyan side. This could arise where importers of exempt goods declare higher values to claim it as relief, such as investment deduction or machinery and installation wear and tear relief,” the study explains.

Dr Saidimu Terra, a finance and tax expert who was the consultant for the study, explains that unlike the US, Kenya imports more finished products from China, hence the motivation to under-declare.

“There is no motivation to under-declare (when importing from the US). In fact, there is motivation to over-declare,” he said during the launch of the study. According to the study, the breakdown in the US-Kenya export-import numbers was -5.83 per cent, which is $444.8 million (Sh53.4 billion).

NTA Chief Executive Patrick Nyangweso pointed out that such misinvoicing is largely private-sector-led, as these are the entities doing business.

“It is killing our economy,” he said. “You have seen illicit goods like alcohol and cigarettes across our borders, which, as NTA, we have been talking about.”

The study notes that Kenya relies heavily on the import of goods to meet domestic demand, adding that the country imports 67 per cent of its needs from the 10 countries.

“This indicates a delicate risk position for Kenya in the sense that loopholes created by any of the top 10 countries have a significant impact on the collection of duties and levies,” the study points out.

The study recommends that Kenya secure data exchange protocols to allow full disclosure of all imports from major trade partners.

“It is also critical that Kenya establish an appropriate valuation methodology for imported goods for purposes of minimising outward illicit financial flows (IFFs) from commercial transactions,” it says.

From the breakdown, the study says, using the partner country method, where export-import values are compared, the absolute figures show a widening variance between declared imports by Kenya and what is exported by trading partners.

“The annual average import value understatement is estimated at Sh79 billion for the period under review,” the study says.

It adds that further analysis shows the trend is widening, with increasingly lower values being declared by Kenya. The years 2022 and 2023 had the highest variances of 15 and 20 per cent.

“Even with the assumption that some of the variances are contributed by the value of re-exports arising from transhipment and transits, the widening gap could indicate an underlying problem related to commercial IFFs,” the study states.

KRA Chief Manager of Investigations Walter Odede said the authority’s customs department is “very vigilant,” adding that the tariff division goes through declarations done to ensure conformity with the standard value.

“We have a lot of updates to ensure what was mispriced is then uplifted to the correct value so that (the correct) taxes are done,” he said.

In the 2024-2025 financial year, KRA reported revenue growth of 11.1 per cent to Sh879.3 billion for its customs and border control department.

Over the period, the authority undertook enhanced customs enforcement measures, which resulted in the interception of illicit goods valued at Sh549 million as of the end of June 2025.

“This was achieved on the back of stringent scanning of imports and use of data analytics in risk management and profiling of taxpayers,” said the taxman in a statement.

“Among the notable enforcement actions that were taken during FY 2024-25 was the seizure of over 40,000 litres of smuggled ethanol concealed in imported molasses.”