The Kenya Revenue Authority (KRA) has intensified its efforts to broaden the tax base, and this time it’s targeting unexplained bank deposits.
Backed by a landmark court ruling and a data-driven strategy, the taxman is now placing the burden of proof squarely on individuals and businesses to prove their wealth is not taxable income.
This new approach is all thanks to the August 22, 2025, ruling by the Tax Appeals Tribunal (TAT) in the case of Kirin Pipes Limited v. Commissioner.
The Tribunal upheld the KRA’s decision, ruling that unidentified bank deposits are presumed to be taxable income unless otherwise explained. TAT found that the taxpayer did not discharge the statutory burden of proof to show the assessments were incorrect.
Under Section 3 of the Income Tax Act, tax is charged on all income that accrues in or is derived from Kenya. It broadly includes gains and profits from business activities, unless exempted.
In short, the ruling reinforces a long-standing but now vigorously enforced principle in Kenyan tax law: money flowing into a bank account is presumed to be income unless the owner can prove otherwise.
Armed with this, KRA has moved beyond traditional audits of financial statements to a method it calls “Banking Analysis.” This is a key tool to identify tax evasion by treating unexplained bank deposits as taxable income.
“Your bank account now speaks louder than your financial statements,” warns a recent analysis by Ronalds LLP, a Nairobi-based advisory firm.
This new methodology involves the KRA obtaining bank and mobile money statements, empowered by Section 59 of the Tax Procedures Act, and scrutinizing every credit. Any deposit that cannot be reconciled with the taxpayer’s declared income is flagged as a potential tax liability.
For ordinary Kenyans, especially the millions engaged in the growing hustler economy, the implications could prove to be quite profound.
Income from freelancing, online work, consultancy, or small-scale farming, often channeled through personal bank or M-Pesa accounts, is now under direct scrutiny.
KRA now requires all income sources to be declared in a single annual return, a departure from the past where salaried income was the primary focus for many.
“If employed but have additional income, declare your employment income together with any additional income, for example, freelance, consultancy, online services, farming, or other income-generating activities,” KRA stated.
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This has ignited public debate around financial privacy and the administrative burden placed on citizens. To defend against a KRA assessment, a taxpayer must now produce meticulous records for transactions that were previously considered private.
While KRA frames this as a necessary step to enhance revenue collection and ensure tax fairness, the fear of constant surveillance and aggressive taxation could drive more transactions into the informal cash economy, reversing years of progress in financial inclusion and digitization.
