When KRA Can Tax Your Bank Deposits, Hackers Steal Ksh810M from Kenyans

Hello and welcome to the Money Weekly Newsletter, where we cover instances when KRA can consider bank deposits as taxable income.

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Court Ruling on Taxation of Bank Deposits

The Kenya Revenue Authority (KRA) says that it will only consider bank deposits as taxable income in cases when the account holder cannot demonstrate the source of the money.

The taxman made the statement following a ruling by the Tax Appeal Tribunal, which sided with KRA in its dispute with Kirin Pipes Limited, a pipe manufacturing company. 

Kirin had appealed to the tribunal after KRA demanded tax payment of Ksh56 million. According to court documents, the company noted that the taxman had considered loans and funds from its shareholders as taxable income, therefore contravening the law.

The company highlighted that it had received Ksh29.4 million in shareholder capital injections through Zhonghao Overseas Construction Engineering Co. Ltd (China) and a Ksh31.7 million in loans advanced by Nanchang Municipal Engineering Development Group Co. Ltd.

The company had also received Advance customer payments totaling Ksh65 million for sales that were later invoiced and declared.

However, the tribunal ruled that KRA did not make an error, given that the company failed to provide enough proof that it had received a loan and capital injection from its shareholders.

KRA, on its part, argued that the taxpayer failed to substantiate its claims. According to the revenue agency, the documents presented were either incomplete, unverifiable, or lacked supporting details

“Kirin Pipes Ltd vs KRA has stirred debate. Here is the ruling position: Deposits without proper documentation proving they are loans or capital injections will be treated as income under Section 3 of the Income Tax Act,” KRA stated.

This ruling marks a significant precedent in how KRA can interpret bank deposits during tax audits. While businesses may receive funds from sources that are not taxable—such as shareholder capital or loans—the decision underscores the need for clarity.

It highlights the critical importance of maintaining accurate financial records and supporting documentation to prevent unnecessary tax disputes.

Here is a quick recap of the top money news for the week:

Hackers steal Ksh810 million from Kenyans

A report by the Central Bank of Kenya (CBK) has revealed that mobile banking users lost close to Ksh810 million in 2024 to fraudsters. The report detailed that there were 146 cases reported last year.

CBK also noted that Kenyans using online banking lost Ksh129 million during the period under review. Also targeted by fraudsters were Kenyans who use their cards online. 

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That’s a wrap for this week’s Money Weekly!

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