The Kenya Revenue Authority (KRA) now has greater power to tax deposits in your bank account if you cannot prove where the money came from.
This follows a landmark ruling by the Tax Appeals Tribunal, which affirmed that all unexplained deposits can be treated as taxable income.
The ruling stems from the case of Kirin Pipes Limited vs. KRA Commissioner Intelligence Strategic Operations Investigations & Enforcement (Appeal No. E1116/2024).
The tribunal dismissed the company’s arguments that over KSh 54 million in deposits were shareholder capital injections or loans, ruling instead that the amounts were taxable because there was no sufficient documentation to prove otherwise.
How KRA Can Tax Your Bank Account
KRA’s authority is anchored in Section 56 of the Tax Procedures Act, which places the burden of proof on taxpayers.
This means if money enters your account and you cannot clearly show its source, KRA can classify it as income and demand taxes on it.
In the Kirin Pipes case, the company claimed part of the deposits came from shareholder funds and interest-free loans.
However, it failed to provide certified bank statements, board resolutions, loan agreements, or repayment schedules. Without such records, the tribunal ruled that the deposits were taxable.
Why This Matters
The decision comes at a time when KRA is under pressure to fill a KSh 200 billion revenue shortfall. With economic growth slowing to 4.8% in 2025, the taxman is scrutinising both corporate and personal accounts more aggressively.
A similar High Court decision in 2024 already set the stage for this ruling, reinforcing the precedent that unexplained money in your account equals taxable income.
For businesses and individuals, the implication is clear: any deposit that cannot be backed up with paperwork—whether from loans, shareholder capital, or even M-Pesa transfers—risks being taxed.
Reactions and Concerns
The ruling has sparked online debate. One user on X asked, “What will stop KRA from treating M-Pesa the same?” while another argued that equating deposits to income shows “lazy tax enforcement.”
Others stressed that documentation is the only safeguard.
Tax experts point out that the law is on KRA’s side. Unless you can produce credible proof of the source of funds, the taxman’s interpretation will stand.
What You Should Do
To avoid unexpected tax bills, businesses and individuals should:
- Keep certified bank statements and clear records of all deposits.
- Maintain shareholder resolutions and loan agreements for capital injections or borrowings.
- Document all repayments and financial transactions.
As Kenya tightens compliance under international tax transparency frameworks, the Kirin Pipes ruling shows that KRA can—and will—treat your unexplained deposits as income.
By Geoffrey mbuthia
