Kagiko & Associates-Accounting

15/07/2026

Audit reveals payroll fraud cost taxpayers an estimated Sh6.2 billion.

The audit found:

— Sh313.6 million paid through a single personal bank account at the National Police Service.
— Sh31.5 million in unsupported salary arrears at the Department of Immigration.
— Sh20 million paid to employees with unverified bank account details.
— The remaining losses came from ghost workers, duplicate salaries, shared bank accounts, and other payroll irregularities

14/07/2026

How a simple software deal in Nairobi turned into a Kshs. 40 MILLION tax war that had the entire tech sector holding its breath.

This is the story of Sybrin Kenya Limited vs. KRA. Buckle up, it’s a Kenyan corporate thriller.

Sybrin Kenya provided specialized software services to two foreign companies — one in South Africa, another in Guernsey.

Those foreigners took Sybrin’s work, added their own magic, and sold the final product to Kenyan banks.

Sybrin had ZERO direct contracts with the banks. They only dealt with their foreign clients. For years, business was sweet. 💼

Then February 2020, KRA dropped the bomb.

“Pay Kshs. 40+ million VAT!”

Reason? The software ended up being used by Kenyan banks, so the service was “consumed in Kenya.” Simple.

Sybrin: “Hold up! Our customers are abroad. This is an export!”


The big question: What makes a service “exported” under Kenyan VAT law?

The law says a service is exported if provided for use or consumption OUTSIDE Kenya.

Sybrin argued: Our foreign clients consumed the service when they integrated our work.

KRA: No. The Kenyan banks are the ultimate consumers.

Game on. ⚔️


Round 1 — Tax Appeals Tribunal (Nov 2021).

They looked at the contracts. Crystal clear. Sybrin only invoiced the foreign companies. One contract even said “all work invoiced from Sybrin Systems only.”

Tribunal: Foreigners are the real customers. Services exported. Sybrin wins!

Company breathes. 🇰🇪

But KRA wasn’t done. They appealed to the High Court.

January 2024, Justice Mabeya flips it.

“Focus on economic reality, not just paperwork. Ultimate consumers are Kenyan banks. Pay the VAT.”

Shockwaves across the tech industry. Companies started sweating. 😰

Now to the Court of Appeal. July 2026. Justices Karanja, Ong’udi & Njuguna.

Sybrin’s lawyer: “These are separate legal entities. Remember Salomon v Salomon (1897)? You can’t just ignore company law because it suits you.”

Foreign companies are the customers, period.


The judges agreed.

Contracts were loud and clear: No direct obligation with Kenyan banks. Payments only to foreign entities.

They even brought in the OECD destination principle — for B2B services, tax where the customer is located.

Customer here? South Africa & Guernsey. Not Kenya.

On 10th July 2026, judgment dropped.

Court of Appeal allows the appeal, overturns the High Court, restores Tribunal ruling.

Sybrin Kenya off the hook for the Kshs. 40M. Costs awarded to the company.

Big W for clarity in cross-border tech business! 🎉


Lesson? In this digital age, contracts and legal structure still matter. Economic reality is important, but you can’t rewrite company law to chase revenue.

Kenyan tech companies exporting services can now breathe easier.

What a case! What do you think — was KRA right or was this overreach?

13/07/2026

IFRS 16 Leases: Transforming Balance Sheets and Testing Finance Teams in 2026

More than seven years after its effective date, IFRS 16 continues to reshape how companies worldwide — including in Kenya and across Africa — account for leases. The standard’s core requirement to bring most leases on-balance sheet has delivered greater transparency, but it has also created persistent practical challenges that accountants and finance leaders are still grappling with today.

The Big Shift: From Off-Balance to On-Balance

Under IFRS 16, lessees recognise a Right-of-Use (ROU) Asset and a corresponding Lease Liability for virtually all leases. This single model replaced the old distinction between operating and finance leases for lessees, fundamentally changing key financial ratios.

A typical company now shows higher assets and liabilities, impacting debt covenants, leverage ratios, return on assets, and EBITDA. In Kenya, many businesses with significant office space, vehicle fleets, or equipment leases have felt this impact strongly.

Current Real-World Challenges in 2025–2026

The International Accounting Standards Board (IASB) launched a Post-Implementation Review of IFRS 16 in 2025, seeking feedback on how the standard is working in practice. Several recurring issues have emerged:

- Identifying embedded and hidden leases remains difficult. Many service contracts (e.g., equipment maintenance, vehicle hire, or cloud services) contain lease components that are easily missed.
- Determining lease term and discount rates is complex, especially with extension options, termination rights, and variable payments linked to indices.
- Ongoing reassessments and modifications create heavy administrative burdens. Changes in lease terms, payments, or discount rates require re-measurement of both the ROU asset and liability.
- Data management and system integration challenges persist. Many companies still rely on spreadsheets, leading to errors during year-end closings and audit season.
- Dual reporting (IFRS 16 vs local GAAP or ASC 842) adds complexity for multinational groups operating in Kenya.

In the Kenyan context, businesses often struggle with incomplete lease inventories, especially in retail, logistics, and real estate sectors where short-term and low-value leases are common.

Practical Implications for Kenyan Businesses

For Kenyan companies, IFRS 16 has increased reported liabilities, affecting borrowing capacity and compliance with bank covenants. Finance teams report spending significant time on lease schedules, depreciation calculations, and interest unwinding using the effective interest method.

The good news is that proper implementation brings benefits: clearer financial reporting, better visibility into lease commitments, and stronger discipline in lease negotiations.

Key Takeaways for Accountants and Finance Professionals

- Recognise ROU assets and lease liabilities for nearly all leases.
- Measure the liability at the present value of lease payments.
- Depreciate the ROU asset over the lease term.
- Apply the effective interest method to the liability.
- Maintain robust processes for modifications, reassessments, and disclosures.

As the IASB reviews feedback from the 2025 Post-Implementation Review, future amendments may address some pain points — particularly around variable payments, sale-and-leaseback transactions, and disclosure overload.

IFRS 16 has delivered more faithful representation of lease obligations, but it demands robust systems, skilled teams, and ongoing attention. In 2026, the most successful finance functions are those treating lease accounting not as a compliance exercise, but as a strategic process for better decision-making and risk management.

Organisations that invest in lease accounting software, staff training, and clear policies are best positioned to turn IFRS 16 from a burden into a competitive advantage.

11/07/2026

Opinion: Unsung Hero of Kenyan Business: Why eTIMS Deserves a Standing Ovation!

In the fast-evolving world of Kenyan taxation, one tool quietly stands out as a game-changer — and it’s time we gave it the recognition it truly deserves. Meet eTIMS (Electronic Tax Invoice Management System) — KRA’s powerful digital invoicing platform that is transforming how businesses operate, prove their transactions, and stay compliant.

Far too many business owners still view eTIMS as just another bureaucratic hurdle. But the reality is far more exciting: *leTIMS is one of the smartest, most valuable tax tools available to Kenyan businesses today.

The Real Magic Behind eTIMS

Every single day, businesses across Kenya incur legitimate expenses — buying stock, paying suppliers, delivering services. VAT is paid on these transactions. But without proper proof, those payments can become invisible when it matters most.

eTIMS creates the proof.

It generates real-time, KRA-validated electronic invoices that serve as ironclad evidence of your transactions. This isn’t just about compliance — it’s about protection and empowerment:

- Stronger tax positions: Every valid eTIMS invoice backs your expense claims and input VAT refunds.
- Better bookkeeping: Automatic records reduce errors and make audits less stressful.
- Business credibility: Suppliers and customers increasingly prefer dealing with eTIMS-compliant partners — it’s becoming a mark of professionalism.
- Real-time visibility: Both you and KRA can track transactions instantly, leading to faster VAT refunds and smoother cash flow.
- Fraud protection: It helps businesses avoid fake invoices from non-compliant suppliers that could later disqualify your claims.

Studies and KRA reports show that eTIMS significantly boosts VAT compliance by enabling real-time monitoring and reducing opportunities for evasion. For forward-thinking businesses, this means fewer penalties, faster refunds, and greater peace of mind.

Why the Reputation Needs Fixing

Yes, like any new system, eTIMS had teething problems. But the narrative that it’s purely a “compliance burden” misses the bigger picture. Free solutions, flexible device compatibility, inventory management features, and integration options make it far more business-friendly than many realize.

In tax, what you know matters— but what you can prove matters even more. eTIMS gives you that proof in a digital, verifiable, and efficient way.

The Future is eTIMS-Ready

As Kenya pushes toward a more transparent and digital economy, businesses that fully embrace eTIMS will have a clear competitive edge. They’ll claim their rightful deductions faster, build stronger financial records, and position themselves as reliable partners in the ecosystem.

eTIMS isn’t just a KRA requirement — it’s a powerful business ally.

It’s time we changed the conversation. Stop seeing it as a burden. Start seeing it as the strategic advantage it truly is.

To every business owner still hesitant: Embrace eTIMS fully. Understand it deeply. Use it strategically. Your future self — and your bottom line — will thank you.

The digital tax revolution is here, and eTIMS is leading the charge. Let’s give this powerful tool the enthusiastic support it deserves!

What do you think — ready to see eTIMS differently? 🚀

11/07/2026

Here's how KRA collected Sh2.84 trillion in FY2025/26

Exchequer revenue: Up 10.5% to Sh2.57 trillion
Domestic revenue: Up 9.7% to Sh1.85 trillion
Customs revenue: Up 12% to Sh989 billion
PAYE: Up 6.7% to Sh599 billion
Domestic VAT: Up 8.5% to Sh355 billion
Corporation tax: Up 14% to Sh347 billion
Agency revenue: Up 11% to Sh276 billion
Betting excise: Up 25% to Sh16.5 billion
Digital service tax: Up 99% to Sh1.6 billion

10/07/2026

From January 1, 2027, KRA will replace the current Excel-based income tax return filing system with a new web-based platform. The goal is to simplify the process and reduce system overload.

Here’s what the change means:

Instead of downloading an Excel template, filling it manually, and uploading it back, taxpayers will file returns directly on KRA’s website through a browser.

Key improvements include:

- Auto-populated returns: KRA will use data from multiple sources — such as eTIMS invoices, employer PAYE records, withholding tax certificates, and customs data — to pre-fill parts of the return automatically.

Example:
If an employer has already reported a monthly salary of Sh100,000 and the PAYE deducted, those details may already appear in the return when logging in. The taxpayer only needs to review the information for accuracy before submitting.

- For businesses issuing eTIMS invoices, KRA can pull those records to pre-fill relevant sections, significantly reducing manual data entry.

- Expanded WhatsApp filing: More taxpayers will be able to file returns directly via WhatsApp, offering greater convenience beyond the iTax portal.

This shift aims to make tax filing faster, simpler, and less prone to errors for both individuals and businesses.

The success of the new platform will depend on its stability, ease of use, and how well it handles corrections where pre-filled data needs adjustment.

10/07/2026

We’re incredibly proud to announce that Mshahara Pro has achieved a 92% satisfaction rate from our users! Over 200 businesses across Kenya have chosen Mshahara Pro to simplify their HR and payroll in just our first month of testing.

Why are they switching?
✅ 100% KRA, NSSF, SHIF, and Housing Levy compliant
✅ Zero-error automated calculations
✅ Instant payslip and P10 report generation
✅ Includes AI-powered payroll assistant

Stop struggling with complex payroll and compliance risks. Join the 92% who love their payroll experience.

Try Mshahara Pro for FREE today!
👉 https://mshaharapro.com/
(Free forever for organizations with 5 or fewer employees)



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09/07/2026

https://tax.kagikoassociates.com

The Finance Act 2026 has introduced a significant tax change that will increase costs for many Kenyan businesses using foreign cloud software.

The government has expanded the definition of “Royalty” under the Income Tax Act to cover a wide range of software-related payments.

What changed?

A previous grey area around software licenses, SaaS subscriptions, maintenance fees, and similar payments has been removed.

The new law now explicitly classifies the following as royalties:

- Payments for any software (whether custom-built or off-the-shelf)
- License fees, development fees, training fees, and support/maintenance fees
- Payments to digital payment networks (such as Visa and Mastercard), even when labelled as “service fees” or “processing fees”

Cost impact

These payments are now subject to 20% withholding tax for non-resident providers (or 5% for local providers).

Most international providers (Google, Microsoft, Zoom, Salesforce, and others) require the full invoice amount, meaning businesses must gross up the payment to cover the tax.

Example:

Annual Google Workspace bill = USD 1,200 (net amount the provider receives)

Withholding tax (20%) = USD 300
Total amount paid= USD 1,500

- Provider receives: USD 1,200
- Withholding tax remitted to KRA: USD 300

This results in a 25% increase in the effective cost of the subscription.

Businesses affected include:

- SMEs and startups using cloud tools
- IT consultants and digital agencies
- Banks, fintechs, and companies using foreign payment gateways
- Any organisation with international SaaS subscriptions

This change is expected to raise operational costs across many sectors.

tax.kagikoassociates.com

We provide you with excellent resources to aid you in your financial and accounting journey, ensuring that you are well equipped for your corporate and personal growth.

08/07/2026

I was going through the latest update on Aliko Dangote’s planned $17 billion (Sh2.2 trillion) oil refinery in Kenya, and I genuinely find the financing plan interesting.

Dangote has chosen Kenya over Tanzania for this massive project — a 700,000-barrel-per-day refinery that would become East Africa’s largest.

Here’s what caught my attention:

The refinery won’t be funded by one single bank or investor. Instead, Dangote Industries plans to combine three main sources to spread the risk.

• First, cash flow from existing businesses — profits from cement, fertiliser, sugar, and the Lagos refinery. They’ll reinvest their own money instead of borrowing everything.

• Second, bonds— borrowing directly from investors who will be repaid with interest over time.

• Third, an Initial Public Offering (IPO) of the Lagos refinery — selling shares to the public on the stock market to raise capital for the Kenya project.

The IPO has already generated strong interest, though it hasn’t been formally launched yet.

According to the Vice President for Oil and Gas, the refinery will be built on Lamu Island. Site selection is done, soil testing is underway, and design work has started. Construction could take 3 to 5 years.

Once complete, it will supply fuel to Kenya and the region, reducing reliance on imported petroleum products.

What I’m wondering is this:

Will this ambitious financing model actually work smoothly in Kenya’s environment, or are there ex*****on risks (land issues, regulatory approvals, local content, etc.) that could delay or complicate it?

What do you think — is this a game-changer for Kenya’s energy sector?