The Kenya Revenue Authority (KRA) has intensified efforts to expand the country’s tax base, and this time the focus has shifted directly to unexplained bank deposits. Following a landmark court ruling, money flowing into a bank or mobile money account may now be treated as taxable income unless the account holder can clearly prove otherwise.

The move marks a notable escalation in how tax enforcement is carried out in Kenya, with significant implications for individuals, freelancers, and businesses that rely on personal bank accounts or mobile money platforms to receive income.

Why KRA Is Targeting Bank Deposits

The policy shift follows an August 22, 2025 decision by the Tax Appeals Tribunal (TAT) in the case of Kirin Pipes Limited v. Commissioner. In its ruling, the Tribunal upheld KRA’s assessment, finding that unidentified bank deposits are presumed to be taxable income when a taxpayer fails to adequately explain their source.

The Tribunal emphasized that the statutory burden of proof lies with the taxpayer. In this case, Kirin Pipes Limited did not sufficiently demonstrate that the deposits in question were non-taxable, leading the Tribunal to affirm KRA’s position.

While the ruling did not introduce new legislation, it reinforced an existing principle under Section 3 of the Income Tax Act: tax is charged on all income that accrues in or is derived from Kenya, unless specifically exempted. In practical terms, deposits into a bank account are presumed to be income unless proven otherwise.

Banking Analysis and Expanded Enforcement

Armed with this ruling, KRA has moved beyond traditional audits of financial statements to a data-driven approach it refers to as banking analysis. This method involves scrutinizing bank and mobile money statements to identify potential tax evasion.

Using powers granted under Section 59 of the Tax Procedures Act, KRA can obtain bank and M-Pesa statements and review every credit transaction. Any deposit that cannot be reconciled with declared income is flagged as a potential tax liability.

As one Nairobi-based advisory firm put it, “Your bank account now speaks louder than your financial statements.”

What This Means for Ordinary Kenyans

For many Kenyans, particularly those in the growing informal and digital economy, the implications are significant. Income from freelancing, online work, consultancy, small-scale farming, and side businesses is often channeled through personal bank accounts or mobile money wallets.

KRA now requires all income sources to be declared in a single annual tax return. This represents a shift from the past, where salaried employment income was the primary focus for many taxpayers.

KRA has been explicit on this point, stating that individuals with employment income and additional sources — such as freelance work, consultancy, online services, farming, or other income-generating activities — must declare all earnings together.

Privacy Concerns and Compliance Burden

The policy has sparked public debate around financial privacy and the administrative burden placed on taxpayers. To successfully challenge a KRA assessment, individuals may now need to produce detailed records explaining deposits that were previously considered private or informal.

While KRA frames the move as necessary to improve revenue collection and promote tax fairness, critics argue that aggressive enforcement could push more transactions back into cash-based systems, undermining years of progress in financial inclusion and digital payments.

Final Thoughts

The presumption that unexplained bank deposits constitute taxable income is not new in Kenyan tax law, but it is now being enforced more rigorously than ever before. For taxpayers, the message is clear: documentation and transparency are no longer optional.

As enforcement tightens, individuals and businesses alike will need to maintain better records, understand their reporting obligations, and seek professional advice where necessary to avoid unexpected tax assessments.