Certified Public Accountant (CPA) Fiona Witaba, an accounts expert, has explained why the Kenya Revenue Authority (KRA) cannot impose tax on bank deposits.
According to Fiona Witaba, taxes should be levied only on profits, not on income. The profits are taxed depending on whether they are individually owned or a corporation.
“According to the law, profit is what is taxed at a certain percentage; for individuals, it is 10 to 35 %, for corporations is 30% and other brackets under percentages,” Fiona stated.
According to Fiona, KRA cannot lawfully tax all the bank deposits, and those who say otherwise are only spreading panic.
Fiona Witaba explained that the Data Protection Act of 2019 has not yet been superseded to allow KRA to access a bank account without a court order.
“KRA can access your bank account and the details, therefore, but only with a court order, and most of the time KRA accesses the bank details to issue an urgency notice when they are freezing your account.”
Fiona Witaba also stated that the issuing of the urgency notice by the KRA takes a process, but they cannot access the bank account details without a court order or under investigation.
She emphasizes that the bank has a confidentiality clause that protects the client’s information, and that, in the event of any changes, the Bankers Association of Kenya and the Bank should notify the client.
Cases where the KRA tax bank deposits
Kirin Pipes Ltd was under investigation by the KRA for discrepancies in bank deposits from 2019 to 2022.
KRA hence treated all the bank deposits as taxable income and raised an additional tax assessment.
However, Kirin Pipes objected, claiming that the deposits were shareholder capital injections, Loan proceeds, Inter-account transfers, and advance customer payments.
The company, however, maintained that they had submitted a certificate of incorporation, bank swift confirmation and financial records and statement that should serve as evidence.
Also Read: New KRA System to Monitor Staff and Taxpayers’ Interactions in Real Time
KRA argued that the lack of proof linking the deposits to capital injections or verifiable loans meant the deposits remained a source of taxable income.
The tribunal sided with KRA in September 2025, in a case involving the company, stating that the taxpayer bears the burden of proof under section 56 of the Tax Procedures Act.
In another instance, a Naivasha hotelier, Virginia Wangari, was required to pay tax on deposits totaling 6.5 million due to a lack of supporting records.
Between 2018 and 2022, her accounts showed a total credit balance of Ksh52.6 million. After applying an 18.49% hospitality industry profit margin, the KRA adjusted the net tax to Ksh6.5 million.
The tribunal confirmed that KRA can use banking analysis to treat unverified bank deposits as taxable income, as in the case of Virginia Wangari.
Integrating this system will ensure that KRA has access to transactional data and reduce cases of tax evasion.
Also Read: KRA Starts Going After Kenyans Over Unpaid Withholding Tax
Situations when KRA can tax Bank deposits
KRA can tax bank deposits if the taxpayers cannot provide clear and verifiable records that prove credits that are from non-revenue sources.
Additionally, if accounting records are missing or inconsistent, or supporting documents do not meet the requirements of the Income Tax Act and the Company Act, KRA can tax the deposits.
Absence of independent supporting proof that represents loans, shareholder funds, or inter-entity transactions and reimbursement from a third party may result in taxing of bank deposits.
Follow our WhatsApp Channel and X Account for real-time news updates
