The Kenya Revenue Authority (KRA) has the legal power to recover unpaid taxes through money held in a taxpayer’s bank account, under a process known as an agency notice.

The process allows the tax authority to direct a bank, employer, business or another third party holding money for a taxpayer to remit the required amount towards an outstanding tax debt.

The power is provided under Section 42 of the Tax Procedures Act, 2015, which outlines the conditions under which KRA can appoint an agent to help recover unpaid taxes.

An agency notice is a formal written instruction that identifies the amount the third party is required to pay. It does not automatically mean that every account or asset belonging to the taxpayer will be seized.

When can KRA issue an agency notice?

KRA may issue an agency notice when tax remains unpaid or when the authority has reasonable grounds to believe that a taxpayer will not pay by the required deadline.

The law provides for different circumstances, including cases where a taxpayer has failed to pay an assessed tax, missed an instalment payment or failed to follow the prescribed objection or appeal procedures.

A bank receiving a valid notice is required to establish whether it holds money for the taxpayer or owes money that is payable to them.

Where the relevant funds are available, the bank may be directed to remit them to KRA, up to the amount specified in the notice and subject to the applicable law.

Does KRA take all the money in your account?

Not necessarily. The amount recoverable through an agency notice depends on the money held or payable to the taxpayer and the terms of the notice.

For example, if a taxpayer owes KRA KSh10 million but the bank holds only KSh3 million belonging to that taxpayer, the notice may require the bank to remit the available funds within the legal framework.

The bank does not automatically become responsible for paying the remaining KSh7 million from its own money.

The agency notice is also different from a court-ordered preservation of funds, which is governed by separate legal provisions.

What happens if the bank cannot pay?

The law provides a procedure for an agent that cannot comply because it does not hold sufficient money or cannot make the required payment.

Under Section 42, the agent must notify KRA in writing within 14 days, explaining why it cannot comply. KRA is then required to respond within 30 days by accepting the explanation and cancelling or amending the notice, or rejecting it.

A bank or another appointed agent that fails to comply without reasonable cause may become personally liable for the amount specified in the notice.

Can taxpayers challenge KRA’s decision?

Taxpayers who disagree with the underlying tax assessment have legal channels through which they can challenge it.

Depending on the circumstances, they may lodge an objection with KRA and, if dissatisfied with the decision, appeal to the Tax Appeals Tribunal and pursue further appeals where permitted by law.

However, taxpayers should not assume that simply disputing a tax demand automatically stops recovery action. They need to establish the status of their assessment, objection or appeal and seek appropriate advice promptly.

Why the issue has attracted attention

The issue has drawn attention following KRA’s move to recover KSh623.39 million in alleged outstanding tax arrears from former Nairobi Governor Mike Sonko through First Community Bank.

In a notice dated October 12, 2026, KRA appointed the bank as an agent and directed it to remit money held on Sonko’s behalf, or money owed to him, towards the claimed tax liability.

The amount comprises approximately KSh308.92 million in principal tax, KSh15.76 million in penalties and KSh298.72 million in interest. The claim relates to the period between January 2015 and December 2019.

The notice illustrates how KRA can use the agency-notice mechanism to pursue outstanding tax liabilities through third parties.

For taxpayers, the key lesson is to respond to tax assessments promptly, maintain accurate financial records and observe the deadlines for objections and appeals.