KRA ramps up checks on offshore accounts
Treasury Cabinet Secretary Njuguna Ndung’u has signed new rules granting the Kenya Revenue Authority unrestricted access to information on secret bank accounts held by Kenyans in 106 foreign countries.
Treasury Cabinet Secretary Njuguna Ndung’u has signed new rules granting the Kenya Revenue Authority (KRA) unrestricted access to information on secret bank accounts held by Kenyans in 106 foreign countries as it steps up its hunt for tax dodgers and beneficiaries of illicit wealth.
“The Tax Procedures (Common Reporting Standards) Regulations, 2023 ... shall be deemed to have come into operation on January 1, 2023,” Prof Ndung’u said in a January 27 notice.
All Kenyan banks, trusts, and other financial firms, including local branches of non-resident financial institutions, will be required to report to KRA information on foreigners’ bank account numbers, names, addresses, residences, Tax Identification Numbers, date and place of birth and persons listed as its beneficiaries. KRA will share this information with the 106 signatory countries — including popular tax havens such as Switzerland, Panama, Cayman Islands, Bermuda, the British Virgin Islands, Mauritius, Jersey, and Monaco — and, in turn, receive from them information on Kenyans holding bank accounts in their jurisdictions.
Where bank accounts are held by companies, information on registered owners of the entities will be reported. Also to be disclosed is the amount of money held in the accounts or the value of the accounts and their surrender value if insured.
For custodial accounts, the institutions will be required to report the total gross interest, dividends, and income credited to the accounts during the year and proceeds from the sale or redemption of any financial assets credited to the accounts.
The regulations also require the financial entities to review all existing accounts with balances of above $250,000 (Sh31.74 million) as of December 31, 2023.
The data will be shared with KRA for a tax deduction, where applicable, and record-keeping and will also be automatically shared with other tax agencies from participating counties. Treasury’s new tax regulations are expected to lift the veil on assets held by Kenyans abroad.
The Common Reporting Standards (CRS) framework was introduced in Kenya in July 2021 through the Finance Act 2021, which amended the Tax Procedures Act 2015, as per a framework developed by the Organisation for Economic Cooperation and Development in July 2014.
The Act required the Treasury CS to publish the regulations that set out how financial entities would identify accounts to report and other relevant information. The entities will be required to review their records to identify suspicious accounts that have to be reported based on due diligence assessment.
The CRS was initially scheduled to kick in on January 1, 2022, but delays in the gazettement of the subsidiary legislation as well as signing information exchange pacts with participating nations caused its delay until now.
President William Ruto has set an ambitious target for KRA to raise Sh3 trillion in ordinary revenue this financial year ending June 2023, Sh538 billion more than the Sh2.14 trillion target set by the previous administration.
KRA missed its revenue collection targets by Sh27 billion in three months to December.
Collections from five major streams—payroll, corporation, VAT, excise, and import duty — in the three months to December amounted to Sh466.46 billion against a target of Sh493.11 billion. Other revenues including investment, fines, levies, and forfeitures trailed its target by Sh6.16 billion with a collection of Sh33.10 billion in the quarter.
