Kenya banks have started sharing data about foreign account holders with the Kenya Revenue Authority (KRA) as the tax authority steps up its purge of tax dodgers and beneficiaries of illicit wealth.
The implementation of common reporting standards (CRS) allows countries to seamlessly exchange taxpayer information. KRA will also receive similar details for resident taxpayers with offshore accounts. Banks will provide the taxman with account balance, address, date of birth, nationality, and identification numbers for individual account holders.
Additionally, banks are required to collect and forward information on registration, entity type, and controlling person for corporate entities. This reporting requirement was established in January 2023, making it mandatory for all Kenyan banks and financial institutions to report foreigners’ details to the KRA. The KRA will then share this information with 106 signatory countries, including well-known tax havens like Switzerland, Panama, the Cayman Islands, Bermuda, the British Virgin Islands, Mauritius, Jersey, and Monaco.
In return, the tax authorities in these signatory countries are required to share similar information with the KRA. This exchange of information enhances the chances of the taxman uncovering cash hidden in offshore accounts. Similar to the rules against money laundering, which require financial institutions to report cash transactions over Sh1 million to the Financial Reporting Center, banks are expected to review all existing accounts with balances above $250,000 (Sh40 million) that belong to foreigners.
However, tax experts warn that banks and the KRA must be cautious in protecting customer confidentiality in accordance with the Data Protection Act.
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“The CRS also mandates participating authorities to have data safeguards in place, and I believe this is addressed by the Data Protection Act,” explained Robert Waruiru, a partner at Ichiban Tax & Business Advisory LLP. He added that EU tax residents will be subject to even stricter EU data regulations.
As a signatory to the CRS, Kenya aims to uncover assets held by Kenyans abroad, particularly those held by companies and individuals who have established themselves in low-tax jurisdictions. In 2017, the Treasury introduced a tax amnesty program to encourage Kenyan investors who had hidden their wealth abroad to repatriate it without facing penalties.
During the same year, Kenya reached an agreement with the Jersey government to repatriate over Sh380 million that had been confiscated from a company associated with former Kenya Power managing director Samuel Gichuru. Kenya Banks Data KRA
CRS was developed by the Organisation for Economic Co-operation and Development (OECD), a club of mostly rich countries, in July 2014 to reduce instances of tax evasion through the sharing of information among jurisdictions on an annual basis.
In the Finance Act, 2021, Kenya adopted the common reporting standards, which allow the KRA to seek information on a taxpayer from tax authorities in other jurisdictions.
On July 22, 2020, Kenya signed the CRS Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information and adopted the OECD Regulations as drafted.
Source: Business Daily
