Financial institutions are now required to comply with the requirement of sharing the details of financial accounts of reportable persons with the Kenya Revenue Authority (KRA) after the lapse of the 31st August 2024 deadline.
A reportable person is defined as an individual or entity that is resident in a reportable jurisdiction under the tax laws of such jurisdiction. After receiving this information, KRA shares it with the tax authorities of the respective home countries of the account holders. The information includes the account holder’s name, address, tax identification number, account balance, income generated from the account and the country of tax residence.
The reporting requirement was initiated by the Organization for Economic Co-operation and Development (OECD), which Kenya is a member state, to combat tax evasion and promote financial transparency. The Common Reporting Standard (CRS) is an international framework established by OECD that facilitates the exchange of financial account information between participating jurisdictions.
In Kenya, CRS was introduced through the Finance Act of 2021, which added Section 6B to the Tax Procedures Act, Cap 469B. This section enabled the Cabinet Secretary for the National Treasury to publish CRS regulations vide Legal Notice No. 8 of 2023 which details the due diligence procedures and record-keeping requirements to ensure Kenya is compliant with international requirements for information exchange with other participating jurisdictions. Kenya is also a signatory of the Multilateral Competent Authority Agreement which outlines the specifics for exchanging CRS information, including financial account data.
CRS reporting distinguishes between two types of accounts based on their balances as of 31st December, 2022 or subsequent periods, to include low-value accounts with a balance of less than USD 1,000,000 and high-value accounts with a balance of USD 1,000,000 or more. CRS records must be maintained for a minimum of at least five years after the reporting period.
CRS regulations have significant implications on individuals and entities with foreign financial accounts. This comprises correctly identifying their tax resident status in compliance with CRS regulations, providing KRA with relevant financial information, and fulfilling their tax obligations.
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