Kenya’s Treasury Cabinet Secretary, Njuguna Ndung’u, has approved new regulations granting the Kenya Revenue Authority (KRA) unrestricted access to information on secret bank accounts held by Kenyans in 106 foreign countries.
The move is part of the KRA’s efforts to track down tax evaders and those who have illicit wealth. The Tax Procedures (Common Reporting Standards) Regulations, 2023, which came into operation on January 1, 2023, require all Kenyan banks, trusts, and other financial firms, including local branches of non-resident financial institutions, to report information to the KRA on foreigners’ bank account numbers, names, addresses, residences, Tax Identification Numbers, date and place of birth, and beneficiaries.
The tax agency will share this information with the 106 signatory countries, including popular tax havens like Switzerland, Panama, Cayman Islands, Bermuda, the British Virgin Islands, Mauritius, Jersey, and Monaco. In return, the KRA will receive information on Kenyans holding bank accounts in these jurisdictions. The regulations also require financial entities to report information on registered owners of companies holding bank accounts.
The financial firms will also be required to disclose 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 must report the total gross interest, dividends, and income credited, as well as proceeds from the sale or redemption of any financial assets credited to the accounts. The regulations also mandate financial entities to review all existing accounts with balances of above $250,000 (Sh31.74 million) as of December 31, 2023.
The KRA will use the information to identify tax deductions where applicable, and for record-keeping. It will also automatically share the information with other tax agencies from participating countries. The new tax regulations are expected to reveal 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, in line with the Organisation for Economic Cooperation and Development’s framework developed in July 2014. The Act required the Treasury Cabinet Secretary to publish regulations that set out how financial entities would identify accounts to report and other relevant information.
Financial entities will also have to identify suspicious accounts that must be reported based on due diligence assessment. Although the CRS was initially scheduled to kick in on January 1, 2022, delays in the gazettement of the subsidiary legislation and information exchange pacts with participating nations caused its delay.