On 14 December 2021, the Kenya Revenue Authority (KRA) published the draft common reporting standards regulations 2021.
The revenue authority also issued a public notice requesting interested members of the public and stakeholders to submit their views on the draft regulations.
The deadline for submission is 4 January 2022.
Here is a highlight of the Tax Procedures (Common Reporting Standards) Regulations 2021.
1 January 2021
The regulations lay down the rules relating to the implementation of the agreements on automatic exchange of information on financial accounts signed and concluded by Kenya, in accordance with the Common Reporting Standard approved by the OECD.
Reporting Financial Institutions
This means a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company.
This means a financial account that is maintained by a reporting financial institution and is held by one or more reportable persons.
This means a reportable jurisdiction person other than:
(a) a corporation the stock of which is regularly traded on one or more established securities markets
(b) any corporation that is a Related Entity of a corporation described in (a)
(c) a Governmental Entity
(d) an International Organisation
(e) a Central Bank
(f) a Financial Institution
- For due diligence purposes – any jurisdiction other than Kenya and the United States of America.
- For reporting purposes – a jurisdiction specified in the second schedule to the regulations.
As of now, the regulations provide the following list of jurisdictions as participating jurisdictions:
Andorra, Anguilla, Antigua Argentina, Aruba, Australia, Austria, Azerbaijan, The Bahamas, Bahrain, Barbados, Barbuda, Belgium, Belize, Bermuda, Brazil, British Virgin Islands, Brunei Darussalam, Bulgaria, Canada, Cayman Islands, Chile, China, Colombia, Cook Islands, Costa Rica Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Ghana, Gibraltar, Greece, Greenland, Grenada, Guernsey, Hong Kong (China), Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Korea, Kuwait, Latvia, Lebanon, Liechtenstein, Lithuania, Luxembourg, Macau (China), Malaysia, Marshall Islands, Mauritius, Monaco, Malta, Mexico, Montserrat, Nauru, New Zealand, Nigeria, Niue, Netherlands, Norway, Oman, Pakistan, Panama, Peru, Poland, Portugal, Qatar, Romania, Russia, Samoa, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Saint Maarten , Switzerland, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turkey, Turks and Caicos Islands, United Arab Emirates United Kingdom, Uruguay, Vanuatu.
1. Reporting Obligations
Under these regulations, Reporting Financial Institutions have a duty to file with the KRA each calendar year, a declaration in respect of each account identified as a reportable account.
Reporting Financial Institutions shall also transmit to the KRA the information not later than 31 May of the year following the year in respect of which the declaration is filed.
The return shall be made by way of electronic means and a nil return should be filed if no reportable account is identified.
This means that the KRA will be able to access accounts of Kenyans who have money in the above foreign countries and the KRA will also submit information about foreigners with wealth in Kenya.
2. Due Diligence Requirements
The regulations also provide a list of reporting and due diligence procedures to be carried out and followed.
The following information is required for each reportable account:
- The name, address, residence, Tax Identification Number (TIN) and date and place of birth (in the case of an individual) of each Reportable Person that is an Account Holder of the account and, in the case of any Entity that is an Account Holder and that, after application of the due diligence procedures consistent with these Regulations, is identified as having one or more Controlling Persons that is a Reportable Person, the name, address, residence and TTIN of the Entity and the name, address, residence, TTIN Number and date and place of birth of each Reportable Person.
- The account number (or functional equivalent in the absence of an account number).
- The name and identifying number (if any) of the Reporting Financial Institution.
- The account balance or value as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year or period, the closure of the account;
- In the case of any Custodial Account—
- The total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period; and
- The total gross proceeds from the sale or redemption of Financial Assets paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Financial Institution acted as a custodian, broker, nominee, or otherwise as an agent for the Account Holder.
- In the case of any Depository Account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period.
- In the case of any account not described in paragraphs (e) or (f), the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Financial Institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the Account Holder during the calendar year or other appropriate reporting period.
For pre-existing individual accounts:
Due diligence must be carried out and institutions must ensure that they have the following information:
- Identification of the account holder as a resident of a reportable jurisdiction
- Current mailing address or residence address in a reportable jurisdiction
- One or more telephone numbers in a reportable jurisdiction
- Standing instructions to transfer funds to an account maintained in a reporting jurisdiction
- Effective power of attorney or signatory authority granted to a person
- Hold mail instruction or in-care of address if the financial institution does not have any other address on file
There is also a requirement that the data maintained by financial institutions be “searchable” data.
Recording keeping obligations also include a duty to retain those records for a period of at least 5 years after the end of the period within which the financial institution must report the information required to be reported.