Local banks are this month expected to fully comply with the requirement to share the details of foreigners’ accounts with Kenya Revenue Authority (KRA), for onward transmission to the respective jurisdictions after the lapse of the August 31, 2024 deadline.
Commercial banks in February started identifying foreign customers who maintain accounts in Kenya ahead of the initial May 31 deadline. The requirement for filing was however extended to August 31, making September the first reporting month for the institutions.
The reporting criteria was introduced by the Organisation for Economic Cooperation and Development as a measure to combat tax evasion and promote financial transparency.
The details to be shared include account balances, address, place and date of birth, country of tax residence or countries and ID numbers. KRA is also expected to receive similar details on a resident taxpayer with an offshore account.
The common reporting standards (CRS) were legislated in Kenya through the CRS regulations gazetted in February last year. Banks have been notifying customers of the standards application including the issuance of self-certification forms.
“To confirm your status under CRS, you may be asked to complete the appropriate self-certification from and return it to your branch or relationship manager,” DTB Kenya said in a communication to customers.
CRS reporting distinguishes between two types of accounts based on balances as of December 31,2023 including low value accounts whose balance was less than Sh129.1 million ($1 million) and higher value accounts whose balance exceed the mark.
CRS records are to be maintained for at least five years after the reporting period. Several countries on the continent have begun exchanges under the framework including South Africa which was the first to do so in 2017.
Others are Mauritius ((2018), Ghana (2019) and Nigeria (2020). Uganda and Rwanda are set to begin the exchange of information in 2025. Globally, over 5,400 bilateral exchange relationships under the framework have been activated covering 120 jurisdictions.
Signatories to the framework include tax havens such as Panama, Cayman Islands, Mauritius and Jersey.
Deloitte has identified several challenges in implementing the CRS in Kenya even as most banks now make the disclosure mandatory especially in the opening of new accounts.
“Several banks in Kenya have proactively implemented self-certification forms as part of their account opening procedures. While this signals a step in the right direction, banks must go a step further and implement robust procedures, policies and effective internal controls to ensure full compliance with CRS requirements,” Joseph Kariuki Partner- Head of Banking sector at Deloitte notes.
“This will enable banks to accurately identify and document the tax residency of account holders, perform thorough due diligence, maintain the integrity and confidentiality of exchanged information and ensure accurate reporting of financial data to the tax authority.”
The CRS framework applies to reporting financial institutions including depository institutions, custodial institutions, investment entities and specified insurance companies.
