As part of a concerted effort to crack down on tax evasion and illicit wealth, banks have initiated the sharing of information about foreign account holders with the Kenya Revenue Authority (KRA).
Several banks have informed their clients that they have commenced implementing the common reporting standards (CRS), an international framework facilitating the seamless exchange of taxpayer information between countries.
Under CRS, the KRA is set to receive similar details regarding residents holding offshore accounts.
For individual account holders, banks are mandated to disclose information such as account balance, address, date and place of birth, countries of tax residence, and identification numbers to the tax authorities.
In the case of corporate entities, banks are also required to provide details on registration location, entity type, and information regarding controlling persons.
In January of last year, the Treasury Cabinet Secretary signed the Tax Procedures (Common Reporting Standards) Regulations, 2023, mandating all Kenyan financial institutions to report information on foreign account holders to the KRA.
The KRA will subsequently share this data with 106 signatory countries, including renowned tax havens such as Switzerland, Panama, and the Cayman Islands, among others.
To comply with CRS regulations, banks will review all existing accounts with balances exceeding $250,000 (Sh40 million) owned by foreigners.
However, tax experts emphasize the importance of balancing compliance with customer confidentiality in accordance with the Data Protection Act.
Kenya’s participation in CRS aims to uncover assets held by Kenyans abroad, particularly those entities and individuals operating in low-tax jurisdictions.
In 2017, the Treasury introduced a tax amnesty to encourage Kenyan investors holding wealth overseas to repatriate their assets without facing penalties.
Additionally, Kenya has entered agreements with other jurisdictions for the repatriation of funds, such as the deal struck with the Jersey government in 2017.
CRS, developed by the Organisation for Economic Co-operation and Development (OECD), serves to combat tax evasion by enabling the exchange of financial information among jurisdictions annually.
Through the Finance Act of 2021, Kenya adopted CRS, empowering the KRA to request taxpayer information from authorities in other jurisdictions.
In line with these efforts, Kenya signed the CRS Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information and embraced OECD Regulations.
