Local banks are expected to fully comply this month with the requirement to share details of foreign accounts with the Kenya Revenue Authority (KRA), in order to transfer them to the relevant jurisdictions after the deadline of August 31, 2024.
Commercial banks began identifying foreign clients holding accounts in Kenya in February ahead of the initial deadline of May 31. However, the reporting requirement has been extended to August 31, making September the first reporting month for institutions.
The reporting standards were introduced by the OECD as a measure to combat tax evasion and enhance financial transparency.
Details to be shared include account balances, address, place and date of birth, country or countries of tax residence and ID numbers. The Kenya Revenue Authority is also expected to receive similar details for 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 implementation of the standards including issuing self-certification forms.
“To confirm your status under the CRS, you may be required to complete the appropriate self-certification form and return it to your branch or relationship manager,” DTB Bank Kenya said in a message to customers.
The CRS report distinguishes between two types of accounts based on balances as at 31 December 2023 including low value accounts with a balance below Sh129.1 million ($1 million) and higher value accounts with a balance above the mark.
CRS records must be kept for at least five years after the reporting period. Several countries on the continent have started exchanging information under the system, including South Africa, which was the first to do so in 2017.
Other countries include Mauritius (2018), Ghana (2019) and Nigeria (2020). Uganda and Rwanda are scheduled to start exchanging information in 2025. Globally, more than 5,400 bilateral exchanges have been activated under this framework, covering 120 jurisdictions.
Signatories to the framework include tax havens such as Panama, the Cayman Islands, Mauritius and Jersey.
Deloitte has identified several challenges in implementing the Common Reporting Standard in Kenya even though most banks now make disclosure mandatory especially when opening new accounts.
“Many banks in Kenya have proactively implemented self-certification modules as part of their account opening procedures. While this is a step in the right direction, banks need to go a step further and implement robust procedures, policies and effective internal controls to ensure full compliance with the CRS requirements,” notes Joseph Kariuki, Partner and Banking Sector Leader at Deloitte.
“This will enable banks to accurately identify and document the tax residency of account holders, conduct full due diligence, maintain the integrity and confidentiality of information exchanged and ensure accurate reporting of financial data to tax authorities.”
The CRS framework applies to reporting financial institutions including depository institutions, custodian institutions, investment entities and specified insurance companies.