In 2021, via the Finance Act 2021, Kenya adopted the Common Reporting Standard (CRS) through Section 6B of the Tax Procedures Act. This section mandated the government to create specific regulations for implementing the CRS. These Regulations act as a guide for financial institutions (like banks and investment firms) in Kenya. They outline the specific requirements for compliance that these institutions need to take with regard to due diligence procedures and record-keeping. This ensures Kenya complies with international agreements on automatically sharing financial information with other countries, helping to prevent tax evasion. The long-term goal to be achieved with these regulations is ensuring Kenya meets international standards for the automatic exchange of information with other jurisdictions.
These Regulations outline which financial institutions must follow them, what kinds of accounts they must report on, and how they should carefully gather and store that information. This ensures everyone plays their part in Kenya’s commitment to international standards for sharing financial details with other countries, helping to fight tax evasion.
Reportable Financial Information
For individuals holding accounts, they are required to provide: their name, address, residency, tax ID, and even date of birth must be reported. Entities with controlling individuals who qualify as reportable persons must provide the following details: the entity’s name, address, tax ID, and information about the controlling individuals. Additionally, the account number, the reporting institution’s details, and the account balance or value at the end of the reporting period are all part of the data that needs to be shared.
Due Diligence Procedures
The Regulations prescribe different due diligence procedures depending on whether an account is new or already existed before the regulations came into effect. They also require the two reportable financial bodies, individuals, and entities to be treated differently. In some cases, account holders must provide a self-certification form stating their tax residency and, if applicable, the tax residency of the people who control their company. This self-certification establishes the account holder’s tax residence and, where appropriate, tax residency of the Controlling Person of a reportable entity. With the approval of these CRS Regulations, individuals and entities with accounts in designated financial institutions are now required to collect and report detailed information about their clients’ accounts to the Kenyan Revenue Authority (KRA) as part of international efforts to fight tax evasion. Essentially, this means ensuring your personal details like name, address, tax ID, and even date of birth are accurate with your financial institution. This requirement also captures overseas individuals and entities as they are required to release any relevant financial disclosures to the KRA to avoid penalties.