Kenya raises revenue limit in new tax reporting rule

Times Tower

Times Tower, Kenya Revenue Authority head office in Nairobi. 

Photo credit: File | Nation Media Group

Kenya-based multinational companies with a minimum gross turnover of Sh95 billion will be compelled to disclose their country-by-country financial information from January next year, the new Finance Act 2022 said.

The move meant to help stamp out corporate tax avoidance marks a major raise from the Sh2.5 billion limit earlier proposal by Treasury Cabinet Secretary Ukur Yatani in January.

 All multinational firms with total group revenues of above Sh95 billion will be required to provide the Kenya Revenue Authority (KRA) with details of their financial dealings in each of the countries where they have operations.

The newly published law requires the multinational companies to disclose the amount of revenue, profit or loss before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents concerning each jurisdiction in which they operate.

Constituent entity

“A country-by-country report filed under subsection (1) shall consist of the information relating to the identity of each constituent entity, its jurisdiction of tax residence, if different, jurisdiction where such entity is organised, and the nature of the main business activity or activities of such entity” the Finance Act 2022 said in part.

The multinationals will also be required to provide their group’s aggregate information relating to revenue, profit or loss before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees and tangible assets other than cash or cash equivalents with regard to each jurisdiction where the group has taxable presence.

Country-by-country reporting differs from regular financial reporting in that companies have to publish information for every country they operate in rather than providing a single set of information at the global level.

Transparency activists have advocated requiring multinationals to disclose country-by-country information as part of reforms of international tax rules, but the measure is opposed by many big business groups and some governments.

Corporate tax avoidance has become a hot issue internationally and campaigners want companies to be obliged to publish country-by-country financial information because it could show whether companies are shifting profits out of major markets and manufacturing centres, into tax havens.