Treasury CS Njuguna Ndung’u loses power to amend rules on offshore account checks
Treasury CS Njuguna Ndung’u has surrendered powers of regularly amending regulations on the exchange of financial information between Kenya and about 106 other countries.
Treasury Cabinet Secretary Njuguna Ndung’u has surrendered powers of regularly amending regulations on the exchange of financial information between Kenya and about 106 other countries even as authorities tightened the noose on tax dodgers and beneficiaries of illicit wealth.
In a major shift, the Treasury has deleted rule 39 of the Tax Procedures (Common Reporting Standards) Regulations, 2023 which granted the Treasury CS powers to amend schedules of the regulations from time to time.
“The Tax Procedures (Common Reporting Standards) L.N No. 8/2023 Regulations, 2023 are amended by deleting regulation 39,” Prof Ndung’u said in a notice without giving detail.
Insiders said the move may be targeted at curbing abuse of the rules through unwarranted amendments that could provide leeway for tax dodgers.
Prof Ndung’u on January 27, 2023 signed the Tax Procedures (Common Reporting Standards) Regulations, 2023 which granted the Kenya Revenue Authority (KRA) unrestricted access to information on secret bank accounts held by Kenyans in 106 foreign countries amid stepped-up purges on tax dodgers and beneficiaries of illicit wealth.
“These Regulations may be cited as the Tax Procedures (Common Reporting Standards) Regulations, 2023, and shall be deemed to have come into operation on the 1st of January, 2023,” the CS said in a notice dated January 27, 2023.
Under the rules, all Kenyan banks, trusts, and other resident financial firms, including local branches of non-resident financial institutions, are required to report to the taxman information on foreigners’ bank account numbers, names, addresses, residences, Tax Identification Numbers (TINs), date and place of birth and persons listed as its beneficiaries.
KRA would then share this information with the participating 106 countries including popular tax havens such as Switzerland, Panama, Cayman Islands, Bermuda, the British Virgin Islands, Mauritius, Jersey, and Monaco, and in turn, receive from them information on Kenyans holding bank accounts in their jurisdictions.
Where bank accounts are held by companies, information on registered owners of the entities will be reported. Also to be disclosed is the amount of money held in the accounts or the value of the accounts and their surrender value if insured.
For custodial accounts, the institutions will be required to report the total gross interest, dividends, and income credited to the accounts during the year and proceeds from the sale or redemption of any financial assets credited to the accounts.
The regulations published by Prof Ndung’u also require the financial entities to review all existing accounts with balances of above $250,000 (Sh35.39 million) as of December 31, 2023.
“A pre-existing entity account that has an aggregate account balance or value that exceeds $250,000 as of the 31st December 2022, and a pre-existing entity account that does not exceed $250,000 as of the 31st December 2022, but the aggregate account balance or value of which exceeds $250,000 as of the 31st December 2023, or the last day of any subsequent calendar year, must be reviewed in accordance with the procedures specified in regulation 22” the new regulations read in part.
The data extracted from the checks will be shared with KRA for a tax deduction, where applicable, and record-keeping and will also be automatically shared with other tax agencies from participating counties.
The Common Reporting Standards (CRS) framework was introduced in Kenya in July 2021 through the Finance Act 2021, which amended the Tax Procedures Act 2015, as per a framework developed by the Organisation for Economic Cooperation and Development (OECD) in July 2014.
