Financial Crime World

Kenya’s Reporting Requirements Under the Common Reporting Standard (CRS)

The Kenyan Revenue Authority (KRA) has implemented the Common Reporting Standard (CRS), a global tax reporting system aimed at promoting transparency and preventing tax evasion. As of January 1, 2023, all Reporting Financial Institutions (RFIs) in Kenya are required to comply with CRS regulations.

Reporting Exemptions

Under the CRS Regulations, RFIs are exempt from reporting certain information, including Tax Identification Number (TIN), date of birth, and place of birth. These exemptions apply if:

  • The TIN is not issued by the reportable jurisdiction or if the domestic law of the reportable jurisdiction does not require the collection of the TIN.
  • The RFIs do not have such information.

However, this information must be reported by the end of the second calendar year following the reportable year.

Due Diligence Obligations

RFIs are mandated to establish and maintain due diligence procedures to determine tax residency and identify reportable accounts. These procedures aim to identify account holders who are tax residents in jurisdictions that have signed agreements with Kenya under the CRS.

The type of due diligence procedure to apply depends on whether the account is new or pre-existing, as well as whether it is held by an individual or entity.

Account Classification

Accounts are classified into two categories:

  • Lower value accounts (aggregate balance below USD 1,000,000)
  • High value accounts (aggregate balance exceeding USD 1,000,000)

Maintenance of Records

RFIs must maintain records of their due diligence procedures, reported information, and other relevant documents for a period of six years.

Compliance Procedures

To ensure compliance with the CRS regulations, RFIs are required to:

  • Develop a Compliance Plan outlining their CRS compliance obligations and procedures.
  • Report and file returns electronically to the KRA by May 31st each year.
  • Retain records used in due diligence procedures for at least six years after filing information returns.
  • Establish systems to undertake due diligence procedures, including Anti-Money Laundering/Know Your Customer (AML/KYC) procedures.
  • Train staff on CRS requirements and procedures.

Account Holder Compliance Obligations

As of January 1, 2023, account holders are required to provide a self-certification to establish their tax residence where due diligence procedures dictate it. Account holders must also be aware of the most recent residential address submitted to the RFI, as this will be regarded as the current residential address for purposes of the residence address test.

Conclusion

The CRS is designed to promote transparency and prevent tax evasion globally. In Kenya, compliance with CRS regulations is mandatory for all RFIs and account holders. To ensure compliance, RFIs must implement additional regular compliance procedures and due diligence requirements set out in the CRS Regulations. Account holders must provide accurate information, consent to information exchange, update their information, report all income earned, and seek professional advice if necessary to avoid penalties and fines.