Financial Crime World

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CRS Reporting Requirements: RFIs and Account Holders Must Comply

A new reporting requirement has been introduced in Kenya under the Common Reporting Standard (CRS), aiming to promote transparency and prevent tax evasion globally. The CRS requires Reporting Financial Institutions (RFIs) to report information on financial accounts held by individuals or entities that are tax residents of another country.

Exemptions for RFIs

RFIs are exempt from reporting Tax Identification Numbers (TINs) or dates of birth if they do not have such information. Additionally, RFIs are exempt from reporting TINs if the same is not issued by the reportable jurisdiction or where the domestic law of the reportable jurisdiction does not require the collection of TINs.

Due Diligence Obligations

RFIs must establish and maintain due diligence procedures to determine tax residency and identify reportable accounts. The choice of procedure depends on whether an account is new or pre-existing, and whether it is held by an individual or entity. RFIs are required to classify accounts into lower value (aggregate balance below $1 billion) or high value (aggregate balance above $1 billion).

Maintenance of Records

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

Compliance Procedures

To ensure CRS compliance, RFIs should:

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

CRS Compliance Obligations for Account Holders

Account holders are required to furnish RFIs with self-certification to establish tax residency where due diligence procedures dictate. Account holders must also be aware of their most recent residential address, as this will be used to determine whether an account is reportable.

Compliance Steps for Account Holders

To maintain CRS compliance, account holders should:

  • Provide accurate information when opening a new account or updating account information
  • Consent to financial institution sharing of financial information with the KRA and other countries where they hold assets
  • Update account information, including name, address, and TIN changes
  • Report all income earned on financial assets to the KRA
  • Seek professional advice if unsure about CRS compliance

Conclusion

The CRS is a global tax reporting system designed to promote transparency and prevent tax evasion. In Kenya, compliance with CRS Regulations is mandatory for RFIs and account holders. RFIs and account holders must be aware of the additional regular compliance procedures and due diligence requirements set out in the CRS Regulations to avoid penalties and fines. By implementing compliance procedures and following the above steps, RFIs and account holders can contribute to the global fight against tax evasion.