Big Brother At The Bank: Kenya Steps Up On Tax Transparency With New Bank Reporting Rules

By Steve Biko Wafula / Published February 10, 2024 | 11:08 am

To boost tax transparency and fight tax evasion, Kenya’s financial sector has started implementing a groundbreaking measure that grants tax authorities access to bank account details.

This initiative aligns with the globally recognized Common Reporting Standard (CRS), adopted under the 2023 Tax Procedures Act, marking a bold step in the country’s efforts to ensure financial honesty and curb illicit financial flows.

Kenyans have begun receiving notifications from their banks, informing them about this shift and the need for compliance. These communications detail the requirements set by the CRS, which mandates financial institutions to collect and report data on their customers’ tax residencies. This could mean that some customers will be asked to provide additional information to affirm their tax status.

Introduced as part of the Finance Act 2021, with the inclusion of Section 6B in the Tax Procedures Act, the CRS initiative draws inspiration from international practices like the U.S. Foreign Account Tax Compliance Act (FATCA). This law compels global financial entities to disclose financial activities of U.S. taxpayers to the Internal Revenue Service (IRS), reflecting a growing global commitment to financial transparency.

To manage this process, accounts will be distinguished as either low or high-value, based on their balance. Accounts with balances up to Ksh160 million are considered low-value and will require basic details like residency, contact information, and beneficiaries. In contrast, high-value accounts, exceeding this limit, will undergo a more thorough review, including examinations of electronic records and historical documentation spanning the past five years.

This policy not only targets tax evasion but also aims to seal loopholes that facilitate money laundering, thereby enhancing Kenya’s revenue collection capabilities. It’s a pivotal moment for the nation, signaling a new era of financial responsibility and integrity.

About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

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