On 15 July 2014 the OECD council approved CRS based on automatic exchange. The CRS outlined the reporting requirements for automatic exchange of information and guidelines on the due diligence procedures in relation to reportable accounts.
Kenya has recently attained key milestones in relation to its efforts to join the global move towards enhancing tax transparency. Through the Finance Act 2021, the Tax Procedures Act 2015 was amended to introduce the CRS regime in Kenya with effect from 1 July 2021. The regime brought into effect the automatic exchange of financial information for tax purposes. Under the provisions, the reporting is to be done by all financial institutions resident in Kenya including branches of non-resident financial institutions operating in Kenya but excluding foreign branches of Kenyan financial institutions. The reporting shall be done by way of filing of returns with the Commissioner Kenya Revenue Authority (KRA). The Cabinet Secretary is yet to publish the regulations envisaged under the CRS provisions. Per the regulations issued by the South African and Nigerian revenue authorities in 2020 and 2019 respectively, some of the information to be reported under their CRS regimes include the name, address , account number, tax identification number and account balance as at a given reporting period. In relation to custodial accounts the gross interest, dividend or any other income generated in respect of the assets held in the account should be reported when paid or credited to or in relation to the account.
Further, the OECD’s update to the list of signatories to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (the Agreement) dated 6 July 2021 indicates that Kenya has signed the agreement with an intended first information exchange date of September 2022. The multilateral agreement provides for a standardized and efficient mechanism to facilitate the automatic exchange of information between its signatories at the competent authority level. In the case of Kenya, the competent authority is the KRA. The Agreement is anchored on the Convention on Mutual Administrative Assistance in Tax Matters (the Convention) and outlines the financial information to be exchanged and when, the institutions required to report, the various reportable accounts and taxpayers covered and the due diligence procedures to be followed.
Earlier, in 8 February 2016, Kenya signed the Convention with the deposit of instruments of ratification having taken place on 22 July 2020. Under Article 1, the convention provides that the administrative assistance that parties are required to provide to each other comprise of exchange of information including participating in tax examinations abroad, assistance in recovery including measures of conservancy and service of documents.