Kenya: Voluntary disclosure by taxpayers, under tax amnesty program

Kenya: Voluntary disclosure by taxpayers

Kenya recently introduced a tax amnesty program through an amendment to the Tax Procedures Act. The tax amnesty program bars the tax authority from levying taxes, penalties, and interest on foreign income earned prior to 31 December 2016, if such income is voluntarily declared under the amnesty.

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To qualify for the amnesty, taxpayers will be required to repatriate their foreign held assets. The aim of the amnesty program is to have all foreign earned income declared in Kenya. A challenge to this goal is that Kenya operates through a source-based tax regime. Therefore, not all foreign earned income is taxable in Kenya. Furthermore, with Kenya not having foreign exchange controls in place, the forced repatriation of funds may be a moot point, since an investor could easily repatriate cash today as required to comply with the amnesty requirements and tomorrow, re-invest the same cash abroad.

While the amnesty provisions do not absolve taxpayers of any criminal liability, tax authority (Kenya Revenue Authority—KRA) has reiterated that the information declared under the amnesty will be maintained in confidence and will not be disclosed to other government agencies. That way, KRA “guarantees” that there will be no criminal prosecution in respect of the previously undeclared foreign income now declared. It remains to be seen how this will apply in practice.

Kenyan residents with foreign income that is taxable in Kenya may want to consider taking steps to regularize their tax affairs in Kenya under the tax amnesty on, or before 30 June 2018. For others who have foreign held assets but the income is not taxable in Kenya, they may have to wait for the next amnesty guidelines in order to assess how best to proceed.

 

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