The Kenya Revenue Authority (KRA) has announced a three-month extension for the deadline for Reporting Financial Institutions (RFIs) to file their Common Reporting Standard (CRS) and Automatic Exchange of Information (AEOI) returns.
Initially set for 31 May, the new deadline is now August 31, 2024. This extension is expected to offer financial institutions additional time to adjust their systems and operations to comply with the reporting requirements.
In a notice published on Mygov on Tuesday, the KRA emphasised the importance of this extension for RFIs, which include banks, investment entities, custodial institutions, and specified insurance companies. The CRS framework mandates that these institutions report certain financial information to the KRA, which then exchanges it with tax authorities in other jurisdictions to combat tax evasion and improve global tax compliance.
Custodial institutions, defined as entities holding financial assets for the account of others as a significant part of their business, are among those affected. Depository institutions, which accept deposits in the ordinary course of banking or similar business, are also required to comply.
The definition extends to investment entities engaged primarily in trading money market instruments, portfolio management, or managing financial assets on behalf of customers. Specified insurance companies, obligated to make payments with respect to cash value insurance contracts or annuity contracts, fall under the CRS regulations as well.
The KRA’s notice highlighted the legal framework underpinning this requirement. "Pursuant to Section 6B of the Tax Procedures Act and the Tax Procedures (Common Reporting Standards) Regulations, 2023, all Reporting Financial Institutions (RFIs) were required to file CRS/AEOI returns with KRA through the Exchange of Information System (EOIS) by May 31, 2024," the statement read.
The extension aims to ensure business continuity and provide RFIs with adequate time to align their internal systems and business processes with the CRS requirements. "To facilitate business continuity and allow for sufficient time for RFIs to make adjustments in their systems and business operations, KRA wishes to notify RFIs of the extension of the filing deadline to 31 August, 2024. Prior to this date, the Commissioner shall not impose penalties for failure to file the CRS/AEOI returns on the RFIs," the KRA elaborated.
Under the new regulations, RFIs must identify reportable accounts and submit the following information to the KRA:
- An information return on reportable accounts held, managed, or administered by the institution. A reportable account includes any financial account maintained by the institution, covering both pre-existing and new accounts.
- A "nil" return if no reportable accounts are identified by the institution.
The regulations categorise pre-existing individual accounts as either lower or high value. Lower-value accounts are those with an aggregate value not exceeding USD 1,000,000 (approximately Ksh132.5 million) as of December 31 each year, while high-value accounts exceed this threshold. RFIs are required to apply due diligence procedures based on the classification of these accounts.
For new accounts, opened on or after 1 January 2023, and pre-existing accounts, maintained as of 31 December 2022, the due diligence requirements differ. However, RFIs have the option to apply the due diligence procedures for new accounts to all pre-existing accounts, and similarly, the procedures for high-value accounts can be applied to low-value accounts.
The KRA reassured stakeholders of its commitment to support RFIs in meeting these obligations. "KRA is committed to continuing supporting and facilitating all RFIs to comply with the requirements of the law by conducting comprehensive stakeholder engagements, awareness campaigns, and sensitisation for the various categories of RFIs," the notice concluded.
This extension comes as a relief to many in the financial sector, providing them with the necessary leeway to ensure full compliance without the immediate threat of penalties.
