In an era where banking secrecy is ending and where there is greater international exchange of information and transparency in tax matters between countries, it has become increasingly difficult for businesses and individuals to avoid paying taxes. Considering same, the Government of Kenya declared a Tax Amnesty program for repatriation of assets and income owned by Kenya residents abroad in the Finance Act (2016). The Tax Amnesty is offered to individuals, Corporates and Trusts who are Kenyan residents for taxation purposes.
What is a Tax Amnesty?
Tax Amnesty programs are limited duration programs where a country provides taxpayers with an opportunity to come clean and pay back taxes with interest and/or penalties reduced or waived. These benefits are available for individuals, businesses or both depending on the particular program. Amnesty programs are usually of benefit to both parties; they provide the taxpayer with a way to reduce their exposure to unpaid taxes and the taxing authority generates revenue it might not otherwise collect. For Kenya, Kenyan tax residents are offered amnesty to declare their assets and income held abroad and to encourage this repatriation to Kenya for the development of the country.
The amnesty took effect on 01st January 2017 and ran up to 30 June 2018. However, in the recent budget of 2018, the amnesty declaration has been extended till 30 June 2019.
Benefits of Tax Amnesty
The persons who qualify for the Tax Amnesty will be able to enjoy the following benefits:
- Non-payment of any tax, penalties and interest on the foreign assets/income by tax payer for the period covered by the Tax Amnesty;
- No queries from the Kenya Revenue Authority regarding the sources of funds/income in connection to the foreign assets and funds abroad.
- Confidentiality on information of the taxpayers and non-provision of the information to any other government body;
- Money returned in the home country can be used for additional investment for a better return; and
- An opportunity to clean up past tax records and begin on a new tax compliant path in the books of the Tax Administration and the Government.
It is also viewed that the tax amnesty will enhance tax enforcement by encouraging taxpayers to become compliant with obligations in their home jurisdiction.
Therefore, Tax Amnesty is being considered as a win-win situation for the taxpayers and the government.
A challenge to this goal is that Kenya operates through a source-based taxation regime. Therefore, not all foreign earned income is taxable in Kenya. Some Kenyan residents are asking themselves questions as to why should they take amnesty when all their investments abroad are from legitimate sources.
There are mixed feelings amongst Kenyan residents about the amnesty. However, most of the banks in Kenya are experiencing unprecedented influx of foreign currency.