The Kenya Revenue Authority (KRA) has announced a three-month extension for Reporting Financial Institutions (RFIs) to file their Common Reporting Standard (CRS) and Automatic Exchange of Information (AEOI) returns. Originally set for May 31, 2024, the new deadline is now August 31, 2024. This extension aims to give financial institutions additional time to adjust their systems and operations to comply with the reporting requirements.
The KRA emphasized the significance of this extension for RFIs, which include banks, investment entities, custodial institutions, and specified insurance companies. Under the CRS framework, these institutions must report specific financial information to the KRA, which then shares it with tax authorities in other jurisdictions. This process is crucial for combating tax evasion and enhancing global tax compliance.
The requirement for RFIs to file CRS/AEOI returns is mandated under Section 6B of the Tax Procedures Act and the Tax Procedures (Common Reporting Standards) Regulations, 2023. Initially, RFIs were expected to file their returns by May 31, 2024, via the Exchange of Information System (EOIS). However, to facilitate business continuity and allow RFIs sufficient time to align their systems and operations with CRS requirements, the KRA has extended the deadline to August 31, 2024. Penalties for failing to file by the initial deadline will not be imposed within this extended period.
RFIs must identify reportable accounts and submit the following information to the KRA:
Pre-existing individual accounts are categorized as either lower or high value. Lower-value accounts have 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 January 1, 2023, and pre-existing accounts maintained as of December 31, 2022, the due diligence requirements differ. However, RFIs can choose to apply the due diligence procedures for new accounts to all pre-existing accounts, and the procedures for high-value accounts to low-value accounts as well.
The KRA has reassured stakeholders of its commitment to support RFIs in meeting these obligations. The authority will continue conducting comprehensive stakeholder engagements, awareness campaigns, and sensitization activities for various categories of RFIs. This extension is seen as a relief to many in the financial sector, providing the necessary leeway to ensure full compliance without the immediate threat of penalties.
The three-month extension for filing CRS and AEOI returns reflects the KRA’s understanding of the complexities involved in compliance and its commitment to supporting financial institutions in aligning with global standards. RFIs should use this additional time to fine-tune their systems and processes to ensure full compliance by the new deadline of August 31, 2024.
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