Rotich extends relief for cash kept abroad

Treasury secretary Henry Rotich. file photo | nmg 

By MUGAMBI MUTEGI

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Summary

• Kenyans were by 2007 estimated to have stashed more than Sh124 billion mainly looted from taxpayers abroad, meaning the amnesty could net up to Sh10 billion if successfully done.
• The Kenya Revenue Authority (KRA) imposes a 20 per cent penalty on the tax payable for any undeclared funds being repatriated on top of the tax payable.
• The taxman can also impose a 75 per cent penalty where it finds that the money was intentionally kept abroad for purposes of avoiding taxes.

Treasury secretary Henry Rotich has added Kenyans with wealth abroad five more years to repatriate it – in a move that will keep the amnesty window partially open beyond the June 2018 deadline.

Beneficiaries of the extended period will pay a 10 per cent penalty on returning funds after declaring the assets to the taxman, according to the Finance Act 2017.

“Where no funds have been transferred within the period of the amnesty, there shall be a five-year period for remittance but a penalty of 10 per cent shall be levied on the remittance,” Mr Rotich says in the Finance Act.

Kenyans were by 2007 estimated to have stashed more than Sh124 billion mainly looted from taxpayers abroad, meaning the amnesty could net up to Sh10 billion if successfully done.

The Kenya Revenue Authority (KRA) imposes a 20 per cent penalty on the tax payable for any undeclared funds being repatriated on top of the tax payable.

The taxman can also impose a 75 per cent penalty where it finds that the money was intentionally kept abroad for purposes of avoiding taxes.

A stiffer penalty of two times the tax due can also be imposed where KRA officers demonstrate that a taxpayer failed to declare income with the help of a tax evasion scheme. Mr Rotich first announced the tax amnesty offer in his June 2016 Budget speech.

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The Finance Act at the time offered the amnesty for income earned up to December 31, 2016, but declared and remitted by the end of this year.

Mr Rotich extended the deadline by a further six months to June 30, 2018 when he presented this year’s budget to Parliament.

Subsequent adjustments to the Finance Bill have now introduced the additional five- year window.

Tax experts have, however, sought clarity on several sections of the law on how the amnesty will work.

One vague mandatory requirement for the amnesty is the full and accurate disclosure of income and assets, a provision that is seen to imply that the amnesty is not automatic but is at the discretion of the KRA.

Besides, income earned outside Kenya is not taxable under the country’s laws except where it relates to business income – partly earned in the country and outside the country, or where it relates to employment income. Audit firm PricewaterhouseCoopers (PwC), in their latest advisory note to clients, raises questions about the operationalisation of the new five-year window after the amnesty expires.

“It is unclear from which date the five-year period would begin, especially since the period within which the KRA can assess a taxpayer generally KRA can assess a taxpayer generally prescribes after five years,” PwC said in its alert.

The taxman is also expected to provide further clarification on the treatment of immovable assets like real estate, plant and machinery. KRA is expected to state whether one would be forced to sell such an asset and repatriate the proceeds in order to enjoy the amnesty.