Treasury To Set Rules On Taxing Financial Derivatives

 

By Kepha Muiruri

The National Treasury is expected to develop Financial Derivatives regulations ahead of a deadline that will see non-residents gains from financial derivatives taxed.

The gains are to be subjected to withholding tax at 15 per cent from January 1, 2023, following amendments made through the 2022 Finance Act.

Subsequently, the Kenya Revenue Authority (KRA), on behalf of the exchequer has invited business organisations and members of the public to submit their views for consideration in the development of the regulations by September 16.

The drafting of the new regulations is expected to clear up grey areas regarding benefits accruing from the taxation of gains made by non-residents on income from financial derivatives made in Kenya.

“The charge to tax gains derived by non-resident persons from financial derivatives could be one day of promoting equity because such gains are not taxed on resident persons. We anticipate that the regulations will provide more clarity on this grey area,” analysts at KPMG had stated.

The provision is meanwhile set to widen the tax base by taxing gains accrued by non-resident persons while still maintaining the competitiveness of financial derivatives traded at the Nairobi Securities Exchange (NSE).

A financial derivative is described as a financial instrument or asset whose value is pegged on another such as stock futures, puts and calls.