NAIROBI, JUNE 5 — The Kenyan government has been urged to extend the foreign income tax amnesty period by another three to six months to give an opportunity to those who are willing to take advantage of the amnesty to do so.
Audit firm-PKF says a lot of Kenyans will be locked out as the June 30 deadline approaches.
National Treasury Cabinet Secretary Henry Rotich had given Kenyans with wealth abroad up to December 31, 2017 to file their returns for the year ended December 31, 2016.
The period was later extended to June 30(this month) allowing Kenyans in the diaspora and those with investments abroad to declare what they have to avoid penalties.
With the reading of the country’s 2018/19 financial year budget set for next week (June 14), experts have proposed for additional time to bring more Kenyans to the tax bracket under the initiative.
“The tax amnesty introduced in 2016 on foreign held income and assets did not gain significant traction until recently as it was not well publicised and much needed clarifications were only issued in late 2017,” PKF’s tax partner Michael Mburugu said.
He was speaking on Monday during the firm’s Pre-budget briefing event in Nairobi.
He said Kenyans living abroad were not well informed on the details of the amnesty, as the government failed to conduct awareness programmes such as road shows.
“There was little information out there on how repatriation was to be done,” Mburugu said.
The government is targeting about $3 billion (Ksh304.1 billion) to be brought in by the amnesty, a figure that PKF says could tripple.
“Alot of people are filling. Alot is being repatriated,” Mburugu noted.
Under the initiative, the National Treasury is also targeting prime real estate investments abroad and funds looted in Kenya and stashed in offshore bank accounts.
A person is considered to be tax resident in Kenya if they: (i) have a permanent home in Kenya and were present in Kenya for any period in a particular year of income under consideration, or do not have a permanent home in Kenya but were: (i) present in Kenya for 183 days or more in that year of income, or present in Kenya in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each year of income.
According to the taxman, assets or property acquired, situated and held abroad by Kenyan citizens should also be declared if proceeds derived from those assets are intended to be repatriated and invested in Kenya.
Beneficiaries of the amnesty will pay a 10 per cent penalty on returning funds after declaring the assets to KRA.
The taxman imposes a 20 per cent penalty on the tax payable for any undeclared funds being repatriated on top of the tax payable.
The authority 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.
As of 2007, an estimated$1.22 billion (Ksh124 billion) was estimated to have been stashed abroad by Kenyans, mainly looted from taxpayers in the country.
Meanwhile, PKF has also urged Treasury to give a domestic amnesty to widen its tax bracket, a move that will help address the revenue shortfalls at Times Tower.
The firm is also rooting for the inclusion of the informal sector which contributes up to 34 per cent of the country’s economy into the tax band.
Kenya Revenue Authority is expected to collect $16.6 billion (Ksh1.684 trillion) in the next financial year beginning July 1, up from $14.7 billion (Ksh1.486 trillion) in the current financial year ending June 30 to fund part of the budget, with the rest coming from borrowing.