We are halfway into a one-year voluntary unclaimed financial assets disclosure programme.
With only a few months to go, it is time to take stock.
The Unclaimed Financial Assets Act of 2011 (Act) provides for the reporting and dealing with unclaimed financial assets. This Act establishes the Unclaimed Financial Assets Authority.
Unclaimed assets are assets which have been presumed abandoned and transferred to the Authority and declared as such by any other law.
Unclaimed financial assets include cheques, money orders, deposits, dividends, unpaid wages, shares and interest unclaimed over a period of one to five years as specified under the Act.
A holder has an obligation to report, pay, and deliver any unclaimed financial assets by November 1 each year for the period of 12 months preceding 30 June.
A holder who fails to pay or deliver unclaimed assets within the time prescribed by the Act is liable to penalties which include one percent interest, above the adjusted prime rate per annum, per month and a penalty equal to 25 percent of the value of the assets that should have been paid or delivered.
The Finance Act of 2022 introduced a waiver of penalties under the Voluntary Unclaimed Financial Assets Disclosure Programme.
The Authority can now waive penalties with the approval of the Cabinet Secretary.
The waiver is available for 12 months from 1 July 2022 and only applies to assets held up to 30 June 2022.
It would be in the best interest of the holders to take part in this Voluntary Unclaimed Financial Assets Disclosure Programme as it provides them with an opportunity to achieve compliance with their legal obligation to report unclaimed financial assets and in turn, they avoid incurring the penalties and fines that might apply in an audit.
Reporting unclaimed financial assets to the Authority can help taxpayers legally clean up their books by getting rid of unclaimed assets in their accounts after reporting and delivering them to the Authority.
Costs incurred in conducting a self-assessment on reportable unclaimed financial assets are deductible for tax purposes, however, fines and penalties incurred after failing to report unclaimed assets are not tax-deductible expenses.
In short, the fines and penalties cannot be deemed to have been incurred in generating income, therefore, will not be allowed as expenses when computing the tax liability for the taxpayer.
It is, therefore, important for taxpayers to take advantage of the Programme.
Taxpayers can also explore putting more effort towards tracing the owners of the unclaimed financial assets within the time provided under the Act.
Surrendering the assets to the owners especially is a welcome gift.
Finally, everyone can reach out to the Authority to find out if they are holding their assets.
This can be done by going into the Authority’s online database or visiting its offices in person.
Kanyi (Partner) and Kamau (Candidate Attorney), Dekker incorporating Kieti Law LLP.