advertisement
Market News

Fresh tax amnesty rules hand fat cats window to bring back offshore wealth

Kenya Revenue Authority headquarters at the Times Tower building in Nairobi. FILE PHOTO | NMG
Kenya Revenue Authority headquarters at the Times Tower building in Nairobi. FILE PHOTO | NMG 

Kenya Revenue Authority has opened a new window for corrupt fat cats who have hidden their wealth abroad to safely bring back home such assets under fresh tax amnesty guidelines.

The taxman on Wednesday published the long-awaited rules on a tax pardon targeted at foreign earned income up to the period ended December 2016.

The rules compel the KRA not to follow up on the source of the income declared, opening a pathway for corrupt individuals who have stashed cash abroad to repatriate such assets to Kenya.

“A person who makes a claim under the amnesty shall not be required to provide any further details or supporting documentation,” reads the rules signed by Benson Korongo, commissioner in charge of domestic taxes.

The returns for such income must be filed by December 31, 2017, according to the new guidelines.

advertisement

Tax experts reckon that the KRA’s ‘don’t ask, don’t tell’ policy comes as a reprieve to wealthy Kenyans said to have hidden questionable amounts of cash overseas, as revealed in the Kroll Report and CMC Motors slush fund scandal.

“It could therefore be interpreted that those publicised in the external reports will not be disqualified from the amnesty,” said Parag Shah, a tax partner at Grant Thornton.

Treasury secretary Henry Rotich in the Finance Act 2016 provided for the tax pardon as an incentive to woo those with undeclared assets overseas to return them home.

The government is eyeing the more than £1 billion (Sh124 billion) looted from Kenyan taxpayers during President Daniel arap Moi’s reign and stashed in offshore bank accounts and prime real estate overseas, according to a forensic study by Kroll Associates.

But those holding non-cash assets in the form of real estate, stocks, plant and machinery, will have a tough time complying as the amnesty rules require physical return of the belongings.

“Physical repatriation of the assets is a requirement under the amnesty,” says rules dubbed ‘Foreign Income and Assets Tax Amnesty Guidelines 2017.’

Daniel Ngumy, tax partner at Anjarwalla & Khanna Advocates, argues that handling of this class of property remains a grey area, and owners may need more time to dispose of their assets.

“There is a lack of clarity in the guidelines how this will actually work particularly in respect of real estate assets and indeed any liabilities which affect these assets like a mortgage over an overseas property. Other countries which have required repatriation as part of an amnesty have given periods of two to three years allow repatriation,” Mr Ngumy told the Business Daily.

“There is no time limit the new guidelines…further clarity will definitely be required on this issue in the coming days.”

The taxman also said the pardon would not be offered to anyone who is under investigation for tax-related crimes.

Mr Shah projects a poor uptake of the tax amnesty on foreign income, given that defaulting landlords who were handed a similar pardon last year and applied for reprieve are yet to get feedback on their requests.

“There would therefore be skepticism by potential persons who wish to apply for an amnesty as to what would be the qualifying criteria, and shall the approval be initiated by a subjective decision,” he said.

advertisement