Head of Nairobi Office
Nine months have passed since the Budget Statement in June last year when the Kenya Tax Amnesty (the “Amnesty”) announcement took the business community by surprise.
The eagerly awaited Guidelines were finally published by the Kenya Revenue Authority (“KRA”) on 8 March as the “Tax Amnesty Guidelines issued under section 37B of the Tax Procedures Act”, and a copy of these can be downloaded from the KRA website, or accessed here.
Since the Budget Statement, our sense has been that the majority view amongst Kenyan professionals was that the Amnesty provided a meaningful opportunity, as it would limit the extent to which historic information would be relevant going forward and enable areas of uncertainty to be clarified.
Although this remains true, the Guidelines contained a surprise in that clause 13 includes the provision that: “Physical repatriation of the Assets is a requirement under the Amnesty”. This was unexpected; MTC Trust in Nairobi (part of the Minerva Group) played a part in influencing thinking on certain practical aspects of the Amnesty process having been a member of a professional panel advising on the subject. Hence it was a surprise to the panel that this provision emerged as it was not included within the Finance Act, 2016 as gazetted in September. The provision also raises a number of practical implementation issues.
On 14 March, the KRA held a briefing on the Amnesty giving interested parties, including MTC, an opportunity to raise practical concerns around the Amnesty Guidelines and repatriation condition, such as how can repatriation be enforced when Kenya does not have any exchange control restrictions? How can physical assets such as commercial property be repatriated?
The KRA appeared to accept there were aspects of the blanket repatriation of assets that were impractical, and indicated they would engage with stakeholders with a view to revising the Guidelines to the extent possible.
Commenting on the publication of the Guidelines, and having attended the KRA briefing, M Soundararajan, managing director of MTC Trust said: “It is surprising the KRA is now insisting on the physical repatriation of assets, as this might jeopardise the success of what is otherwise a laudable initiative on the part of the government. It is understandable the KRA wants to see the Amnesty practically benefit the Kenya economy however this could have been achieved in other ways. Nevertheless, we look forward to engaging with the KRA to help determine how the Amnesty can work successfully”
The consensus view is that some form of the repatriation condition is likely to remain a requirement. We await with interest the KRA’s actions following consultation and in due course their more detailed guidance on what repatriation should be taken as meaning.
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