KRA tightens noose on multinationals in fresh bid to fight tax evasion
Kenya Revenue Authority (KRA) is seeking to tighten the noose on tax evasion among multinationals in a new amendment in the Finance Bill 2022. The Bill if approved will see the tax man access not only local dealings but also full disclosure of international transactions by foreign companies with local operations.
If passed, multinationals will be required to provide significantly more detailed reports to the Commissioner. These reports will include details of all the group’s entities and their respective activities.
“An ultimate parent entity or a constituent entity of a multinational of a multinational group with a turnover of Sh95 billion that is resident in Kenya shall file a country by country report with the Commissioner of its financial activities in Kenya and for all other jurisdictions where the company has taxable presence,” reads the Finance Bill.
The move could see companies give up critical market information such as revenues per country which could expose some of the companies which understate profits in Kenya. Entities will also be required to submit a master file that contains the group’s overview, growth engines, supply chain description of all key products, the group’s research and development policy, and each constituent’s contribution to the value chain.
Also on the list is information on intangible assets and the group’s intercompany agreements on the same, information on the transfers of intangible assets within the group, the group’s financing activities, the group’s consolidated financial statements, tax rulings made in respect of the group and any other information required by the Commissioner.
“A person who fails to comply with the provisions commits an offence and shall be subject to the penalties prescribed under Tax procedures Act 2015,” the Bill reads in part. Currently, only ultimate parent entities resident in Kenya are subject to the country-by-country reporting requirements. There have been concerns that the government is losing billions of revenue in unpaid taxes due to profit shifting to tax havens.
The Bill also proposes the submission of a local file that contains detailed information on the resident entity’s activities in the group, management structure and business strategies.
