Tax Transparency: Govt Mandates Banks to Disclose Account Details
Financial institutions have introduced fresh regulations enabling tax authorities to obtain access to bank account information, aiming to boost transparency and strengthen initiatives to combat tax evasion.
This aligns with the regulations of the Common Reporting Standard (CRS) as established by the Tax Procedures Act of 2023. These rules mandate financial institutions to gather and disclose information about the account details of their customers.
Numerous individuals from Kenya confirmed that they had received an email from the bank, informing them about the recent modifications and urging them to adhere to the given instructions.
“Under the CRS, tax authorities require financial institutions to collect and report information relating to their customers’ tax statuses.
“(Name of bank withheld) is therefore required by law to review all our customers and establish their tax residency through customer information provided or self-declaration,” read part of the message.
“We may therefore reach out to you for any additional information as required by law where the information currently provided is not sufficient to establish your tax residency.”
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The Common Reporting Standard (CRS) was created under the Finance Act of 2021, which introduced Section 6B into the Tax Procedures Act (TPA).
The rule resembles the Foreign Account Tax Compliance Act (FATCA) in the United States, which mandates that foreign financial institutions and other non-financial entities disclose financial details of American account holders to the Internal Revenue Service (IRS).
The individual accounts will be divided into two groups: low-value and high-value accounts. Low-value accounts are those with a balance not surpassing Ksh160 million (equivalent to 1 million US dollars), whereas high-value accounts exceed this specified threshold.
Banks must furnish specific information for account holders with low-value accounts, including details such as residency status, address, phone numbers, email addresses, and beneficiaries.
Conversely, advanced methods are employed for account holders with substantial value, which involve examining electronically searchable databases, reviewing the master file, and assessing documentation submitted over the last five years.
The objective of this action is to address loopholes related to money laundering and enhance the collection of revenue nationwide.
Tax Transparency: Govt Mandates Banks to Disclose Account Details