UPDATE ON THE TAX AMNESTY ON FOREIGN SOURCED INCOME
In a move to provide clarity and encourage more taxpayers to take up the tax amnesty introduced through section 37B of the Tax Procedures Act (which came into force on 1 January 2017), the government, has through the Finance Act 2017 which was assented into law on 21 June 2017 (the Finance Act), amended section 37B of the Tax Procedures Act in order to:
- extend the deadline for submission of returns and accounts relating to the declared income from 31 December 2017 to 30 June 2018; and
- introduce a requirement for repatriation of the declared income back to Kenya within the period of the amnesty (before 30 June 2018) in order to qualify for the tax amnesty.
If taxpayers repatriate the declared income back to Kenya after 30 June 2018 but before 30 June 2023, they will still be entitled to benefit from the amnesty but be subject to a penalty of 10% on the repatriation of the declared income.While the amendment is not clear, we assume that this means that the penalty is 10% of the amount remitted rather than 10% of the tax that would have been paid on such income.
Interestingly, the penalty would be 10% whether the amount is remitted in 2018 or just before the expiry of the amnesty period.
It is not clear what the definition of ‘funds' is, and whether the repatriation will apply to non-cash investments as well.
Whilst this is a step in the right direction, the government is yet to address various additional issues raised by stakeholders including clarifications on the income subject to the tax amnesty and the procedure for applying for the tax amnesty (including uploading the various returns for declaration of the income on iTax). In this regard, we await further guidelines from the KRA.
Please click here to access our initial analysis of the various issues arising from the tax amnesty.
We shall keep you updated on further developments with respect to the tax amnesty.
For further assistance please contact Paras Shah, Partner and Head of M&A and Projects, Alex Mathini, Partner Corporate Commercial and Head of Tax, or your relationship partner at Bowmans Kenya.