Profits, taxes and income of foreign companies on the radar of the KRA

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Profits, taxes and income of foreign companies on the radar of the KRA


Times Tower in Nairobi, headquarters of the Kenya Revenue Authority. PICTURES | DENNIS ONSONGO | NMG

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Summary

  • Multinationals like Google, Facebook, Amazon, Netflix and PayPal will be forced to share data on revenues, profits and taxes in Kenya and other countries with the tax authorities if MPs approve proposed changes to the law.
  • Multinationals are required to provide a breakdown of revenues, profits, taxes and other indicators of economic activities for each tax jurisdiction they operate under the treaty.
  • The reporting rules apply to multinationals whose consolidated annual group turnover was €750 million (approximately 95 billion shillings) or more in the previous financial year.

Multinationals like Google, Facebook, Amazon, Netflix and PayPal will be forced to share data on revenues, profits and taxes in Kenya and other countries with the tax authorities if MPs approve proposed changes to the law.

Treasury Cabinet Secretary Ukur Yatani on Thursday proposed amendments to the Income Tax Act to enable the Kenya Revenue Authority (KRA) to assess the global financial transactions of multinational corporations that operate in Kenya .

The move aims to help the KRA carry out audits on the books of multinationals in a bid to identify revenue generated in Kenya but reported in other jurisdictions – a practice technically known as transfer pricing.

Tax transparency

“In order to promote greater tax transparency among multinational companies, I propose to amend the Income Tax Act to require multinational companies that do business in Kenya to declare their activities in Kenya and other jurisdictions to the Commissioner General of the Kenya Revenue Authority,” Mr. Yatani said.

The proposed amendments are in line with the requirements of the Global Forum on Transparency and Exchange of Information in Tax Matters of which Kenya is a part after ratifying the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC).

The convention, backed by the Organization for Economic Co-operation and Development (OECD), obliges Nairobi to share tax data with more than 140 jurisdictions.

Multinationals are required to provide a breakdown of revenues, profits, taxes and other indicators of economic activities for each tax jurisdiction they operate under the treaty.

The reporting rules apply to multinationals whose consolidated annual group turnover was €750 million (approximately 95 billion shillings) or more in the previous financial year.

The tax authorities have long believed that Kenya loses hundreds of billions of shillings to global companies that under-report sales made in Kenya, resulting in lower tax payments.

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Laura J. Boyer