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LAWS OF KENYA
TAX PROCEDURES ACT
THE TAX PROCEDURES (COMMON REPORTING STANDARDS) REGULATIONS
LEGAL NOTICE 8 OF 2023
- Published in Kenya Gazette Vol. CXXV—No. 36 on 17 February 2023
- Commenced on 1 January 2023
- [Amended by Tax Procedures (Common Reporting Standards) (Amendment) Regulations, 2023 (Legal Notice 74 of 2023) on 13 June 2023]
Part I – PRELIMINARY
1. Citation and commencement
These Regulations may be cited as the Tax Procedures (Common Reporting Standards) Regulations, 2023, and shall be deemed to have come into operation on the 1st of January, 2023.2. Interpretation
In these Regulations, unless the context otherwise requires—"Account Holder" means the person listed or identified as the holder of a Financial Account by the Financial Institution that maintains the account:Provided that—(a)a person, other than a Financial Institution, holding a Financial Account for the benefit or account of another person as agent, custodian, nominee, signatory, investment advisor, or intermediary, is not treated as holding the account for purposes of these Regulations, and such other person is treated as holding the account;(b)in the case of a Cash Value Insurance Contract or an Annuity Contract, the Account Holder is any person entitled to access the Cash Value or change the beneficiary of the contract;(c)if no person can access the Cash Value or change the beneficiary, the Account Holder is any person named as the owner in the contract and any person with a vested entitlement to payment under the terms of the contract; and(d)upon the maturity of a Cash Value Insurance Contract or an Annuity Contract, each person entitled to receive a payment under the contract is treated as an Account Holder;"Active NFE" means any NFE that meets any of the following criteria—(a)less than 50% of the NFE's gross income for the preceding calendar year or other appropriate reporting period is passive income and less than 50% of the assets held by the NFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income;(b)the stock of the NFE is regularly traded on an established securities market or the NFE is a Related Entity of an Entity the stock of which is regularly traded on an established securities market;(c)the NFE is a Governmental Entity, an International Organisation, a Central Bank, or an Entity wholly owned by one or more of the foregoing;(d)substantially all of the activities of the NFE consist of holding (in whole or in part) the outstanding stock of, or providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a Financial Institution, except that an Entity does not qualify for this status if the Entity functions (or holds itself out) as an investment fund, such as a private equity fund, venture capital fund, leveraged buyout fund, or any investment vehicle whose purpose is to acquire or fund companies and then hold interests in those companies as capital assets for investment purposes;(e)the NFE is not yet operating a business and has no prior operating history, but is investing capital into assets with the intent to operate a business other than that of a Financial Institution:Provided that the NFE does not qualify for this exception after the date that is 24 months after the date of the initial organisation of the NFE;(f)the NFE was not a Financial Institution in the past five years, and is in the process of liquidating its assets or is reorganising with the intent to continue or recommence operations in a business other than that of a Financial Institution; and(g)the NFE primarily engages in financing and hedging transactions with, or for, Related Entities that are not Financial Institutions, and does not provide financing or hedging services to any Entity that is not a Related Entity:Provided that the group of any such Related Entities is primarily engaged in a business other than that of a Financial Institution;(h)where the NFE is established and operated in its jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes; or it is established and operated in its jurisdiction of residence and it is a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare, the NFE shall meet all the following requirements—(i)NFE is exempt from income tax in its jurisdiction of residence;(ii)NFE has no shareholders or members who have a proprietary or beneficial interest in its income or assets;(iii)the applicable laws of the NFE's jurisdiction of residence or the NFE's formation documents do not permit any income or assets of the NFE to be distributed to, or applied for the benefit of, a private person or non-charitable Entity other than pursuant to the conduct of the NFE's charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the NFE has purchased; and(iv)the applicable laws of the NFE's jurisdiction of residence or the NFE's formation documents require that, upon the NFE's liquidation or dissolution, all of its assets be distributed to a Governmental Entity or other non-profit organisation, or escheat to the government of the NFE's jurisdiction of residence or any political subdivision thereof;"Anti-Money Laundering/Know Your Customer (AML/KYC) Procedures" means the customer due diligence procedures of a Reporting Financial Institution pursuant to the anti-money laundering or similar requirements to which such Reporting Financial Institution is subject;"Annuity Contract" means a contract under which the issuer agrees to make payments for a period of time determined in whole or in part by reference to the life expectancy of one or more individuals, including a contract that is considered to be an Annuity Contract in accordance with the law, regulation, or practice of the jurisdiction in which the contract was issued, and under which the issuer agrees to make payments for a term of years;"Broad Participation Retirement Fund" means a fund established to provide retirement, disability, or death benefits, or any combination thereof, to beneficiaries who are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered:Provided that the fund—(a)does not have a single beneficiary with a right to more than 5% of the fund's assets;(b)is subject to government regulation and provides information reporting to the tax authorities; and(c)satisfies at least one of the following requirements—(i)the fund is generally exempt from tax on investment income, or taxation of such income is deferred or taxed at a reduced rate, due to its status as a retirement or pension plan;(ii)the fund receives at least 50% of its total contributions, other than transfers of assets from other plans described under the Narrow Participation Retirement Fund, Pension Fund of a Governmental Entity, International Organisation or Central Bank or from retirement and pension accounts or another Broad Participation Retirement Fund described under these Regulations from the sponsoring employers;(iii)distributions or withdrawals from the fund are allowed only upon the occurrence of specified events related to retirement, disability, or death, except rollover distributions to other retirement funds described in the Narrow Participation Retirement Fund, Pension Fund of a Governmental Entity, International Organisation or Central Bank or from retirement and pension accounts or another Broad Participation Retirement Fund or penalties that applied to distributions or withdrawals made before such specified events; or(iv)contributions (other than certain permitted make-up contributions) by employees to the fund are limited by reference to earned income of the employee or may not exceed USD 50 000 annually, applying the rules provided for under Regulations 27, 28, 29, 30 and 31 to these Regulations;"Cash Value" means the greater of—(a)the amount that the policyholder is entitled to receive upon surrender or termination of the contract (determined without reduction for any surrender charge or policy loan); and(b)the amount the policyholder can borrow under or with regard to the contract, Provided that the term "Cash Value" does not include an amount payable under an Insurance Contract—(i)solely by reason of the death of an individual insured under a life insurance contract;(ii)as a personal injury or sickness benefit or other benefit providing indemnification of an economic loss incurred upon the occurrence of the event insured against;(iii)as a refund of a previously paid premium (less cost of insurance charges whether or not actually imposed) under an Insurance Contract (other than an investment-linked life insurance or annuity contract) due to cancellation or termination of the contract, decrease in risk exposure during the effective period of the contract, or arising from the correction of a posting or similar error with regard to the premium for the contract;(iv)as a policyholder dividend (other than a termination dividend) provided that the dividend relates to an Insurance Contract under which the only benefits payable are described in subparagraph (ii); or(v)as a return of an advance premium or premium deposit for an Insurance Contract for which the premium is payable at least annually if the amount of the advance premium or premium deposit does not exceed the next annual premium that will be payable under the contract;"Cash Value Insurance Contract" means an Insurance Contract (other than an indemnity reinsurance contract between two insurance companies) that has a Cash Value;"Central Bank" means an institution that is by law or government sanction the principal authority, other than the government of the jurisdiction itself, issuing instruments intended to circulate as currency and such an institution may include an instrumentality that is separate from the government of the jurisdiction, whether or not owned in whole or in part by the jurisdiction;"Controlling Persons" means the natural persons who exercise control over an Entity:Provided that Controlling Persons shall be interpreted in a manner consistent with the Financial Action Task Force (FATF) Recommendations (as adopted in February 2012) and shall apply as follows—(a)for an Entity that is a legal person, the words "Controlling Persons" means—(i)the natural person(s) who exercises control over the Entity and "Control" over an Entity is exercised by the natural person(s) who owns more than 10%;(ii)where no natural person(s) exercises control through ownership interests, the natural person(s) who exercises control of the Entity through other means;(iii)where no natural person(s) is identified as exercising control of the Entity, the natural person(s) who holds the position of senior managing official;(b)in the case of a trust, the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust, including any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership);(c)in the case of a legal arrangement other than a trust, persons in equivalent or similar positions as those that are Controlling Persons of a trust; and(d)in relation to legal persons, those that are functionally similar to trusts, including foundations, persons identified by Reporting Financial Institutions through similar customer due diligence procedures as those required for trusts;Note: Where a Reporting Financial Institution relies on information collected and maintained pursuant to AML/KYC Procedures for purposes of determining the Controlling Persons of an Account Holder of a New Entity Account, such AML/KYC Procedures must be consistent with Recommendations 10 and 25 of the Financial Action Task Force (FATF) Recommendations (as adopted in February 2012), including always treating the settlor(s) of a trust as a Controlling Person of the trust and the founder(s) of a foundation as a Controlling Person of the foundation and for purposes of determining the Controlling Persons of an Account Holder of a Pre-existing Entity Account, a Reporting Financial Institution may rely on information collected and maintained pursuant to the Reporting Financial Institution's AML/KYC Procedures."Custodial Account" means an account (other than an Insurance Contract or Annuity Contract) which holds one or more Financial Assets for the benefit of another person;"Custodial Institution" means any Entity that holds, as a substantial portion of its business, Financial Assets for the account of others as a substantial portion of its business if the Entity's gross income attributable to the holding of Financial Assets and related financial services equals or exceeds 20% of the Entity's gross income during the shorter of—(a)the three-year period that ends on the 31st December (or the final day of a non-calendar year accounting period) prior to the year in which the determination is being made; or(b)the period during which the Entity has been in existence;"Depository Account" includes any commercial, checking, savings, time, or thrift account, or an account that is evidenced by a certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar instrument maintained by a Financial Institution in the ordinary course of a banking or similar business and includes an amount held by an insurance company pursuant to a guaranteed investment contract or similar agreement to pay or credit interest thereon;"Depository Institution" means any Entity that accepts deposits in the ordinary course of a banking or similar business;"Documentary Evidence" includes any of the following—(a)a certificate of residence issued by an authorised government body of the jurisdiction in which the payee claims to be a resident;(b)with respect to an individual, any valid identification issued by an authorised government body that includes the individual's name and is typically used for identification purposes;(c)with respect to an Entity, any official documentation issued by an authorised government body that includes the name of the Entity and either the address of its principal office in the jurisdiction in which it claims to be a resident or the jurisdiction in which the Entity was incorporated or organised; or(d)any audited financial statement, third-party credit report, bankruptcy filing, or securities regulator's report;"Entity" means a legal person or a legal arrangement, such as a corporation, partnership, trust, or foundation and an Entity is a "related Entity" of another Entity if either Entity controls the other Entity, or the two Entities are under common control and control includes direct or indirect ownership of more than 50% of the vote and value in an Entity;"Equity Interest" means—(a)in the case of a partnership that is a Financial Institution, either a capital or profits interest in the partnership; or(b)in the case of a trust that is a Financial Institution, an Equity Interest considered to be held by any person treated as a settlor or beneficiary of all or a portion of the trust, or any other natural person exercising ultimate effective control over the trust;Note: A Reportable Person will be treated as being a beneficiary of a trust if such Reportable Person has the right to receive directly or indirectly (for example, through a nominee) a mandatory distribution or may receive, directly or indirectly, a discretionary distribution from the trust. For these purposes, a beneficiary who may receive a discretionary distribution from the trust will only be treated as a beneficiary of a trust if such person receives a distribution in the calendar year or other appropriate reporting period (i.e. either the distribution has been paid or made payable). The same is applicable with respect to the treatment of a Reportable Person as a beneficiary of a legal arrangement that is equivalent or similar to a trust, or foundation."Excluded Account" means any of the following accounts—(a)a retirement or pension account that satisfies the following requirements—(i)the account is subject to regulation as a personal retirement account or is part of a registered or regulated retirement or pension plan for the provision of retirement or pension benefits (including disability or death benefits);(ii)the account is tax-favoured (i.e. contributions to the account that would otherwise be subject to tax are deductible or excluded from the gross income of the Account Holder or taxed at a reduced rate, or taxation of investment income from the account is deferred or taxed at a reduced rate);(iii)information reporting is required to the tax authorities with respect to the account;(iv)withdrawals are conditioned on reaching a specified retirement age, disability, or death, or penalties apply to withdrawals made before such specified events; and(v)either annual contributions are limited to USD 50 000 or less; or there is a maximum lifetime contribution limit to the account of USD 1 000 000 or less, in each case applying the rules set forth in Regulations 27, 28, 29, 30 and 31 to these Regulations;Note: A Financial Account that otherwise satisfies the requirement of subparagraph (v) will not fail to satisfy such requirement solely because such Financial Account may receive assets or funds transferred from one or more Financial Accounts that meet the requirements of paragraphs (a) or (b) or from one or more retirement or pension funds that meet the requirements under paragraph (c)(i) through (iv) in the definition of "Broad Participation Retirement Fund", "Narrow Participation Retirement Fund" and "Pension Fund of a Governmental Entity, International Organisation or Central Bank";(b)an account that satisfies the following requirements—(i)the account is subject to regulation as an investment vehicle for purposes other than for retirement and is regularly traded on an established securities market, or the account is subject to regulation as a savings vehicle for purposes other than for retirement;(ii)the account is tax-favoured (i.e., contributions to the account that would otherwise be subject to tax are deductible or excluded from the gross income of the Account Holder or taxed at a reduced rate, or taxation of investment income from the account is deferred or taxed at a reduced rate);(iii)withdrawals are conditioned on meeting specific criteria related to the purpose of the investment or savings account (for example, the provision of educational or medical benefits), or penalties apply to withdrawals made before such criteria are met; and(iv)annual contributions are limited to USD 50 000 or less, applying the rules set forth in Regulations 27, 28, 29,30 and 31 of these Regulations;Note: A Financial Account that otherwise satisfies the requirement of paragraph (b)(iv) will not fail to satisfy such requirement solely because such Financial Account may receive assets or funds transferred from one or more Financial Accounts that meet the requirements of paragraph (a) or (b) or from one or more retirement or pension funds that meet the requirements of any of paragraph (c)(ii) and (iii) in the definition of "Broad Participation Retirement Fund," "Narrow Participation Retirement Fund" and "Pension Fund of a Governmental Entity, International Organisation or Central Bank".(c)a life insurance contract with a coverage period that will end before the insured individual attains age 90:Provided that the contract satisfies the following requirements—(i)periodic premiums, which do not decrease over time, are payable at least annually during the period the contract is in existence or until the insured attains age 90, whichever is shorter;(ii)the contract has no contract value that any person can access (by withdrawal, loan, or otherwise) without terminating the contract;(iii)the amount (other than a death benefit) payable upon cancellation or termination of the contract cannot exceed the aggregate premiums paid for the contract, less the sum of mortality, morbidity, and expense charges (whether or not actually imposed) for the period or periods of the contract's existence and any amounts paid prior to the cancellation or termination of the contract; and(iv)the contract is not held by a transferee for value;(d)an account that is held solely by an estate if the documentation for such account includes a copy of the deceased's will or death certificate;(e)an account established in connection with any of the following—(i)a court order or judgment;(ii)a sale, exchange, or lease of real or personal property, provided that the account satisfies the following requirements—(aa)the account is funded solely with a down payment, earnest money, deposit in an amount appropriate to secure an obligation directly related to the transaction, or a similar payment, or is funded with a Financial Asset that is deposited in the account in connection with the sale, exchange, or lease of the property;(bb)the account is established and used solely to secure the obligation of the purchaser to pay the purchase price for the property, the seller to pay any contingent liability, or the lessor or lessee to pay for any damages relating to the leased property as agreed under the lease;(cc)the assets of the account, including the income earned thereon, will be paid or otherwise distributed for the benefit of the purchaser, seller, lessor, or lessee (including to satisfy such person's obligation) when the property is sold, exchanged, or surrendered, or the lease terminates;(dd)the account is not a margin or similar account established in connection with a sale or exchange of a Financial Asset, and(ee)the account is not associated with an account described in paragraph (f);(iii)an obligation of a Financial Institution servicing a loan secured by real property to set aside a portion of a payment solely to facilitate the payment of taxes or insurance related to the real property at a later time;and(iv)an obligation of a Financial Institution solely to facilitate the payment of taxes at a later time;(f)a Depository Account that satisfies the following requirements—(i)the account exists solely because a customer makes a payment in excess of a balance due with respect to a credit card or other revolving credit facility and the overpayment is not immediately returned to the customer; and(ii)beginning on or before the 1st January, 2023, the Financial Institution implements policies and procedures either to prevent a customer from making an overpayment in excess of USD 50 000, or to ensure that any customer overpayment in excess of that amount is refunded to the customer within 60 days, in each case applying the rules set forth in Regulations 27, 28, 29,30 and 31 of these Regulations:Provided that for this purpose, a customer overpayment shall not refer to credit balances to the extent of disputed charges but does include credit balances resulting from merchandise returns;(g)any other account that presents a low risk of being used to evade tax, has substantially similar characteristics to any of the accounts described in paragraphs (a), (b), (c), (d), (e) and (f) and is included in the list of Excluded Accounts (published by the Commissioner):Provided that the status of such account as an Excluded Account does not frustrate the purposes of these Regulations."Exempt Collective Investment Vehicle" means an Investment Entity that is regulated as a collective investment vehicle:Provided that all of the interests in the collective investment vehicle are held by or through individuals or Entities that are not Reportable Persons, except a Passive NFE with Controlling Persons who are Reportable Persons;"Financial Account" means an account maintained by a Financial Institution, and includes a Depository Account and a Custodial Account, but does not include Excluded Account;Notes: When defining "Financial Account", the following shall be noted:(a)in the case of an Investment Entity, any equity or debt interest in the Financial Institution shall be taken into consideration. Notwithstanding the foregoing, the term "Financial Account" does not include any equity or debt interest in an Entity that is an Investment Entity solely because it—(i)renders investment advice to, and acts on behalf of; or(ii)manages portfolios for, and acts on behalf of, a customer for the purpose of investing, managing, or administering Financial Assets deposited in the name of the customer with a Financial Institution other than such Entity;(b)in the case of a Financial Institution not described in paragraph (a), any equity or debt interest in the Financial Institution, if the class of interests was established with the purpose of avoiding reporting; and(c)any Cash Value Insurance Contract and any Annuity Contract issued or maintained by a Financial Institution, other than a non-investment-linked, non-transferable immediate life annuity that is issued to an individual and monetises a pension or disability benefit provided under an account that is an Excluded Account."Financial Institution" means a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company;"Financial Asset" includes a security (including shares of stock in a corporation, partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust, note, bond, debenture, or other evidence of indebtedness), partnership interest, commodity, swap (including interest rate swaps, currency swaps, basis swaps, interest rate caps, interest rate floors, commodity swaps, equity swaps, equity index swaps, and similar agreements), Insurance Contract or Annuity Contract, or any interest (including a futures or forward contract or option) in a security, partnership interest, commodity, swap, Insurance Contract, or Annuity Contract and does not include a non-debt, direct interest in real property;"Governmental Entity" means the government of a jurisdiction, any political subdivision of a jurisdiction (which, for the avoidance of doubt, includes a state, province, county, or municipality), or any wholly owned agency or instrumentality of a jurisdiction or of any one or more of the foregoing;Notes:This category is comprised of the integral parts, controlled entities, and political subdivisions of a jurisdiction, and for this purpose—(a)an "integral part" of a jurisdiction means any person, organisation, agency, bureau, fund, instrumentality, or other body, however designated, that constitutes a governing authority of a jurisdiction. The net earnings of the governing authority must be credited to its own account or to other accounts of the jurisdiction, with no portion inuring to the benefit of any private person. An integral part does not include any individual who is a sovereign, official, or administrator acting in a private or personal capacity;(b)a "controlled entity" means an entity which is separate in form from the jurisdiction or that otherwise constitutes a separate juridical entity:Provided that—(i)the entity is wholly owned and controlled by one or more Governmental Entities directly or through one or more controlled entities;(ii)the entity's net earnings are credited to its own account or to the accounts of one or more Governmental Entities, with no portion of its income inuring to the benefit of any private person; and(iii)the entity's assets vest in one or more Governmental Entities upon dissolution;(c)income does not inure to the benefit of private persons if such persons are the intended beneficiaries of a governmental programme, and the programme activities are performed for the general public with respect to the common welfare or relate to the administration of some phase of government. Notwithstanding the foregoing, however, income is considered to inure to the benefit of private persons if the income is derived from the use of a Governmental Entity to conduct a commercial business, such as a commercial banking business, that provides financial services to private persons;"High Value Account" means a Pre-existing Individual Account with an aggregate balance or value that exceeds USD 1 000 000 as of the 31st December, 2022 or 31st December of any subsequent year;"Information Return" means a report, setting out certain information as specified by these Regulations, which a Reporting Financial Institution is required to file with the Commissioner;"Insurance Contract" means a contract (other than an Annuity Contract) under which the issuer agrees to pay an amount upon the occurrence of a specified contingency involving mortality, morbidity, accident, liability, or property risk;"Investment Entity" means any Entity —(a)that primarily conducts as a business one or more of the following activities or operations for or on behalf of a customer—(i)trading in money market instruments (including cheques, bills, certificates of deposit, derivatives), foreign exchange, exchange, interest rate and index instruments; transferable securities; or commodity futures trading;(ii)individual and collective portfolio management; or(iii)otherwise investing, administering, or managing Financial Assets or money on behalf of other persons; or(b)the gross income of which is primarily attributable to investing, reinvesting, or trading in Financial Assets, if the Entity is managed by another Entity that is a Depository Institution, a Custodial Institution, a Specified Insurance Company, or an Investment Entity described in paragraph (a);Notes:For the purposes of the definition of "Investment Entity"—(a)an Entity is "managed by" another Entity if the managing Entity performs, either directly or through another service provider, any of the activities or operations described in paragraph (a) in the definition of "Investment Entity" on behalf of the managed Entity. However, an Entity does not manage another Entity if it does not have discretionary authority to manage the Entity's assets (in whole or part). Where an Entity is managed by a mix of Financial Institutions, NFEs or individuals, the Entity is considered to be managed by another Entity that is a Depository Institution, a Custodial Institution, a Specified Insurance Company, or an Investment Entity described in paragraph (a) in definition of "Investment Entity", if any of the managing Entities is such another Entity.(b)an Entity is treated as primarily conducting as a business one or more of the activities described in paragraph (a) in the definition of "Investment Entity" or an Entity's gross income is primarily attributable to investing, reinvesting, or trading in Financial Assets for the purposes of paragraph (b) in the definition of "Investment Entity", if the Entity's gross income attributable to the relevant activities equals or exceeds 50% of the Entity's gross income during the shorter of—(i)the three-year period ending on the 31st December of the year (or the final day of a non-calendar year accounting period) preceding the year in which the determination is made; or(ii)the period during which the Entity has been in existence.Note: The term "Investment Entity" does not include an Entity that is an Active NFE because that Entity meets any of the criteria in paragraphs (d), (e), (f) and (g) in the definition of "Active NFE".This paragraph shall be interpreted in a manner consistent with similar language set forth in the definition of "financial institution" in the Financial Action Task Force Recommendations."International Organisation" means any international organisation or wholly owned agency or instrumentality thereof and this category includes any intergovernmental organisation (including a supranational organisation)—(a)that is comprised primarily of governments;(b)that has in effect a headquarters or substantially similar agreement with the jurisdiction; and(c)the income of which does not inure to the benefit of private persons."Kenyan Financial Institution" has the meaning assigned in the Act"Lower Value Account" means a Pre-existing Individual Account with an aggregate balance or value as of the 31st December, 2022 or 31st December of any subsequent year that does not exceed USD 1 000 000;"New Account" means a financial account maintained by a Reporting Financial Institution opened on or after the 1st January, 2023;"NFE" means Non- Financial Entity;"Non-Reporting Financial Institution" means any Financial Institution that is—(a)a Governmental Entity, International Organisation or Central Bank, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a Specified Insurance Company, Custodial Institution, or Depository Institution;(b)a Broad Participation Retirement Fund, a Narrow Participation Retirement Fund, a Pension Fund of a Governmental Entity, International Organisation or Central Bank, or a Qualified Credit Card Issuer;(c)any other Entity that presents a low risk of being used to evade tax and has substantially similar characteristics to any of the Entities described in subparagraphs (a) and (b) above and is included in the list of Non-Reporting Financial Institutions:Provided that the status of such Entity as a Non-Reporting Financial Institution does not frustrate the purposes of these Regulations;(d)an Exempt Collective Investment Vehicle; or(e)a trust to the extent that the trustee of the trust is a Reporting Financial Institution and reports all information required to be reported with respect to all Reportable Accounts of the trust;"Participating jurisdiction" means a jurisdiction which is specified in the Schedule of these Regulations;"Passive Income" includes the portion of gross income that consists of—(a)dividends;(b)interest;(c)income equivalent to interest;(d)rents and royalties, other than rents and royalties derived in the active conduct of a business conducted, at least in part, by employees of the NFE;(e)annuities;(f)the excess of gains over losses from the sale or exchange of Financial Assets from which income described in paragraphs (a) to (e) may be derived;(g)the excess of gains over losses from transactions (including futures, forwards, options, and similar transactions) in any Financial Assets;(h)the excess of foreign currency gains over foreign currency losses;(i)net income from swaps; or(j)amounts received under Cash Value Insurance Contracts;Note: Notwithstanding the foregoing, Passive Income will not include, in the case of a NFE, that regularly acts as a dealer in Financial Assets, any income from any transaction entered into in the ordinary course of such dealer's business as such a dealer."Passive NFE" means any NFE that is not an Active NFE or an Investment Entity described in subparagraph (b) of the definition of "Investment Entity" that is not a Participating Jurisdiction Financial Institution;"Pension Fund of a Governmental Entity, International Organisation or Central Bank" means a fund established by a Governmental Entity, International Organisation or Central Bank to provide retirement, disability, or death benefits to beneficiaries or participants who are current or former employees (or persons designated by such employees), or who are not current or former employees, if the benefits provided to such beneficiaries or participants are in consideration of personal services performed for the Governmental Entity, International Organisation or Central Bank;"Pre-existing Account" means a Financial Account maintained by a Reporting Financial Institution as of the 31st December, 2022;"Pre-existing Entity Account" means a Pre-existing Account held by one or more Entities;"Pre-existing Individual Account" means a Pre-existing Account held by one or more individuals;"Qualified Credit Card Issuer" means a Financial Institution satisfying the following requirements—(a)the Financial Institution is a Financial Institution solely because it is an issuer of credit cards that accepts deposits only when a customer makes a payment in excess of a balance due with respect to the card and the overpayment is not immediately returned to the customer; and(b)beginning on or before the 1st January, 2023, the Financial Institution implements policies and procedures either to prevent a customer from making an overpayment in excess of USD 50 000, or to ensure that any customer overpayment in excess of that amount is refunded to the customer within 60 days, in each case applying the rules set forth in Regulations 27, 28,29,30, and 31 of these Regulations and for this purpose, a customer overpayment does not refer to credit balances to the extent of disputed charges but does include credit balances resulting from merchandise returns;"Reportable Account" means a Financial Account that is maintained by a Reporting Financial Institution and is held by one or more Reportable Persons or by a Passive NFE with one or more Controlling Persons that is a Reportable Person and identified as such pursuant to the due diligence procedures described in these Regulations;"Reportable Jurisdiction" means—(a)for the purposes of applying the due diligence procedures described in these Regulations, a jurisdiction other than the United States of America or Kenya; and(b)for the purposes of applying reporting requirements, a jurisdiction which is published by the Commissioner as such under these Regulations;"Reportable Jurisdiction Person" means an individual or Entity that is resident in a Reportable Jurisdiction under the tax laws of such jurisdiction, or an estate of a decedent that was a resident of a Reportable Jurisdiction;Note: For this purpose, an Entity such as a partnership, limited liability partnership or similar legal person or arrangement, which has no residence for tax purposes shall be treated as resident in the jurisdiction in which its place of effective management is situated. A legal person or a legal arrangement (other than a trust that is a Passive NFE) is considered "similar" to a partnership and a limited liability partnership where it is not treated as a taxable unit in a Reportable Jurisdiction under the tax laws of such jurisdiction;"Reportable Person" means a Reportable Jurisdiction Person other than—(a)a corporation the stock of which is regularly traded on one or more established securities markets;(b)any corporation that is a Related Entity of a corporation described in paragraph (a);(c)a Governmental Entity;(d)an International Organisation;(e)a Central Bank; or(f)a Financial Institution;"Specified Insurance Company" means any entity that is an insurance company (or the holding company of an insurance company) which issues, or is obligated to make payments with respect to, a Cash Value Insurance Contract or an Annuity Contract;"TIN" means Tax Identification Number, such as the Personal Identification Number, (or functional equivalent in the absence of a Tax Identification Number).3. Application of the Regulations
These Regulations shall be applied and interpreted in accordance with the Common Reporting Standard, including the Commentaries, approved by the Organisation for Economic Co-operation and Development (OECD) on the 15th July, 2014, and as amended from time to time.Part II – REPORTING AND RECORD-KEEPING OBLIGATIONS
4. Reporting obligations
5. Record-keeping obligations
Reporting Financial Institutions shall—6. Self-certification
As from the 1st January, 2023, and in the circumstances where the Due Diligence procedures described in these Regulations require a self-certification to be obtained by a Financial Institution, the Account Holder shall provide a self-certification to establish their tax residence and, where applicable, the Account Holder or Controlling Person shall provide such self-certification in respect of the Controlling Person.Part III – GENERAL REPORTING AND DUE DILIGENCE REQUIREMENTS
7. General reporting requirements
8. Exception to requirements to be reported
Notwithstanding the provisions of regulation 7(1)(a)—9. Information required for reporting of amounts
Part IV – GENERAL DUE DILIGENCE REQUIREMENTS
10. General due diligence requirements
Part V – DUE DILIGENCE FOR PRE-EXISTING INDIVIDUAL ACCOUNTS
11. Accounts not required to be reviewed, identified, or reported
A Pre-existing Individual Account that is a Cash Value Insurance Contract or an Annuity Contract is not required to be reviewed, identified or reported:Provided that the Reporting Financial Institution is effectively prevented by law from selling such Contracts to residents of a Reportable Jurisdiction.12. Lower Value Accounts
13. Enhanced review procedures for High Value Accounts
14. Exception to the extent databases contain sufficient information
A Reporting Financial Institution is not required to perform the paper record search described in regulation 13(1)(b) and (c) to the extent the Reporting Financial Institution's electronically searchable information includes the following—15. Relationship manager inquiry for actual knowledge
In addition to the electronic and paper record searches described in regulation 13, a Reporting Financial Institution must treat as a Reportable Account any High Value Account assigned to a relationship manager (including any Financial Accounts aggregated with that High Value Account) if the relationship manager has actual knowledge that the account is held by a resident for tax purposes in a Reportable Jurisdiction.16. Effect of finding or not finding indicia
17. Timeline for review
Review of Pre-existing High Value Individual Accounts must be completed by the 31st December, 2022, and review of Pre- existing Lower Value Individual Accounts must be completed by the 31st December 2023.Part VI – DUE DILIGENCE FOR NEW INDIVIDUAL ACCOUNTS
18. Applicable procedures in respect of New Individual Accounts
Part VII – DUE DILIGENCE FOR PRE-EXISTING ENTITY ACCOUNTS
19. Entity Accounts not required to be reviewed, identified or reported
Unless the Reporting Financial Institution elects otherwise, either with respect to all Pre-existing Entity Accounts or, separately, with respect to any clearly identified group of such accounts, a Pre- existing Entity Account with an aggregate account balance or value that does not exceed USD 250 000 as of the 31st December, 2022, is not required to be reviewed, identified, or reported as a Reportable Account until the aggregate account balance or value exceeds that amount as of the 31st December, 2023, or the last day of any subsequent calendar year.20. Entity Accounts subject to review
A Pre-existing Entity Account that has an aggregate account balance or value that exceeds USD 250 000 as of the 31st December, 2022, and a Pre-existing Entity Account that does not exceed USD 250 000 as of the 31st December, 2022, but the aggregate account balance or value of which exceeds USD 250 000 as of the 31st December, 2023, or the last day of any subsequent calendar year, must be reviewed in accordance with the procedures specified in regulation 22.21. Entity Accounts with respect to which reporting is required
With respect to Pre-existing Entity Accounts described in regulation 20, only accounts that are held by one or more Entities that are Reportable Persons, or by Passive NFEs with one or more Controlling Persons who are Reportable Persons, shall be treated as Reportable Accounts.22. Review procedures for identifying entity accounts with respect to which reporting is required
23. Timing of review and additional procedures applicable to Pre-existing Entity Accounts
Part VIII – DUE DILIGENCE FOR NEW ENTITY ACCOUNTS
24. Applicable procedures for New Entry Accounts
Part IX – SPECIAL DUE DILIGENCE RULES
25. Reliance on Self-Certifications and Documentary Evidence
A Reporting Financial Institution may not rely on a self-certification or Documentary Evidence if the Reporting Financial Institution knows or has reason to know that the self-certification or Documentary Evidence is incorrect or unreliable.26. Alternative Piocedures for Financial Accounts held by Individual Beneficiaries
27. Aggregation of Individual Accounts
28. Aggregation of Entity Accounts
29. Special Aggregation Rule to apply to Relationship Managers
For purposes of determining the aggregate balance or value of Financial Accounts held by a person to determine whether a financial account is a High Value Account, a Reporting Financial Institution shall, in the case of any Financial Accounts that a relationship manager knows, or has reason to know, are directly or indirectly owned, controlled, or established (other than in a fiduciary capacity) by the same person, aggregate all such accounts.30. Amounts read to include equivalent in other currencies
31. Accounts with negative balance
An account with a balance or value that is negative shall be deemed to have a balance or value equal to nil.Part X – COMPLEMENTARY REPORTING AND DUE DILIGENCE RULES FOR FINANCIAL ACCOUNT INFORMATION
32. Current residence address
33. When current residence address is based on documentary evidence
34. Absence of documentary evidence
35. Change in circumstances
36. Residence of a Financial Institution
37. Maintaining of account
In general, an account shall be considered to be maintained by a Financial Institution, if—38. Address of entity's principal office
39. Deleted by L.N. 74 of 2023, r. 2.
History of this document
13 June 2023 this version
17 February 2023
01 January 2023
Commenced