AFRICA: Tax authority to launch new database to curb tax evasion in Kenya

The Kenya Revenue Authority (KRA) is reportedly considering a new transfer pricing database, allowing its agents to review multinational company transactions to detect tax evasion and ensure compliance.
Installing the transfer pricing database will assist KRA agents in compiling, analysing, and managing data from cross-border transactions. The database will present the data electronically.

KRA plans this initiative months after the national treasury issued a new draft Income Tax Rules that proposed broadening the scope of transactions subject to transfer pricing rules.
Transfer pricing is the price at which goods and services are exchanged between companies sharing common control or ownership, whether in a cross-border or domestic transaction. For example, when a subsidiary company sells goods or services to its parent or another affiliated one, the transfer price is the fee charged for these transactions.

Ghana to tax residents’ foreign incomes, impacting remote workers, content creators
However, the use of this practice by some multinational corporations to evade tax payments has raised concerns among tax authorities. They take advantage of transfer pricing by changing their taxable income, potentially lowering their overall tax burden.

Some multinational corporations use the transfer pricing scheme to shift their tax liabilities to low-cost tax jurisdictions. Consequently, KRA has stated that it plans to implement a tool to improve company auditing.

“The KRA is desirous of having access to a transfer pricing benchmark tool database that will enhance transfer pricing audits of multinational enterprises and audit of companies in extractive industries.”

Nigeria’s tax agency sues Binance for tax evasion
The authority is also considering including pricing and margin-based information on various transactions, such as manufacturing, distribution, services, and royalty agreements, as well as enabling benchmark studies, in the new transfer pricing database solution.

Kenya also appears to be prepared in terms of taxation and remittance. While it focuses on multinational corporations and provides transfer pricing rules, it has also launched a new platform for non-VAT registered taxpayers called “eTIMS Lite.”

Okra, uLesson granted tax exemptions for $120.95 million investment in 2023
In 2022, the KRA launched the Tax Invoice Management System (TIMS) for tax payment, followed by the electronic tax invoice management system (eTIMS) in 2023.

KRA required all businesses, including informal and small businesses, to electronically generate and send invoices through the eTIMS. Companies with less than KSh5 million (~$38,000) in annual revenue must generate eTIMS invoices using the eCitizen platform or USSD.

24 May 2024

UK: IMF warns Tories against further UK tax cuts

Amid a higher debt burden, U.K. should not be considering pre-election tax cuts, forecaster says. The International Monetary Fund advised Chancellor Jeremy Hunt against additional tax cuts in its annual

Read More
11 October 2024

SOUTH AFRICA: Sars Confirms Criminal Sanctions for Crypto Non-Compliance

Sars confirms ability to receive information directly from local crypto asset exchanges, to ensure non-compliance is both hard and costly for taxpayers! Looking beyond the borders of South Africa, the

Read More
6 February 2024

BAHAMAS: Gov’t ‘disagrees’ on IMF’s ‘top 10%’ income taxation

THE Government “disagrees” with the IMF’s assertion that it must introduce a personal income tax targeting “the top 10 percent of earners” and other reforms to hit its 25 percent revenue-to-GDP

Read More
26 April 2024

US: IRS Uses AI to Detect Crypto Tax Fraud

The Internal Revenue Service (IRS) is enhancing its oversight of cryptocurrency transactions through the use of artificial intelligence (AI). In a groundbreaking move, the IRS released a draft of Form

Read More