• CbC reporting is part of Action 13 of the Organization for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action Plan. It is intended to promote greater transparency for tax administrations by providing them with relevant and reliable information to conduct high-level transfer pricing risk assessments. To accomplish this, a competent authority will automatically exchange CbC reports prepared by multinational enterprise (MNE) groups with a reporting entity in its jurisdiction with partner jurisdiction competent authorities in all jurisdictions in which the MNE group operates, provided that a legal instrument allowing for the automatic exchange of information (e.g. Double Taxation Agreement  (DTA) or Tax Information Exchange Agreement (TIEA) is in force and a Multilateral Competent Authority Arrangement (MCAA) for the exchange of CbC reports is operative with such second-mentioned jurisdictions.

• Kenya is a member of the OECD Inclusive Framework (IF) on BEPS, a group of jurisdictions committed to the implementation of the minimum standard of BEPS-related measures. Kenya introduced Sections 18B, 18C, 18D, 18E and 18F of the Income Tax Act (ITA) through the Finance Act, 2022. These sections provide for CbC reporting filing requirements which apply to returns for the years of income 2022 and subsequent years of income. It requires the ultimate parent entities and constituent entities to comply with CbC reporting obligations and, where applicable, to file a CbC Report, master file, and local file.

• CbC notification is a formal communication submitted by a reporting entity to the Commissioner informing KRA of the identity and tax residence of the entity within a MNE group that will file the CbC report for a particular reporting period.

• Any constituent entity (CE) that is a member of an MNE Group and is resident in Kenya for tax purposes must notify KRA if it is the ultimate parent entity (UPE). If the entity is not the UPE, it must notify KRA of the identity and tax residence of the reporting entity.

• The CbC notification enables the Commissioner to determine:

1. Whether the MNE group is subject to CbC reporting requirements;
2. Which entity within the group will submit the CbC report; and

• The jurisdiction in which that report will be filed.

• The CbC Notification Form is available for download on the KRA website under the publications. To access the form, visit the KRA Publications page using the link: https://www.kra.go.ke/publication, enter “Country by Country Reporting Notification Form” in the search bar, and click Search. Select the form from the search results to access and download it.

• Completed CbC notification forms should be submitted to the Kenyan Competent Authority via email at cbcr@kra.go.ke

• The CbC notification must be filed no later than the last day of the reporting financial year of the MNE Group.

An MNE Group with a total consolidated group turnover of Kshs.95 billion or more during the financial year immediately preceding the reporting financial year, as reflected in its consolidated financial statements for such preceding financial year, is required to file a CbC report.

a) The UPE of an MNE group, where the UPE is resident in Kenya during the reporting financial year (primary reporting mechanism); or

b) A CE of the MNE, other than the UPE, where the CE is resident in Kenya during the reporting financial year, and the prescribed conditions for secondary reporting or local filing are satisfied.

Secondary reporting mechanism refers to the requirement for a CE of an MNE group that is resident in Kenya to file a CbC report in Kenya.

A CE that is resident in Kenya, other than the UPE, shall be required to file a CbC report in Kenya where:

1. The UPE of the MNE is not obligated to file a CbC report in its jurisdiction of tax residence;
2. The jurisdiction of tax residence of the UPE does not have an effective exchange of information arrangement with Kenya for the automatic exchange of CbC reports; or
3. There has been a systemic failure in the jurisdiction of tax residence of the UPE that has been notified to the CE by the Commissioner.

• Where the secondary reporting mechanism applies and more than one CE of the same MNE group is resident in Kenya during a reporting financial year, the group may designate one of the resident CEs to file the CbC report in Kenya on behalf of all the resident CEs of the group.

• The designated entity shall notify the Commissioner of the designation in the prescribed manner and shall be responsible for filing the CbC report in accordance with the applicable requirements.

• An MNE group may avoid having the secondary reporting requirement imposed on multiple CEs in multiple jurisdictions by designating one of its CEs to be an SPE for filing purposes. The SPE will file the CbC report on behalf of the UPE.

• The SPE will be appointed by the group to file the CbC report in its jurisdiction of tax residence on behalf of the UPE and other CEs of the group.

• There are conditions that must be met for an SPE to file a CbC report on behalf of the UPE. If the conditions are met, the Kenyan resident CE is not required to file a CbC report with the KRA with respect to a reporting financial year under the secondary reporting mechanism.

• To qualify, an SPE of the MNE group must file a CbC report in respect of the reporting financial year with the tax authority of its jurisdiction of tax residence on or before the time for filing. In addition, the jurisdiction of tax residence of the SPE must meet certain requirements. In particular, it must:

1. Require filing of CbC reports;
2. Have a qualifying competent authority agreement (QCAA) in effect to which Kenya is a party on or before the time for filing the CbC report; or
3. Not be in a position of systemic failure.

A systemic failure refers to a situation where the jurisdiction of tax residence of the UPE or SPE has an agreement with Kenya for the automatic exchange of CbC reports but has suspended or persistently failed to automatically provide such reports to the Commissioner. A systemic failure shall be considered to exist only where the Commissioner has notified the CE resident in Kenya of the failure.

A reporting financial year means the accounting period of a MNE group for which the financial results are prepared and reported in the consolidated financial statements of the group.

CbC reporting requirements in Kenya apply to reporting financial years of MNE groups commencing on or after 1st January 2022.

A CbC report shall be filed not later than 12 months after the last day of the reporting financial year of the MNE group.

• UPE or CE of a MNE group is required to file a master file and local file with the KRA not later than six (6) months after the last day of the reporting financial year of the MNE group. This requirement applies irrespective of the gross turnover of the MNE Group in the financial year to which the master file and local file relates.

• The master files and local files should be submitted to the Kenyan Competent Authority via email at cbcr@kra.go.ke.

• There is no prescribed or mandatory format for preparing the master file and local file under the OECD Action Plan 13 (2015) final report. This approach is intentional to provide flexibility to MNE entities to prepare the master file in a manner that best reflects their specific business operations and organizational structures.

• CEs are required to ensure that the master file and local file contains, at a minimum, the information outlined in section 18D (6) & (7) of the ITA as well as any other information as may be required by the Commissioner.

Section 18E of the ITA provides that a person who fails to comply with provisions of section 18C and 18D commits an offence and shall be subject to the penalties prescribed under the Tax Procedures Act, 469B (TPA).

The CbC MCAA is a multilateral framework agreement that provides a standardized and efficient mechanism to facilitate the automatic exchange of CbC Reports.

• The exchange mechanisms are only activated for jurisdictions that Kenya has both the Convention on Mutual Administrative Assistance in Tax Matters (the MAAC) in force and the Multilateral Competent Authority Agreement for exchange of CbC reports (CbC MCAA) in effect at the time of filing of the CbC reports for the financial year in question.

• Kenya has ratified the MAAC and has a competent authority agreement in effect i.e. the CbC MCAA.

The list of jurisdictions with an effective exchange relationship with Kenya is available on the OECD website using the link -

https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-transparency-and-international-co-operation/cbc-mcaa-signatories.pdf

• Section 18D (11) of the ITA provides that the commissioner shall maintain the confidentiality of the information contained in a return submitted in accordance with section 6(1) and section 6A (2) of the TPA.

• Kenya has also ratified the MAAC and the CbC MCAA. These instruments provide legal protections for the confidentiality of information exchanged. CbC Reports exchanged with Kenya are subject to the applicable confidentiality and data protection provisions governing the exchange of information under these instruments.

KRA shall use the CbC Report only for purposes of assessing high-level transfer pricing risks and other BEPs related risks in Kenya, including assessing the risk of non-compliance by members of the MNE Group with applicable transfer pricing rules, and where appropriate for economic and statistical analysis.

There are no other exemptions.

CbC reporting queries can be directed to:

1. Email: cbcr@kra.go.ke or  kenyacompetentauthority@kra.go.ke
2. Contacts: 0709-017945/85/33/1890 or Call center (0711) 099 999