Beware! There is no double taxation agreement between Kenya and America. Uncle Sam may come for you!

Many Kenyans in Diaspora are wondering what in the world is the significance of the Kenya Revenue Authority one-year tax amnesty to December 31, 2017 for tax payers in the diaspora to file their returns for the year ended December 31, 2016.

According to the deputy commissioner in-charge of the policy and co-ordination unit at KRA James Ojee, those who fail to meet these new regulations will be investigated for assessment of taxes due, interest and penalties:“We are asking these people to voluntarily come forward and take advantage of the tax amnesty. We are aware there are Kenyans holding assets overseas,” he said. To better understand this KRA directive and how it affects Kenyans in Diaspora, it is important to first figure out if your current country of residence has a double taxation agreement with Kenya.  A Double Taxation Agreement (DTA) is an international agreement concluded between two jurisdictions to allocate taxing rights between two countries that have negotiated the particular DTA in question. According to the KRA Website, Kenya has  double taxation agreements in force with the following countries: India, Zambia, Britain, Sweden, Norway, Denmark, Canada and Germany.Contrary to a promise made by Kenya's ambassador to the US Njeru Githae in 2015 that a treaty with the USA would be negotiated to shield Kenyans from the effect of double taxation, such a treaty, according to the KRA website does not seem to be in the works.According to Ndichu Kuria, Kenyans in America should be wary and approach this taxation issue with the seriousness it deserves. Ndichu noted the following:"Kenya does not tax global income. In fact only two countries on earth tax global income i.e. the US and Eritrea.The test for paying taxes in Kenya are:a) The income must be derived from Kenya. So if you live in 'Mboston' (Boston) but have flats in Ruaka you must pay taxes because this income is derived from Kenya.b) You must be resident in Kenya. Now Residency is determined in 3 ways. You are a resident if you have been in Kenya for more than 183 days in each of the last 2 years. You are a resident if you have been in Kenya for more than 122 days in each of the last 3 years. You are a resident if you have a permanent home in Kenya.Nobody cares if all of your income is derived from 'Ataranta' (Atlanta) and are just Kenyan because you hold a Kenyan passport.However, just know that the US government has compelled all banks to disclose any funds they hold for US residents. We do not have a double taxation agreement with the US. So if you have money coming from Ruaka flats, Kenya will tax you as it is its right, and the US will tax you because it taxes global income.The problem is not Kenya. The problem is the US.According to Ndichu,  all global banks that use US based systems like Visa or have assets in the US are required under the Foreign Account Tax Compliance Act (FATCA) to disclose the details of all account holders who are resident in the US including their bank balance and activity to the IRS. Any bank that fails to do this stands to lose 25% of its assets in the US as well as in these US based payment systems.Kenyan banks complied with this requirement in 2015. Ndichu notes that Kenyans in America who operate bank accounts in Kenya and are US residents should include this information in the form 1040. They know. And will audit you