KRA set to tax hedging profits under new rules
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Loading... - Anne Cherop
- 13 Feb 2023
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Kenyans engaging in transactions with foreigners to cushion them from volatility in financial markets will now be required to account for any profit realised by non-resident parties and remit tax on the same to the Kenya Revenue Authority (KRA).
This follows the gazettement of the Income Tax (Financial Derivatives) Regulations of 2023 on January 27, effectively bringing to life amendments to the Income Tax Act, which were initiated by the Finance Act 2022.
This development now places under KRA’s radar entities such as national flag carrier, Kenya Airways, which engages in hedging to cushion itself against volatility in the price of fuel as well as commercial banks that have engaged in long-term foreign currency-denominated borrowing which requires them to hedge against interest rate risk.
Interest rate risk materialises when such borrowing is adversely affected by fluctuations in the price (interest rate) attached to it.
Players in Kenya’s rapidly growing foreign exchange trading market are now also within KRA’s net.
Currently, Kenya has nine non-dealing foreign exchange traders licensed by the Capital Markets Authority.
In the April 7, 2022 budget former Treasury Cabinet Secretary, Ukur Yatani, said this tax was meant to help widen Kenya’s revenue base with a focus on non-resident transactions. Read More…
