Expansion of the Double Taxation Avoidance Agreement (DTAA) network: DTAA with the Republic of Kenya

The Republic of Mauritius had signed a DTAA with the Republic of Kenya during the State visit of the President of Kenya to Mauritius on 10 April 2019.

Before ratifying the Agreement, both countries agreed to engage into bilateral discussions to amend certain provisions of the DTAA with a view to ensuring that it is BEPS compliant and is in line with the tax treaty policies of the two countries.

The President of Kenya, during the TICAD meeting in Japan in August last, acceded to the request of the Prime Minister, for the technical teams of Mauritius and Kenya to meet at the earliest to discuss the amendments to be brought to the agreement.

Negotiations were successfully concluded in September of this year and a Protocol amending the DTAA with Kenya was finalized.

The Protocol to the DTAA with Kenya has been signed on 16 October 2019 in Washington by the Financial Secretary who is presently attending the IMF/World Bank meetings.

The DTAA will eliminate double taxation and provide greater tax certainty for our businessmen.  It will make clear the taxing rights of Mauritius and Kenya on all forms of income arising from cross-border economic activities between our two countries.  Mauritian businessmen and investors looking for opportunities in Kenya will benefit from this Agreement as will the Kenyan businessmen and investors looking for opportunities in Mauritius.

The Agreement aims at encouraging greater cross-border investment flows between our two countries.

The benefits that would accrue under the DTAA are elaborated in the Annex to the Communique.

Ministry of Finance and Economic Development

18 October 2019

Annex

Benefits of the Mauritius-Kenya Double Taxation Avoidance Agreements (DTAAs)

• The DTAA will ensure that income derived by investors do not suffer double taxation.
• It will provide greater tax certainty for businessmen of our two countries as it makes clear the taxing rights of Mauritius and Kenya on all forms of income arising from cross-border economic activities between our two countries.
• Moreover, investors will be able to enjoy more favourable tax rates than what is applied under the domestic law.  For example under the domestic law of Kenya:
  • dividends paid to foreign investors are subject to a withholding tax at the rate of 10%.  With the DTAA the tax rate will now be 8%;
  • interest paid to foreign investors are subject to a withholding tax at the rate of 15% when paid by a financial institution and at the rates of 25% and 10%, respectively, on bearer certificates and bearer bonds.  Under the DTAA the rate of tax is now set at 12.5% for all interest income;
  • royalties paid to foreign investors are subject to a withholding tax at the rate of 20%. Under the DTAA the new rate of tax is set at 12% for all interest income;
  • technical fees paid to foreign investors are subject to a withholding tax at the rate of 20%.  Under the DTAA the rate of tax is now set at 10%.
• The Mauritius-Kenya DTAA will bring the competitiveness of Kenyan companies at par with other African countries already having a DTAA with Mauritius.
• The Mauritius-Kenya DTAA will offer Kenyan companies with fiscal certainty in their international business operations involving Mauritius.
• As such, Mauritian businessmen and investors looking for opportunities in Kenya will benefit from this Agreement as will the Kenyan businessmen and investors looking for opportunities in Mauritius.

The DTAA will also provide the tax authorities of our two countries an effective mechanism to fight tax evasion and other malpractices.

Posted by Minority Voice on Oct 18 2019. Filed under Economie. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry