DOUBLE TAXATION AGREEMENTS: KENYA

Introduction

Double taxation is a tax principle referring to income taxes paid twice on the same source of income. It can occur when income is taxed at both the corporate level and personal level; and in international trade or investment when the same income is taxed in two different countries. It mainly occurs because corporations are considered separate legal entities from their shareholders. As such, corporations pay taxes on their annual earnings, just like individuals. When corporations pay out dividends to shareholders, those dividend payments incur income-tax liabilities for the shareholders who receive them, even though the earnings that provided the cash to pay the dividends were already taxed at the corporate level.

It is important to note that Double taxation is often an unintended consequence of tax legislation. It is generally seen as a negative element of a tax system and tax authorities attempt to avoid it whenever possible. A key method authorities use to address double taxation problem is through Double Taxation Agreements (DTAs). DTAs are international agreements between two countries to allocate taxing rights between the two countries that have negotiated the particular DTA. The purpose of a DTA is to help the two countries to avoid double taxation.

Kenya, just like some other countries, uses DTAs to avoid double taxation at international level. The table below outlines some of countries Kenya has entered into DTA with and those which are in the progress:

At A.O. WANGA ADVOCATES we are happy to assist you with advisory and tax related issues in Kenya. For assistance and more information please contact us on info@aowangaadvocates.com or +254794600191

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