Kenya woos UAE investors with new tax agreement

Kenya has ratified a double taxation agreement with the United Arab Emirates (UAE) that Treasury aims will attract investment from the petrol-rich Arab countries.

The agreement seeks to avoid double taxation on earnings that private companies with operations both in Kenya and UAE derive, in an attempt to attract investment. On top of that, shareholders in such companies will also be exempt from the taxes.

“In exercise of the powers conferred by section 41 of the Income Tax Act the Cabinet Secretary for the National Treasury has ratified the double taxation treaty between Kenya and the United Arab Emirates, by way of legal notice No.218 of 2017,” a communication from the Treasury read.

Kenya usually imposes a 20 per cent tax on share earnings by private companies. Under the agreement, this tax has been reduced by 5 per cent, while the public sector and sovereign funds have been exempted from all taxes, including corporate tax.

Capital profits generated by the public and private sectors will also be exempted from taxes, provided natural resources are subject to tax in the country in possession of these resources.

The UAE has a liberal taxation system offering lucrative tax incentives to residents, foreigners and multi-national corporations. As per the agreement, both countries will also exchange tax information between each other that could lead to nabbing Kenyan tax-cheats with investments in the UAE and vice verse.


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Mbiki Kamanjira, a tax expert with financial services firm Grant Thornton says the agreement if not abused, could work out quite well for Kenya.

“No other country in the region has a double taxation agreement with the UAE. That means Kenya has set herself strategically to attract investments from the UAE more than the other counties,” Mr Kamanjira said. Kenya imports goods worth Sh126 billion annually from the UAE.


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