Double taxation is a taxation principle referring to income taxes that are paid twice on the same source of earned income. It occurs when the same transaction or income source is subject to two or more taxing authorities.
Double taxation agreements on the other hand refer to agreements between governments of two countries stating that the taxes one pays on dividends in one country may be deducted from one’s income from foreign dividends in the other country. This is especially important for multinational corporations and individuals who have overseas interests when one or both countries tax worldwide income.
The problems that double taxation presents have long been recognized, and with the constantly expanding integration of domestic economies into a world economy, countries have undertaken several measures to reduce the problem of double taxation. An individual country can offer tax credits for foreign taxes paid, or outright exemptions from taxation of foreign-source income.
According to a double taxation agreements document published by the Kenya Revenue Authority (KRA), the Government of the Republic of Kenya has so far concluded Double Taxation Agreements (DTA’s) with a number of countries and is currently expanding the treaty network. DTA’s are important since they help in alleviating double taxation where business is conducted in different tax jurisdictions and also assist tax administrations in preventing fiscal evasion.
The document lists the following DTA’s as ones that have been ratified and are therefore in force. The Legal Notices contain the full text of the conventions.
- Zambia – 27.8.1968 Legal Notice No. 10/1970
- Norway – 13.12.1972 Legal Notice No. 6/1973
- Denmark – 13.12.1972 Legal Notice No. 5/1973
- Sweden – 28.6.1973 Legal Notice No. 14/1973
- U.K – 31.7.1973 Legal Notice No. 253/1977
- Germany – 17.5.1977 Legal Notice No. 20/1980
- Canada – 27.4.1983 Legal Notice No. 111/1987
- India – 12.4.1985 Legal Notice No. 61/1989
Other DTA’s have been signed but have however not been ratified by all the Contracting States and are therefore in NOT in force. they are listed as follows:-
- Italy – 15.10.1979
- Tanzania & Uganda – 31.3.1999 L/N no. 45/1999 (Re-negotiated by EAC States on 23rd November 2005 in Arusha, Tanzania
The following DTA’s are at different stages of negotiation. For those that are in force, but under review, the existing DTA’s continue to operate until the review is complete. This will be intimated through a Legal Notice revoking the existing one.
- Tanzania & Uganda (re-negotiatiated 23rd November 2005)
- France (2nd round negotiations, Nairobi, 3rd February 2006)
- Thailand {1st round negotiations, Bangkok, 7th July 2006}
- India {review 1st round, New Delhi, 14th July 2006}
- Seychelles
- Nigeria
- South Africa
- Mauritius
- Finland
- Russia
- United Arab Emirates
- Islamic Republic of Iran