Kenya-Mauritius Double Tax Avoidance Treaty

Posted on March 19th, 2019

By Walter Amoko | Lena Onchwari

Introduction

Kenya, as is the case with other countries, has entered into a number of Double Tax Avoidance Treaties (DTAs) with an aim of avoiding or mitigating double taxation of persons (both legal and natural) residing in the contracting states but more importantly as a way of encouraging Foreign Direct Investments.

Kenya signed a DTA with Mauritius (a country that has a vast treaty network and favorable tax framework) which was subsequently gazetted by the Cabinet Secretary of Finance via Legal Notice Number 59 of 2014 issued under the Income Tax Act. The Tax Justice Network Africa challenged both the constitutionality of the DTA and Legal Notice before the High Court on multiple grounds including opacity of the process, the need for public participation in the exercise, that it was not for the benefit of Kenya and lack of Parliamentary scrutiny.

The High Court has now given its Judgment. The constitutional challenge to the DTA failed. The High Court found that the DTA had some form of ratification as required since both states agreed to be bound by it and that the process of its formulation was open and transparent. Further the court found there was no basis for faulting want of public participation. However, the Legal Notice that was intended to domesticate it was void because it was not tabled before Parliament within the time required by the Statutory Instruments Act.

Impact

The High court’s decision did not invalidate the Double Tax Avoidance Treaty by declaring it unconstitutional nor did it affect the propriety of anything done under it prior to the invalidation of the Legal Notice. It merely declared the Legal Notice as void for lack of parliamentary scrutiny. The impact of this is that though the DTA is still valid, it does not have legal effect in Kenya.

It is open to the Cabinet Secretary to issue a new Legal Notice in respect of this (and any other similar Legal Notices on any DTAs entered after 2013) and ensure full compliance with the Statutory Instruments Act including presenting it ; with all the required information, on time to Parliament.


Should you require further information on the DTA, please contact Walter Amoko (Partner) or Lena Onchwari (Partner):

Tax

Posted on June 13th, 2018

Our Tax practice area is well known for its comprehensive understanding of the Kenyan tax laws. The practice area is regarded for its expertise in handling both contentious and non-contentious tax matters, developing solutions that are both tax efficient and practical to help our clients maximize opportunities, while minimizing risks.

The practice area provides advice on domestic and international tax, value-added tax, income tax, capital gains tax and transfer pricing. We also advise on the tax implications of mergers and acquisitions and capital markets transactions. In tax disputes, the tax practice is renowned for its creative approach and is forward thinking in tax litigation due to the complexity of Kenyan tax laws.

Some of our notable contentious and non-contentious tax matters include:

  • Acting for a Kenyan based company that manufactures branded beer, spirits, and non-alcoholic beverages in an appeal against excise duty and VAT assessment on alcoholic beverages amounting to KES 18 million. We are currently representing our client at the Tax Appeal Tribunal.
  • Advised regional company on the tax aspects of their share restructuring and group reorganisations in regard to significant capital investment by global private equity investors.
  • Advised a Credit Company with both domestic and foreign presence, operating business in the digital loan industry on transfer pricing, thin capitalization, related party transactions, bad debts and tax deductions.
  • Acting for a major real property leasing company in seeking to compel the KRA to make an objection decision with respect to the Company’s objection to KES 14 million tax demands allegedly arising out of inconsistent VAT entries on the Company’s iTax Portal.
  • Representing a leading beverage bottling company in an Excise Duty dispute amounting to USD 5,611,025 at the Tax Appeals Tribunal.

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For more information about our Arbitration practice, please contact George Oraro SC (Founding Partner) or Lilian Renee Omondi (Partner).  Alternatively click here to download our Tax profile.

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George Oraro SC
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E: goraro@oraro.co.ke

About Us

Oraro & Company Advocates is a full-service market-leading African law firm established in 1977 with a strong focus on dispute resolution and corporate & commercial law. With a dedicated team of 10 partners, 4 senior associates, 10 associates, 1 lawyer and 36 support staff, the Firm has been consistently ranked by leading legal directories such as Chambers Global, IFLR 1000 and Legal 500 as a top-tier firm in Kenya.

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