The Double Taxation Relief (Taxes on Income) (Kenya) Order 1977

PART II

“PROTOCOL AMENDING THE AGREEMENT SIGNED AT NAIROBI ON 31 JULY 1973 BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE REPUBLIC OF KENYA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS, SIGNED AT LONDON ON 20 JANUARY 1976, AS AMENDED BY NOTES EXCHANGED AT NAIROBI ON 8 FEBRUARY 1977

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Kenya;

Desiring to conclude a Protocol to amend the Agreement between the Contracting Governments for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, signed at Nairobi on 31 July 1973 (hereinafter referred to as “the Agreement”);

Have agreed as follows:

ARTICLE I.  Paragraph (3) of Article 12 of the Agreement shall be deleted and replaced by the following:

“(3) Notwithstanding the provisions of paragraph (2):

(a) interest arising in a Contracting State, and paid to the Government of the other Contracting State or a local authority thereof, the Central Bank of that other Contracting State, or any agency wholly owned by that Government or local authority shall be exempt from tax in the first-mentioned Contracting State. The competent authorities of the Contracting States may determine by mutual agreement any other governmental institution to which this paragraph shall apply;

(b) interest arising in Kenya which is paid to a resident of the United Kingdom, other than to a person mentioned in sub-paragraph (a) of this paragraph, may be exempt from Kenya tax at the discretion of the competent authority of Kenya.”

  

ARTICLE II.  Paragraph (2) of Article 14 of the Agreement shall be deleted and replaced by the following:

“(2) Notwithstanding Article 8, management fees may also be taxed in the State in which they arise and according to the law of that State; but where such management fees are paid to a resident of the other Contracting State who is subject to tax there in respect thereof the tax so charged in the Contracting State in which the management fees arise shall not exceed 12 ½ per cent of the gross amount of the management fees arising there.”

  

ARTICLE III.  Paragraph (5) of Article 14 of the Agreement shall be deleted and replaced by the following:

“(5) If a resident of one of the Contracting States who receives management fees which arise in the other Contracting State and who is subject to tax in respect thereof in the first-mentioned Contracting State so elects for any year of assessment, financial year or year of income, the tax chargeable in respect of those management fees in the Contracting State in which they arise shall be calculated as if he had a permanent establishment in the last-mentioned Contracting State and as if those management fees were taxable in accordance with Article 8 as profits attributable to that permanent establishment.

Provided that in no such case shall the expenses deductible in calculating the tax chargeable in respect of those management fees exceed 75 per cent of the gross amount of those management fees arising in the last-mentioned Contracting State.”

  

ARTICLE IV.  Paragraph (1) of Article 20 of the Agreement shall be deleted and replaced by the following:

“(1) Any pension (other than a pension of the kind referred to in paragraph (2) of this Article) and any annuity, derived from sources within a Contracting State by an individual who is a resident of the other Contracting State may be taxed in the first-mentioned Contracting State, but if the individual is subject to tax in the other Contracting State in respect of the pension or annuity the tax so charged in the first-mentioned Contracting State shall not exceed the lower of:

(a) 5 per cent of the pension or annuity, or

(b) the amount of tax chargeable on the pension or annuity in the other Contracting State.”

  

ARTICLE V.  Paragraph (1) of Article 26 of the Agreement shall be deleted and replaced by the following:

“(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

(a) Kenya tax payable under the laws of Kenya and in accordance with this Agreement, whether directly or by deduction, on profits, income or chargeable gains from sources within Kenya shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Kenya tax is computed.

Provided that in the case of a dividend the credit shall take into account only such tax in respect thereof as is additional to any tax payable by the company on the profits out of which the dividend is paid and is ultimately borne by the recipient without reference to any tax so payable.

(b) In the case of a dividend paid by a company which is a resident of Kenya to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend the credit shall take into account (in addition to any Kenya tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Kenya tax payable by the company in respect of the profits out of which such dividend is paid.”

  

ARTICLE VI.  Paragraph (2) of Article 28 of the Agreement shall be deleted and replaced by the following:

“(2) The taxation on a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State shall not be less favourably levied in that other Contracting State than the taxation levied on an enterprise of that other Contracting State carrying on the same activities.

Provided that this paragraph shall not prevent the Government of one of the Contracting States from imposing on the profits attributable to a permanent establishment in that Contracting State of a company which is a resident of the other Contracting State a tax not exceeding 7 ½ per cent of those profits in addition to the tax which would be chargeable on those profits if they were the profits of a company which was a resident of that Contracting State.”

  

ARTICLE VII.  Article 32 of the Agreement shall be deleted and replaced by the following:

“Entry into force

ARTICLE 32.   This Agreement shall come into force on the date when the last of all such things shall have been done in the United Kingdom and Kenya as are necessary to give the Agreement the force of law in the United Kingdom and Kenya respectively, and shall thereupon have effect:

(a) in the United Kingdom:

(i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6 April 1976;

(ii) in respect of corporation tax, for any financial year beginning on or after 1 April 1976;

(b) in Kenya:

in respect of income arising for the year of income 1976 and subsequent years.”

  

ARTICLE VIII.  This Protocol, which shall form an integral part of the Agreement, shall come into force when the last of all such things shall have been done in the United Kingdom and Kenya as are necessary to give the Protocol the force of law in the United Kingdom and Kenya respectively, and shall thereupon have effect:

(a) in the United Kingdom:

(i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6 April 1976;

(ii) in respect of corporation tax, for any financial year beginning on or after 1 April 1976;

(b) in Kenya:

in respect of income arising for the year of income 1976 and subsequent years.

In witness whereof the undersigned, duly authorised thereto, have signed this Protocol.

Done in duplicate at London this 20th day of January 1976.

  

FOR THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND:

D. ENNALS

FOR THE GOVERNMENT OF THE REPUBLIC OF KENYA:

NG'ETHE NJOROGE”