President William Ruto’s administration has initiated plans with the Bangladesh National Government to eliminate double taxation between the two countries.
The program is spearheaded by the National Treasury Ministry and will see Bangladesh businesses not pay taxes in Kenya with the favour replicated to Kenyan businesses in the Asian country.
The only time Kenya will receive revenue from the business profits is if the business is permanently situated in Kenya instead of Bangladesh.
Bangladesh Foreign Minister AK Abdul Momen
According to the National Treasury, the elimination of double taxation ensures no opportunities for non-taxation through tax avoidance or evasion.
Should the business have a permanent establishment in Kenya, it will be taxed but only so much of it is attributable to that permanent establishment.
According to the two countries, permanent establishment means, “Fixed place of business through which the business of an enterprise is wholly or partly carried on.”
This includes but is not limited to; a place of management, branch, office, factory, workshop or any place of extraction of natural resources.
Additionally, businesses from Bangladesh will be exempt from taxation on profits received from shipping and air transport.
“Profits of an enterprise of a contracting state (Kenya or Bangladesh) from the operation of ships in international traffic may be taxed by the other contracting state, provided that such profits are derived from operations in that other contracting state,” the agreement reads in part.
The taxation though will be capped to ensure that it does not exceed per cent of the tax imposed by the other country.
As outlined by the National Treasury, profits from the operation of ships or aircraft in international traffic shall include profits derived from the rental on a bare boat basis of ships or aircraft used in international traffic.
The tax exemption will not include income derived from immovable property.
“Income derived by a resident of a contracting state from immovable property (including income from agriculture, forestry or fishing) situated in the other contracting state may be taxed in that other state,” the agreement outlines.
Other forms of revenue that will be subject to double taxation include dividends, interest, royalties, capital gains and fees for technical services.
A collage of Bangladesh Foreign Minister AK Abdul Momen (Left ) and President William Ruto at the opening of the Second Session of the United Nations Habitat Assembly on Monday, June 5, 2023.(Right)