Treaties and International Policy

 

Treaties and International Policy

Treaties and International Policy

The Treaty & International Policy office is tasked with managing international tax matters that include Double Taxation Agreements (DTAs), Mutual Agreement Procedures (MAP), Legislative Review and Implementation of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Agenda recommendations domestically.

01

Double Taxation Agreement (DTA) Management

  • A Double Taxation Agreement (DTA) is a treaty between two or more countries to avoid double taxation of income and to enhance economic cooperation.
  • This function of the office involves carrying out an in depth analysis of the DTA network and domestic tax systems of countries with which Kenya intends to negotiate and sign DTAs. The team prepares a report on this and shares it with the National Treasury to be used during the preparation phase and actual negotiation of the DTA.
  • The office also provides interpretation of tax treaties which are in force between Kenya and other countries to ensure that they are properly applied and implemented. This interpretation is done upon request from taxpayers seeking to understand how treaties apply to their transactions.

For more information on Double Taxation Agreements (DTAs), including access to the DTAs currently in force, please visit the National Treasury website using the following link:

National Treasury – Double Taxation Agreements →
02

Legislative Review

  • This involves providing comprehensive policy analysis and advice to the National Treasury on all matters of taxation of cross border transactions.
  • It involves identifying gaps in the international tax legal framework and designing and recommending amendments to legislation on all issues of cross border taxation.
  • The proposals made are mainly in line with the policies being adopted internationally in order to minimize cases of base erosion and profit shifting in order to preserve the country’s tax base.
03

Participation in International Taxation meetings

  • The meetings are held to develop international tax laws and policies intended to seal loopholes in domestic tax systems and to ensure that taxes are paid in the jurisdictions where value is created.
  • The main bodies that organize these meetings are the OECD (Organisation for Economic Cooperation and Development), the UN (United Nations), ATAF (African Tax Administration Forum) and EARATC (East African Revenue Authority Technical Committee).
  • This engagement is beneficial because it ensures that developing country perspectives are incorporated in the development of international tax policies.
04

Mutual Agreement Procedure (MAP) - Dispute Resolution

  • A Mutual Agreement Procedure (MAP) is a process through which taxpayers approach the Competent Authorities of the parties to the DTA in order for them to address cases of double taxation or taxation not in accordance with the DTA.
  • A Kenyan resident taxpayer can initiate a MAP with the Kenyan Competent Authority if he establishes that an action of KRA or one of Kenya’s tax treaty partners, or both, will result in taxation not in accordance with a tax treaty in force between the two jurisdictions.
  • The MAP request must be filed within 3 years from the date of notification of the act.
  • Where the Kenyan Competent Authority can resolve the taxation not in accordance with the DTA unilaterally, then the MAP case is closed at this stage.
  • Where the taxation not in accordance with the DTA cannot be resolved unilaterally, the two Competent Authorities will enter into discussions and endeavour to resolve the issue.

For more information on Kenya's MAP Guidance, please access the guidance using the link .

Guidance on Mutual Agreement Procedure →
05

Tax Residence Certificates (TRCs)

  • These are certificates issued to taxpayers to prove their tax residency in Kenya and that taxes are paid herein. The certificate is generally used to avoid double taxation in the other country where they may be conducting business and with which there is a DTA with Kenya in force.
  • Tax residence is determined by Section 2(1) of the Income Tax Act.
The information to be included in an application for a Tax Residence Certificate and the documents required to be attached to the application letter are as follows:
Application for Individuals
  1. Full name and address of the applicant.
  2. I.D. Number and KRA PIN.
  3. Alien I.D and work permit, where applicable.
  4. The reason and period for which a certificate is required.
  5. The type and amount of foreign income received during the period for which a certificate is required (attach invoice where applicable).
  6. The Article of the DTA under which the request regarding this income is being made (attach form from the other country where applicable).
  7. If the individual is not in receipt of foreign income, details of the circumstances under which a certificate is required.
    1. Proof of a permanent home in Kenya (for example, title deed, lease/tenancy agreements etc)
    2. Proof of presence in Kenya (for example, bills paid in the applicant’s name, Passport entry or exit stamps etc) as required by Section 2 of the Income Tax Act.
  9. If no permanent home, proof of presence in Kenya for 183 days or an average of 122 days in that year of income and in each of the two preceding years as required by Section 2 of the Income Tax Act.
Application for Companies
  1. Name and address of the applicant.
  2. Copy of Certificate of incorporation of the applicant.
  3. The reason and period for which a certificate is required.
  4. The type and amount of foreign income received during the period for which a certificate is required.
  5. The Article of the DTA under which the request regarding this income is being made (attach form from the other country where applicable).
  6. If the company is not in receipt of foreign income, details of the circumstances under which a certificate is required.
Application for Partnerships

(Section 3(3)(a) of the Income Tax Act excludes partnerships from being subject to tax in Kenya, meaning that the partnership itself cannot be a tax resident. The partnership can be issued with a Certificate clearly stating that, while the partnership itself is not a tax resident, some or all of its partners are resident and can claim treaty benefits. Limited liability partnerships are still transparent for tax purposes.)

  1. Name and address of the applicant.
  2. Business Registration details of the applicant.
  3. A signed list detailing the individual partners’ names, separately identifying those that are residents of Kenya and those that are not. Each individual partner is required to provide documents to support their residence status as required in the section on ‘Application for individuals’.
  4. The reason and period for which a certificate is required.
  5. The type and amount of foreign income received during the period for which a certificate is required.
  6. The Article of the DTA under which the request regarding this income is being made (attach form from the other country where applicable).
  7. If the partnership is not in receipt of foreign income, details of the circumstances under which a certificate is required.
The application should be addressed to:

The Commissioner,
Large and Medium Taxpayers Department,
Kenya Revenue Authority,
Times Towers, 19th Floor,
P.O. Box 48240 – 00100,

For physical submission submit to;

Kenya Revenue Authority
Ushuru Pension Plaza- Ground Floor
Muthangari Drive, Westlands

For Submission and inquiry send an email to trc@kra.go.ke or call 0709017933
NOTE: PROCESSING OF TRC APPLICATIONS TAKES 15 WORKING DAYS.
06

Country-by-Country Reporting (CbCR)

  • Kenya legislated CbCR by introducing Sections 18B, 18C, 18D, 18E and 18F of the Income Tax Act (ITA) through the Finance Act, 2022. These sections provide for CbCR filing requirements which apply to returns for the years of income 2022 and subsequent years of income. These sections require the ultimate parent entities and constituent entities to comply with CbCR obligations and, where applicable, to file a CbC Report, Master File, and Local File.
  • The three-tiered CbCR documentation comprises of the Country-by-Country Report, Master File and Local File.
  • The CbC Report enables tax administrations to assess high-level transfer pricing and Base Erosion and Profit Shifting (BEPS) risks and supports the automatic exchange of information between relevant tax jurisdictions.
  • Filing of a CbC Report applies to MNE groups with annual consolidated group revenue of Ksh. 95 billion or more.

The filing requirements are:

CbCR Notification:

The Constituent Entity (CE) is required to submit a notification through the CbCR email before the end of the reporting financial year.

Master File and Local File:

The CE submits the Master File and Local File through the CbCR email within six months after the end of the reporting financial year.

CbC Report:

The Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) submits the CbC Report through the CbCR email within 12 months after the end of the reporting financial year.

For more information on Country-by-Country Reporting, please access the FAQs using the link

Country-by-Country Reporting FAQs →

For inquiries, send an email to cbcr@kra.go.ke or call 0709017933/2425.

cbcr@kra.go.ke
0709017933/2425