Double tax agreement between South Africa and Kenya: A guide for investors

South Africa and Kenya have recently signed a double tax agreement (DTA) to help stimulate trade and investment between the two nations. The new agreement, which was signed on 18 April 2019, aims to eliminate the double taxation of individuals and companies operating in South Africa and Kenya. This article will provide an overview of the new DTA and its implications for investors.

What is a double tax agreement?

A double tax agreement is a treaty between two countries that aims to prevent double taxation of an individual or company`s income. Double taxation occurs when two countries tax the same income or profits of an individual or a company. This can happen when an individual or company has income or profits in both countries. A DTA aims to provide clarity on how taxes should be paid and at what rate.

What does the South Africa-Kenya DTA cover?

The South Africa-Kenya DTA covers taxes on income and capital gains. It applies to residents of both countries who are subject to tax in both countries. The agreement provides relief from double taxation by allowing residents of one country to claim a credit for taxes paid in the other country.

The DTA also sets out the maximum tax rates that can be imposed on certain types of income or activities. For instance, the maximum rate of withholding tax that can be levied on dividends is set at 5%. The DTA also provides for the exchange of information between tax authorities to prevent tax evasion.

Implications for investors

The new DTA has important implications for investors from both countries. It helps to provide certainty and clarity on how taxes will be paid and at what rate. This can help to reduce the tax burden on investors and increase investment flows between the two countries.

Investors in South Africa who receive income from Kenya or invest in Kenyan companies will benefit from the reduced tax rates on dividends, interest, and royalties. The DTA also provides for reduced withholding tax rates on technical services and management fees.

Investors in Kenya who receive income from South Africa or invest in South African companies will also benefit from the reduced tax rates on dividends, interest, and royalties. The DTA also provides for reduced withholding tax rates on technical services and management fees.

Conclusion

The South Africa-Kenya double tax agreement is a positive development for investors and businesses looking to expand their operations between the two countries. The agreement provides clarity on how taxes will be paid and at what rate, helping to reduce the tax burden on investors. It also provides for the exchange of information between tax authorities to prevent tax evasion. With the implementation of this DTA, investors and businesses can now look forward to a more attractive investment climate that encourages cross-border investments and partnerships.