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Barbados-Kenya

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Update - Tax Treaty between Barbados and Kenya

The income tax treaty between Barbados and Kenya was signed on 7 December 2019. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Barbados income tax and corporation tax and covers Kenyan income tax chargeable in accordance with the provisions of the Income Tax Act.

Residence

If a person other than an individual is considered resident in both Contracting States, the competent authorities of both States will determine its residence for the purpose of the treaty through mutual agreement, having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. If no agreement is reached, such person will not be entitled to any relief or exemption from tax provided by the treaty except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting States.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel in a Contracting State if the activities continue for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 5%
  • Interest - 12.5%
  • Royalties - 12.5%
  • Technical Fees for any service of a managerial, contractual, technical, agency, professional, or consultancy nature - 12.5%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of share or comparable interests, such as interests in a partnership or trust if, at any time during the 365 days preceding the alienation, the share or comparable interests derived more than 50% of their value from immovable property situated in the other State, excluding property other than rental property through which the business of the company, partnership, or trust is carried on; and
  • Gains from the alienation of shares, other than the above, of a company that is a resident of the other State if the alienator, at any time during the 12-month period preceding the alienation, held directly or indirectly at least 25% of the capital of the company.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entitlement to Benefits

Article 30 (Entitlement to Benefits) provides that a benefit under the treaty will not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. However, Articles 26 (Mutual Agreement Procedure) and 27 (Exchange of Information) will apply from the date the treaty enters into force, without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.

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