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Resident Kenyans are taxed on worldwide employment income. For non -resident tax is charged on income which is deemed occurred in Kenya. Non-residents with investments or income accruing from Kenya may be taxed twice i.e. in Kenya and in their country of origin. To avoid this double taxation see 41 and 42 ITA deals with double taxation treaty or agreement DT A is a bilateral agreement between the Kenya country and other countries seeking to set out the implications and avoidance of double taxation.
Where a taxpayer is supposed to pay tax in Kenya and his country, he will be granted a tax relief on credit on tax payable in Kenya if his country of origin has a DTA with Kenya. Currently, DTA exists between Kenya and a number of countries which include
UK, Denmark, Germany, Malawi, Zambia, Switzerland, Canada, Italy, India, Sweden and Norway. DTA with Tanzania and Uganda existed up to 1977 and was withdrawn in 1978 by repealing see 41 of the ITA that deals with special arrangement for relief of double taxation treaty between Kenya and other countries.
DTA is intended to reduce tax liability and if DTA exists between Kenya and other countries the tax payable in that other country can be offset against tax payable in Kenya. DTA is granted for the following reasons
1. Facilitate exchange of technology in commerce and industry without making investors feel that they are overburden with double taxation
2. Facilitate exchange of qualified technical personnel without over burdening the persons with heavy taxation due to double taxation
3. To make domestic legislation comparable with other countries with which Kenya countries do not exceed that of Kenya.
Implications of double taxation agreement
1. Exchange of qualified technical experts
2. Increased labour mobility between the two countries
3. Transfer of technology from one country to another
4. Increased trade between the two countries
5. Removal of any trade barriers e.g. tariffs and quotas
6. Promotion of investments since DTA reduces the tax liability and increases the disposal income available for investment
7. There will be savings in foreign exchange currency
Wilfykil answered the question on February 25, 2019 at 11:09
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