KRA Double Taxation Agreements: Understanding Their Significance for Business
Double taxation agreements or DTAs have been created to eliminate the taxation of the same income in two different countries. These agreements are meant to benefit businesses and individuals that have international operations. Kenya Revenue Authority (KRA) has entered into several bilateral DTAs with other countries to promote cross-border trade and investments. One such agreement is the KRA Double Taxation Agreement.
A double taxation agreement is an agreement between two countries that ensures that individuals and companies in one country are not taxed twice on the same income in another country. Through such an agreement, taxes levied in one country can be offset against taxes paid in another country, thereby ensuring that individuals and companies are not taxed at a higher rate than they need to be.
Kenya has signed DTAs with various countries, including the United Kingdom, Germany, Canada, South Africa, and Mauritius, among others. These agreements provide a wide range of benefits to businesses, including reduced withholding tax rates on dividends, interest, and royalties, and lower rates of income tax for employees.
The KRA Double Taxation Agreement is an agreement between Kenya and another country that eliminates the double taxation of income earned in both countries. This agreement helps businesses avoid tax disputes and double taxation that could result in significant financial losses.
One example of a DTA benefit for businesses is seen in the case of Kenyan businesses investing in Mauritius. The KRA Double Taxation Agreement between Kenya and Mauritius provides for a lower withholding tax rate of 5% on dividends paid by companies in Mauritius to Kenyan shareholders. This means that Kenyan shareholders of Mauritian companies will only be required to pay 5% withholding tax on dividends paid by the company, rather than the higher rate of 15% that would apply without the agreement.
In terms of employment benefits, DTAs also offer relief for expatriate employees from double taxation on income earned in both countries. This is beneficial for companies that provide services or employ individuals in more than one country.
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In conclusion, DTAs are crucial for business owners or individuals with international operations. They provide relief from double taxation, reduce tax disputes, and promote cross-border trade and investments. For businesses investing in Kenya or other countries, it is essential to analyze the tax implications of DTAs to ensure full benefits are obtained.
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