Kenya’s ambassador to South Korea Ngovi Kitau. The two countries are negotiating a tax and investment treaty to boost business relations. Photo/FILE
What you need to know:
A delegation of negotiators from the Treasury in Nairobi has since Tuesday been held up in follow-up talks with the counterparts from Korea on the prospects of signing a tax and investment treaty soon.
Kenya is also eyeing knowledge transfer from Korea to help develop nuclear energy, to supplement its electricity requirements.
Kenya is eyeing a tax and investment deal with South Korea amid growing business ties between the two nations.
A delegation of negotiators from the Treasury in Nairobi has since Tuesday been held up in follow-up talks with the counterparts from Korea on the prospects of signing a tax and investment treaty soon.
The two groups held a similar meeting in Nairobi late last year to push for the deal that could open up business between the two countries.
“The issue of taxation and protection of investment are sensitive to any investor and can influence the direction things take,” Ngovi Kitau, Kenya’s ambassador in South Korea, said while confirming the ongoing talks in Seoul.
Kenya and South Korea have witnessed increased business activity between them, hence the new push for favourable trade and investment ties.
For instance, Korea’s technology firm Samsung is set to open an electronic assembly plant in Kenya by end of year positioning Nairobi as the nerve centre of its operations in East Africa.
Many Korea companies have also invested in Kenya’s energy, transport, construction, manufacturing and service sectors.
Kenya is also eyeing knowledge transfer from Korea to help develop nuclear energy, to supplement its electricity requirements. The Asian nation is already providing technical support to Kenya on nuclear energy.
South Korea in June last year began direct flights between its Incheon International Airport and the Jomo Kenyatta International Airport, signalling its resolve for deeper ties with Kenya.
One of the Kenyan negotiators said the week-long talks centred on double-taxation and related issues such as protection of investments.
“We want to get the best for both sides because the partnership looks headed for bigger things,” he said on condition of anonymity, citing protocol.
Double taxation leads to losing significant portion of income. Corporations too face the challenges of double taxation in that apart from paying company taxes on their earnings they could also have their shareholders taxed.
But even with such disadvantages, Kenya has over the years, only had a handful of double tax treaties (DTTs) with key trade and investment partners, losing out to rivals such as Mauritius with a more favourable tax regime, efficient judicial system and robust asset protection laws.
Kenya has double tax treaties with the UK, Canada, Denmark, Norway, India, Sweden, Zambia and Germany while talks are ongoing to sign such an arrangement with France and Italy.
Kenya has further signed DDTs with fast-rising economic tigers such as China and India, Singapore, United Arab Emirates and Malaysia. In 2011 it signed a tax treaty with the East African Community (EAC).
The EAC is a key market for the country with one of its members — Uganda — being the single largest importer of Kenyan goods while the UAE remains the country’s largest source of imports mainly because of the large quantities of petroleum it supplies to East Africa.
Kenya also has draft agreements for negotiation with Seychelles, Nigeria, South Africa, Mauritius, Finland, Russia and Iran.
Investors are sensitive to the protection of their wealth by host countries and always pay keen attention on laws governing such issues.
Attractive package
Mauritius has given countries in the region a run for their money owing to its favourable tax regime.
For instance, while Kenya only had in place a few DTTs, the Indian Ocean country has more than 30 of them with countries in the region as well as abroad.
Uganda, Botswana, Lesotho, Mozambique, Rwanda, South Africa, Swaziland, Tunisia and Uganda are among African nations that have signed double taxation treaties with Mauritius.
Besides the DTTs a review of the business climate in Mauritius showed an attractive package for foreign investors.
