Mauritius yet to ratify Kenya tax deal 3 years on - Treasury


The National Treasury building in Nairobi. PHOTO | DENNIS ONSONGO | NMG

Mauritius is yet to ratify the double tax deal with Kenya more than three years after Nairobi deposited the instrument with the Indian Ocean Island nation.

The Treasury told the National Assembly’s Finance and National Planning Committee that Parliament ratified the expanded double taxation avoidance agreement (DTAA) between Kenya and Mauritius on December 12, 2020, after the court nullified the one that existed.

“We immediately notified Mauritius in January 2021 through Foreign Affairs and did a reminder to them in July 2021 but they have not received a response,” said Samuel Gitau, senior deputy director at the Treasury.

“We ratified the DTAA through our Embassy in Addis Ababa but Mauritius has not ratified it for it to take effect.”

Mr Gitau represented the Treasury during the ongoing public participation in the ratification of the Multilateral Convention to implement tax treaty related to measures to prevent Base Erosion and Profit Shifting.

The committee chaired by Molo MP Kuria Kimani is seeking stakeholder views on the proposed ratification of the MLI, an instrument that seeks to modify Covered Tax Agreements to implement tax treaty-related measures to prevent Base Erosion and Profit Shifting projects.

In 2017, about 70 tax jurisdictions worldwide signed the MLI under the Organisation of Economic Cooperation and Development, (OECD) to seal loopholes that multinational companies use to exploit gaps in tax regulations to shift profits to low-tax locations, thereby preventing double non-taxation where income is untaxed in multiple jurisdictions.

Several stakeholders including the Law Society of Kenya, Anjarwala & Khanna, Bowmans, RSM, PwC, PKF, EY and the Kenya Private Sector Alliance, supported the ratification of the MLI.

“We note that Kenya has included DTAs that are signed but not ratified or in force. Italy and Mauritius for instance and other signed DTAs are not ratified should also be included in the list of notification,” PwC said in submissions to the committee.

“The list of notifications should include China, EAC, Kuwait and the Netherlands.”

Kenya has given notification of tax treaties covered by the MLI Convention to include 17 DTAs. They include Canada, Denmark, France, Germany, India, Iran, Italy, Korea, Mauritius, Norway, Qatar, Seychelles, South Africa, United Arab Emirates, Sweden, United Kingdom and Zambia.

The PwC said Kenya has no treaties signed with countries with significant foreign direct investments (FDI) such as the US (11 percent FDI), Japan (3 percent FDI), Switzerland (3 percent (FDI) and Australia (2.1 percent FDI).

“Why have you not signed DTA with the US? We know the President will be undertaking a State visit to Washington in May, can the Treasury take advantage to negotiate a DTA?” Mr Kimani asked.

Mr Gitau told the committee that before countries agree to enter a DTA, they look at their national and regional interests.

He said Kenya initiated the process of the Millennium Challenge with the US but the US preferred to engage through another framework.

“We are in engagement with Japan. We are in the third round of negotiations with Switzerland, we have submitted to China our outcome of public participation and we have engaged twice with the Netherlands,” Mr Gitau said.

“Netherlands delayed the process until we concluded a DTA with Belgium. The countries are looking at their national interest as well as regional interests.”

Kenya has 14 DTAs that are in force. The Kenya-Mauritius DTA has faced challenges after it was subject to litigation for six years.

Kenya and Mauritius signed a protocol amending the earlier DTAA in a bid to eliminate double taxation and provide greater tax certainty for business persons of both countries on all forms of income arising from cross-border activities.

Kenyans are believed to hold billions of shillings in Mauritian banks with unconfirmed sources indicating that the bulk of Sh800 billion that was wired back early this year under the Kenya Revenue Authority’s amnesty came from the island state.

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