Kenya and Singapore have signed pacts that will see their firms pay taxes only once when their trade traverse the two states.
Treasury secretary Henry Rotich and Singapore’s Trade and Industry minister Koh Poh Koon signed an agreement on avoidance of double taxation (DTA) committing to give up levies already collected in each other’s jurisdiction.
The deals will also the two countries promote and protect each other’s investments.
“We have had a long negotiation on these documents which we have finally signed today,” said Mr Rotich. “We hope to see more Singaporean investments set up here in Nairobi and vice versa.”
Under a DTA, a firm or its subsidiary that has paid taxes in host country of operation can not be asked to pay levies of a similar nature for proceeds repatriated home.
The agreement on promotion and protection of investments, on the other hand, guarantees investors a degree of confidence and comfort by assigning the foreign firms an array of legally binding rights and obligations based on international law.
“Beyond and above these agreements, Kenya also needs to fix its governance since this has been the basis of Singapore’s progress,” said Dr Koon. “We also expect to collaborate on boosting connectivity between the two states.”
The DTA between Kenya and Singapore must however be ratified by Parliament before it can take effect.
Trade between the two states has nosedived in the last five years with Kenya’s annual imports falling from Sh19.4 billion in 2013 to Sh5.8 billion last year and exports dropping from Sh1.8 billion to Sh375 million.
Mr Rotich said the DTA signed on Tuesday would boost trade in goods and services by removing taxation uncertainties.