Tax breaks can be used if tax already paid on income and profits made in other countries is used as a deduction ahead of tax due in the country of residence. In addition, Kenya has signed the DTAs with Mauritius, Norway, South Africa, Sweden, Great Britain, Zambia, Qatar and Italy. However, payments made by PE to its head office or to one of the other institutions of its head office in respect of royalties or similar payments, commissions, administrative costs or interest shall not be deductible expenses, unless they relate to an actual reimbursement of expenses. Following the repeal of the DBA, the Kenyan government issued, on 26 June 2020, a subsequent DBA between Kenya and Mauritius. The DBA is substantially similar to the initial DBA and provides for reduced rates of withholding tax on dividends, interest and royalties. Agreements may also contain details of how tax paid in one country is set off against tax due in the other country. In cases where two countries are entitled to taxable income, the agreements determine which country has priority. Under Mauritian domestic laws, no withholding tax applies to interest paid to a non-resident who is not engaged in business in Mauritius (a) by a company holding a Global Business Licence (GBL) on its foreign income, in accordance with the Financial Services Act (ASL); (b) by a bank holding a banking licence under the Banking Act, provided that interest on the gross income from its banking operations is paid with non-residents and companies holding a GBL according to the ASL. Interest is also exempt in a number of other cases, for example.B. Interest of a non-resident person from a Mauritian bank and interest on listed bonds and sucuks held by a non-resident company. Since a country can sign DTAs with many countries, is there a single format for DTAs? The answer is no. There is no single agreed format for DTAs. There is no withholding tax when the royalty is paid by a company of income at the foreign source of the Mauritian company.
That is why Kenya has signed DTAs with several countries. Some countries are India, Singapore, the United Arab Emirates, the Netherlands, Japan, China and Russia. The DBA provides for reduced withholding tax rates, as shown below, but not all countries have ratified the DCM. This effectively means that the agreements are not applicable in some countries. However, there are some counter-arguments that DTAs are counterproductive for countries because they reduce taxes paid and thus hurt tax revenues. Many Chinese companies earn income from their investments in Kenya, which necessitated the signing of the agreements. This requires the signing of DTAs so that Kenyans can benefit from them and the government can also receive a share of taxes that should have been paid in other countries. Countries that obtain DTAs are those whose inhabitants have investments and make income or profits in both countries. For example, in Kenya, the DTA has with China. Some of these agreements provide for preferential rates for withholding tax. .