The DBA applies to direct taxes managed under the Income Tax Act, Cape 470 of Kenyan laws. It includes corporation tax, withholding tax, payroll payment (PAYE) and capital gains tax (CGT). Mauritius does not have a CGT scheme, so the DBA only covers income tax, including corporate social responsibility. The DBA foresees a reduction in withholding rates at source, as shown below: under the cancellation of the DBA, the Kenyan government introduced a subsequent DBA between Kenya and Mauritius on 26 June 2020. The DBA is very similar to the original DBA and provides for reduced withholding rates on dividends, interest and royalties. The DBA also addresses other relevant issues, including the exchange of information between the two countries and the procedures of the reciprocal agreement. However, payments made by PE to its head office or to one of its other headquarters for licensing fees, commissions, administrative fees or interest are non-deductible expenses, unless they relate to an effective reimbursement of fees. There is no withholding tax if the royalty is paid by a company from the foreign income of the Mauritian company. Reduced withholding rates only apply if the recipient is the recipient of the income.
Expenses, including general administrative and supervisory expenses, borne by the EP inside or outside the country in which it is located, are deductible for the calculation of PE`s taxable profit. Under Mauritian national law, no withholding tax applies to interest paid to a non-resident who does not operate in Mauritius (a) from a Financial Services Act (FSA) company on his foreign source income; (b) by a bank holding a banking licence under the Banking Act, to the extent that interest is paid on the gross income of its banking operations with non-residents and companies holding a GBL under the FSA. Interest collected is also tax-exempt in a number of other cases, such as. B the interest rate for a non-resident person of a Mauritanian bank and interest on bonds and sukuks listed on the stock market of a non-resident company. In March 2019, the High Court of Kenya annulled an agreement on the prevention of double taxation (DBA) between Kenya and Mauritius. Here is an EY Tax Insights article with more details on the nullity of the DBA. The two states agreed to exchange information relevant to the application of the DBA as well as to the management of national taxes collected in the contracting states . . . . However, the remuneration of a resident of a contracting state for employment in the other contracting state is taxable only in the first state, if: a) the 5% rate applies when the economic beneficiary of the dividends is a company (with a partnership) that directly owns at least 10% of the capital of the dividend distribution company.