Kenya has struck a deal with Singapore to eliminate double taxation, positioning itself as a strategic business hub for Asian investors. The agreement, reached during the United Nations General Assembly, is set to ease cross-border trade and investments, marking Singapore as the 50th country to enter such a pact with Kenya.
This move is expected to not only benefit businesses operating between the two nations but also position Kenya as a strategic economic hub.
Foreign Affairs Cabinet Secretary Musalia Mudavadi and Singapore's Vivian Balakrishnan finalised the deal, which supersedes a previous 2018 agreement. The changes in taxation will particularly affect companies engaged in sectors such as shipping, logistics, and FinTech, sectors where Singapore already has a significant presence in Kenya.
Why it matters: The agreement is more than just paperwork—it’s a promise to ease cross-border business operations by eliminating the financial burden of double taxation. Kenyan businesses operating in Singapore, as well as Singaporean enterprises in Kenya, will now benefit from clearer taxation rules.
Importers, exporters, and investors will feel immediate relief, particularly in industries such as agribusiness and port management.
Dig Deeper: For businesses with permanent establishments in either country, the agreement outlines deductions for expenses incurred during operations. This includes administrative expenses, executive costs, and general business-related costs, ensuring businesses are not double-charged on profits made across borders. However, exceptions have been made for certain industries, notably banking, ensuring that royalties or interest payments aren't exploited.
What makes this deal stand out is its clarity. Taxpayers will no longer face the challenge of paying taxes twice—once in their home country and again in the foreign country they operate in. Instead, profits made from operations like international shipping or aircraft rentals will only be taxed in the country where the business is headquartered.
As part of the agreement, profits made through the operation of ships or aircraft in international traffic will only be taxed in the country where the business is registered. This means shipping and airline industries stand to gain significantly, especially for companies with dual operations in both countries.
For individual taxpayers, this deal could also bring about long-term relief. Double Taxation Agreements (DTAs) aim to prevent individuals and companies from being taxed twice on the same income. In the case of cross-border professionals, clarity in tax rules means less confusion and fewer disputes over where income taxes should be paid.
What Kenya gets: Kenya, often compared to Singapore in terms of its ambitions to become an economic powerhouse, stands to gain from this deal. Singapore, renowned for its advanced infrastructure and technological advancements, can provide the blueprint for Kenya’s growth.
The removal of double taxation is a practical step in this direction, encouraging not just bilateral trade but also long-term economic partnerships.
