Kenya-Singapore Double Taxation Agreement (DTA) Now in Effect

On 11th February 2025, the Kenyan Cabinet approved the Kenya-Singapore Double Taxation Agreement (DTA) on the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and avoidance. This agreement, signed on 23rd September 2024, marks a significant update from the earlier DTA in force since 12th June 2018.

The new DTA, officially gazetted on 2nd May 2025 (Gazette Notice No. 5583), introduces several key provisions aimed at reducing tax burdens and enhancing trade between the two nations.

Key Highlights:

Withholding Tax Rates:

• Dividends: 8%
• Interest: 10%
• Royalties: 10%
• Technical Fees (including payments for managerial, contractual, professional, and consultancy services): 10%

Residency Determination:

• Individuals: Based on permanent home, center of vital interests, habitual abode, or nationality if unresolved.
• Corporate Entities: Determined by the place of effective management.

Permanent Establishment (PE) Tests:

• Construction activities: 6 months
• Service provision: 183 days in any 12-month period
• Natural resource exploration: 91 days in any 12-month period

Capital Gains Tax:

• Gains from immovable property taxable in the state where the property is located.
• Gains from shares or similar interests taxable if more than 50% of their value is derived from immovable property in the state.

This DTA is a vital step in enhancing bilateral trade by offering preferential tax rates, encouraging Foreign Direct Investment (FDI) from Singapore, and complementing the provisions of the existing Bilateral Investment Treaty (BIT).