Kenya plans to sign an agreement with China to end double taxation of income or gains arising from one country and paid to residents of the other.
The deal, which will be subject to ratification by both the Chinese and Kenyan parliaments, is meant to create a conducive environment for investment and trade in goods and services between the two countries.
National Treasury Cabinet Secretary Ukur Yatani has asked citizens for their views before the government signs the deal.
Kenya and China are major trading partners, but the trade deficit between the two countries has been widening, with China increasingly exporting more goods into the country.
Statistics released by KNBS last month showed the country’s trade deficit with China widened to Sh425.17 billion in the year through March 2022 from Sh370.58 billion a year ago, a 15 per cent jump.
A review of the intended Double Taxation Agreement (DTA) between Nairobi and Beijing showed it would focus on trade and investment, education and research, and sports.
Kenyans studying in China, for example, will be exempted from paying tax on cash sent to them for tuition and upkeep in the proposed deal.
The DTA will also see Chinese firms paying income tax on their business in Kenya get a reprieve from paying the same tax in China unless what they are required to pay on the income in China is higher. The same will apply to local firms doing business in China.
“Where a resident of China derives income from Kenya, the amount of tax on that income payable in Kenya in accordance with the provisions of this agreement may be credited against the Chinese tax imposed on that resident,” states the DTA.
However, the agreement deals a blow to sportspersons working or participating in events in China, as their income will still be taxed both in both countries
This also applies to radio and television personalities, actors and other players in theatre or motion picture, as well as musicians and other entertainers.