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Kenya 24. Convention for avoidance of double taxation
of income and the prevention of fiscal evasion with Kenya Whereas
the Government of India and the Government of Kenya have concluded a
Convention, as set out in the Annexure hereto, for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income; And
whereas all the requirements have been completed in India and Kenya as are
necessary to give the said Convention the force of law in India and Kenya
respectively, as required by paragraph (1) of Article 30 of the said
Convention; And
whereas the diplomatic notes to this effect have been exchanged between the
said two Governments, as required by paragraph (2) of Article 30 of the said
Convention; Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961) and section 24A of the Companies (Profits) Surtax Act,
1964 (7 of 1964), the Central Government hereby directs that all the provisions
of the said Convention shall be given effect to in the Union of India. Notification :
No. GSR 665(E), dated 20-8-1985. Text of Annexed Agreement, Dated 12-4-1985 The Government
of India and the Government of the Republic of Kenya desiring to conclude a
Convention to avoid double taxation and to prevent fiscal evasion with respect
to taxes on income have agreed upon the following measures: ARTICLE
1 - Personal scope - This Convention shall apply to persons who are
residents of one or both of the Contracting States. ARTICLE
2 - Taxes covered - 1. This Convention shall apply to taxes on
income imposed on behalf of each Contracting State, irrespective of the manner
in which they are levied. 2. There
shall be regarded as taxes on income all taxes imposed on total income, or on
elements of income including taxes on gains from the alienation of movable or
immovable property, and taxes on the total amounts of wages or salaries paid by
enterprises. 3. The
existing taxes to which the Convention shall apply are, in particular, (a) in the case of India, the income-tax including
any surcharge thereon imported under the Income-tax Act, 1961 (43 of 1961); and
the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964)
(hereinafter referred to as Indian tax), (b) in the case of Kenya, the income-tax imposed
under the Income-tax Act (Cap. 70) (hereinafter referred to as Kenyan tax). 4. This
Convention shall apply also to any identical or substantially similar taxes on
income which are imposed after the date of signature of this Convention in
addition to, or in place of, the existing taxes. The Contracting States shall
notify each other of significant changes which have been made in their respective
taxation laws. ARTICLE
3 - General definitions - 1. In this Convention unless the context
otherwise requires: (a) the term Kenya
means the Republic of Kenya, including any area outside the territorial waters
of Kenya which, in accordance with international law, has been or may be
designated, under the laws of Kenya concerning the Continental Shelf as an area
over which Kenya may exercise sovereign rights with respect to the exploration
for and exploitation of natural resources; (b) the term India
means the territory of India and includes the territorial sea and air space
above it as well as any other maritime zone referred to in the Territorial
Waters Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act,
1976 (Act No. 80 of 1976), in which India has certain rights and to the extent
that these rights can be exercised therein as if such maritime zone is a part
of the territory of India ; (c) the terms a
Contracting State and the other Contracting State mean Kenya or India as the
context requires ; (d) the term tax
means Kenyan tax or Indian tax as the context requires, but shall not include
any tax which is payable in respect of any default or omission in relation to
the taxes to which this Convention applies or which represents a penalty
imposed relating to those taxes ; (e) the term person
means an individual, a company and any other body of persons treated as an
entity for tax purposes ; (f) the term
company means any body corporate or any entity which is treated as a body
corporate for tax purposes ; (g) the terms Kenyan
enterprise and Indian enterprise mean respectively an industrial or
commercial enterprise or undertaking carried on by a resident of Kenya and an industrial
or commercial enterprise or undertaking carried on by a resident of India and
the terms enterprise of a Contracting State and enterprise of the other
Contracting State mean a Kenyan enterprise or an Indian enterprise, as the
context requires; (h) the term
national means any individual possessing the nationality of Kenya or India as
the case may be and all legal persons, partnerships and associations deriving
their status as such from the law in force in Kenya or India, as the case may
be; (i) the term
competent authority means : (a) in the case of
Kenya, the Minister of Finance or his authorised representative ; (b) in the case of
India, the Ministry of Finance (Department of Revenue) ; (j) the term
international traffic means any voyage of a ship or aircraft operated by an
enterprise of a Contracting State, except where the voyage is confined solely
to places within the other Contracting State. 2. In the
application of the provisions of this Convention by a Contracting State any term
not otherwise defined herein shall unless the context otherwise requires, have
the meaning which it has under the laws in force in that Contracting State
relating to the taxes which are the subject of the present Convention. ARTICLE
4 - Fiscal domicile - 1. For the purpose of this Convention, the
term resident of a Contracting State means any person who, under the law of
that State, is liable to taxation therein by reason of his domicile, residence,
place of management or any other criterion of a similar nature. (2)
Where by reason of the provisions of paragraph (1) an individual is a resident
of both Contracting States, then his residential status shall be determined in
accordance with the following rules: (a) He shall be deemed
to be a resident of the Contracting State in which he has a permanent home
available to him. If he has a permanent home available to him in both
Contracting States, he shall be deemed to be a resident of the Contracting
States with which his personal and economic relations are closer (hereinafter
referred to as his centre of vital interests). (b) If the Contracting State in which he has his
centre of vital interests cannot be determined, or if he does not have a
permanent home available to him in either Contracting State, he shall be deemed
to be a resident of the Contracting State in which he has an habitual abode. (c) If he has an habitual abode in both
Contracting States or in neither of them, he shall be deemed to be a resident
of the Contracting States of which he is a national. (d) If he is a national of both Contracting States
or of neither of them, the competent authorities of the Contracting States
shall settle the question by mutual agreement. 3. Where
by reason of the provisions of paragraph (1) a company is a resident of both
Contracting States, then this case shall be determined in accordance with the
following rules : (a) It shall be deemed to be a resident of the
Contracting State of which it is a national. (b) If it is a national of neither of the
Contracting States then it shall be deemed to be a resident of a Contracting
State in which its place of effective management is situated. 4. Where
by reason of the provisions of paragraph (1) a person other than an individual
or a company is a resident of both Contracting States, it shall then be deemed
to be a resident of the Contracting State in which its place of effective
management is situated. ARTICLE
5 - Permanent establishment - 1. For the purposes of this Convention
the term permanent establishment means a fixed place of business in which the
business of the enterprise is wholly or partly carried on. 2. The
term permanent establishment shall include especially (a) a place of management ; (b) a branch ; (c) an office ; (d) a factory ; (e) a workshop ; (f) a mine, oil-well, quarry or other place of
extraction of natural resources; (g) a farm, plantation or other place where
agricultural, forest, plantation or related activities are carried on ; (h) a building site or construction or assembly
project which exists for more than six months; (i) the provision of supervisory activities for
more than six months on a building site or construction or assembly project. 3. The
term permanent establishment shall not be deemed to include (a) the use of facilities solely for the purpose
of storage or display of goods or merchandise belonging to the enterprise ; (b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage or
display ; (c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise ; (d) the maintenance of a fixed place of business
solely for the purpose of purchasing goods or merchandise, or for collecting
information for the enterprise; (e) the maintenance of a fixed place of business
solely for the purpose of advertising, for the supply of information, for
scientific research or for similar activities which have a preparatory or
auxiliary character for the enterprise. 4. A
person acting in a Contracting State for or on behalf of an enterprise of the
other Contracting State - other than an agent of an independent status to whom
the provisions of paragraph (6) apply - shall be deemed to be a permanent
establishment in the first-mentioned State if (a) he has, and habitually exercises in that
State, an authority to conclude contracts for or on behalf of the enterprise,
unless his activities are limited to the purchase of goods or merchandise for
the enterprise ; or (b) he maintains in that first-mentioned State a
stock of goods or merchandise belonging to that enterprise from which he
regularly fulfils orders on behalf of that enterprise. 5. An
insurance enterprise of a Contracting State shall be deemed to have a permanent
establishment in the other Contracting State if it collects premiums in that
other State or insures risks therein through an employee or through a
representative who is not an agent of independent status within the meaning of
paragraph (6). 6. An
enterprise of a Contracting States shall not be deemed to have a permanent
establishment in the other Contracting States merely because it carries on
business in that other State through a broker, general commission agent or any
other agent of an independent status, where such persons are acting in the
ordinary course of their business. However, where the activities of such an
agent are devoted wholly or almost wholly on behalf of that enterprise he would
not be considered an agent of an independent status within the meaning of this
paragraph. 7. The
fact that a company which is a resident of a Contracting State controls or is
controlled by a company which is a resident of the other Contracting State, or
which carries on business in that other State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company, a
permanent establishment of the other. ARTICLE
6 - Income from immovable property - 1. Income from immovable
property including income from agriculture or forestry may be taxed in the
Contracting State in which such property is situated. 2. For
the purposes of this Convention, the term immovable property shall be defined
in accordance with the law of the Contracting State in which the property in
question is situated. The term shall in any case include property accessory to
immovable property, livestock and equipment used in agriculture and forestry,
right to which the provisions of general law respecting landed property apply,
usufruct of immovable property and rights to variable or fixed payments as,
consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources; ships, boats and aircraft shall not be regarded
as immovable property. 3. The
provisions of paragraph (1) shall apply to income derived from the direct use,
letting, or use in any other form of immovable property and to profits from the
alienation of such property. 4. The
provisions of paragraphs (1) and (3) shall also apply to the income from
immovable property of an enterprise and to income from immovable property used
for the performance of professional services. ARTICLE
7 - Business profits - 1. The profits of an enterprise of a
Contracting State shall be taxable only in that State unless the enterprise
carries on business in the other Contracting State through a permanent
establishment situated therein. If the enterprise carries on or has carried on
business as aforesaid, the profits of the enterprise may be taxed in the other
State but only so much of them as is attributable to (a) that permanent
establishment, (b) sales in the other State of goods or merchandise of
the same or similar kind as those sold through that permanent establishment, or
(c) other business activities carried on in that other State of the same
or similar kind as those effected through that permanent establishment. 2. Where
an enterprise of a Contracting State carries on business in the other
Contracting State through a permanent establishment situated therein, there
shall in each Contracting State be attributed to the permanent establishment
the profits which it might be expected to make if it were a distinct and
separate enterprises engaged in the same or similar activities under the same
or similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment. 3. In the
determination of the profits of a permanent establishment there shall be
allowed as deduction expenses which are incurred for the purposes of the
business of the permanent establishment including executive and general
administrative expenses so incurred whether in the State in which the permanent
establishment is situated or elsewhere. 4.
Insofar as it has been customary in a Contracting State, according to its law,
to determine the profits to be attributed to a permanent establishment on the
basis of an apportionment of the total profits of the enterprise to its various
parts, nothing in paragraph (2) shall preclude that State from determining the
profits to be taxed by such an apportionment as may be customary; the method of
apportionment adopted shall, however, be such that the result shall be in
accordance with the principles laid down in this article. 5. No
portion of any profits arising to an enterprise of a Contracting State shall
be attributed to a permanent establishment situated in the other Contracting
State by reason of the mere purchase of goods or merchandise within that other
State for the enterprise. 6. For
the purposes of the preceding paragraphs, the profits to be attributed to the
permanent establishment shall be determined by the same method year by year
unless there is good and sufficient reason to the contrary. 7. Where
profits include items of income which are dealt with separately in other
Articles of this Convention, then the provisions of those Articles shall not be
affected by the provisions of this article. ARTICLE
8 - Air transport - 1. Profits derived by an enterprise of a
Contracting State from the operation of aircraft in international traffic
shall be taxable only in the Contracting State in which the place of effective
management of the enterprise is situated. 2. The
provisions of paragraph (1) of this article shall also apply to a share of the
profits from the operation of aircraft in international traffic derived by an
enterprise of a Contracting State through participation in a pooled service,
in a joint air transport operation or in an international operating agency. 3. For
the purposes of paragraph (1), interests on funds directly connected with the
operation of aircraft in international traffic shall be regarded as income from
the operation of such aircraft, and the provisions of article 12 shall not
apply in relation to such interest. ARTICLE
9 - Shipping - Profits derived by an enterprise of a Contracting
State from the operation of ships in international traffic may be taxed in both
Contracting States according to the law of each Contracting State : Provided that
where such an enterprise derives profit from such operation in the other
Contracting State, (a) such profits shall be deemed to be an amount
not exceeding five per cent of the full amount received by the enterprise on
account of the carriage of passengers or freight embarked in that other State; (b) the tax chargeable in that other State shall
be reduced by an amount equal to fifty per cent thereof. ARTICLE
10 - Associated enterprises - 1. Where (a) an enterprise of a Contracting State participates
directly or indirectly in the management, control or capital of an enterprise
of the other Contracting State, or (b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a Contracting
State and an enterprise of the other Contracting State, and in
either case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly. 2. Where
profits on which an enterprise of a Contracting State has been charged to tax
in that State are also included in the profits of an enterprise of the other
Contracting State and taxed accordingly, and the profits so included are
profits which would have accrued to that enterprise of the other State, if the
conditions made between the enterprises had been those which would have been
made between independent enterprises, then the first-mentioned State shall make
an appropriate adjustment to the amount of tax charged on those profits in the
first-mentioned State. In determining such an adjustment due regard shall be
had to the other provisions of this Convention in relation to the nature of the
income. ARTICLE
11 - Dividends - 1. Dividends paid by a company which is resident of
a Contracting State to a resident of the other Contracting State may be taxed
in that other State. 2.
However, such dividends may also be taxed in the Contracting State of which the
company paying the dividends is a resident, and according to the law of that
State, but if the recipient is the beneficial owner of the dividends the tax so
charged shall not exceed 15 per cent of the gross amount. 3. The
term dividends as used in this article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights assimilated to income from shares or any other item
which is deemed to be a dividend or distribution of a company by the taxation
law of the Contracting State of which the company making the distribution is a
resident. 4. The
provisions of paragraph (2) shall not apply if the recipient of the dividends,
being a resident of a Contracting State, carries on business in the other
Contracting State of which the company paying the dividends is a resident,
through a permanent establishment situated therein, or performs in that other
State professional services from a fixed base situated therein, and the holding
by virtue of which the dividends are paid is effectively connected with such
permanent establishment or fixed base. In such a case, the provisions of
article 7 or article 16, as the case may be, shall apply. 5. Where
a company which is a resident of a Contracting State derives profits or income
from the other Contracting State, that other State may not impose any tax on
the dividends paid by the company except insofar as such dividends are paid to
a resident of that other State or insofar as the holding in respect of which
the dividends are paid is effectively connected with a permanent establishment
or a fixed base situated in that other State, nor subject the companys
undistributed profits to a tax on the company's undistributed profits, even if
the dividends paid or the undistributed profits consist wholly or partly of
profits or income arising in such other State. ARTICLE
12 - Interest - 1. Interest arising in a Contracting State and paid
to a resident of the other Contracting State may be taxed in that other State. 2.
However, such interest may be taxed in the Contracting State in which it arises,
and according to the law of that State, but the tax so charged in the
Contracting State in which the interest arises, shall not exceed 15 per cent of
the gross amount of the interest. 3.
Notwithstanding the provisions of paragraph (2), interest arising in a
Contracting State and paid to the Government of the other Contracting State or
local authority thereof, the Central Bank of that other Contracting State, or
any agency wholly owned by that Government or local authority, shall be exempt
from tax of the first-mentioned Contracting State. The competent authorities
of the Contracting State may determine by mutual agreement any other
governmental institution to which this paragraph shall apply. 4. The
term interest as used in this article means income from Government
securities, bonds or debentures, whether or not secured by mortgage and
whether or not carrying a right to participate in profits, and other
debt-claims of every kind as well as all other incomes assimilated to income
from money lent by the taxation law of the Contracting State in which the
income arises. 5. The
provisions of paragraph (2) shall not apply if the recipient of the interest,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises through a permanent
establishment situated therein, or performs in that other State professional
services from a fixed base situated therein, and the debt-claim in respect of
which the interest is paid is effectively connected with such permanent
establishment or fixed base. In such a case, the provisions of article 7 or
article 16, as the case may be, shall apply. 6.
Interest shall be deemed to arise in a Contracting State when the payer is that
State itself, a political sub-division, a local authority or a resident of that
State. Where, however, the person paying the interest, whether he is a resident
of a Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the indebtedness on which the interest
is paid was incurred, and that interest is borne by that permanent
establishment or fixed base, then such interest shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is situated. 7. Where,
owing to a special relationship between the payer and the recipient or between
both of them and some other person, the amount of the interest paid, having
regard to the debt-claim for which it is paid, exceeds the amount which would
have been agreed upon by the payer and the recipient in the absence of such
relationship, the provisions of this article shall apply only to the
last-mentioned amount in that case, the excess part of the payment shall
remain taxable according to the law of each Contracting State, due regard
being had to the other provisions of this Convention. ARTICLE
13 - Royalties - 1. Royalties arising in a Contracting State and
paid to a resident of the other Contracting State may be taxed in that other
State. 2.
However, such royalties may be taxed in the Contracting State in which they
arise, and according to the law of that State, but the tax so charged in the
Contracting State in which the royalties arise, shall not exceed 20 per cent
of the gross amount of the royalties. 3. The
term royalties as used in this article means payments of any kind received as
a consideration for the use of, or the right to use, any copyright of literary,
artistic or scientific work (including cinematograph films, and films or tapes
for radio or television broadcasting), any patent, trade mark, design or model,
plan, secret formula or process, or for the use of, or the right to use,
industrial, commercial or scientific equipment, or for information concerning
industrial, commercial or scientific experience. 4. The provisions of paragraph
(2) shall not apply if the recipient of the royalties, being a resident of a
Contracting State, carries on business in the other Contracting State in which
the royalties arise through a permanent establishment situated herein, or performs in that other State
professional services from a fixed base situated therein, and the right or
property in respect of which the royalties are paid is effectively connected
with such permanent establishment or fixed base. In such a case, the provisions
of article 7 or article 16, as the case may be, shall apply. 5.
Royalties shall be deemed to arise in a Contracting State when the payer is
that Contracting State itself, a political sub-division, a local authority or a
resident of that State. Where, however, the person paying the royalties,
whether he is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment or a fixed base in connection with which the
liability to pay the royalties was incurred, and such royalties are borne by
such permanent establishment or fixed base, then such royalties shall be deemed
to arise in the Contracting State in which the permanent establishment or fixed
base is situated. 6. Where,
owning to a special relationship between the payer and the recipient or between
both of them and some other person, the amount of royalties paid, having regard
to the use, right or information for which they are paid, exceeds the amount
which would have been agreed upon by the payer and the recipient in the absence
of such relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In that case, the excess part of the payments shall
remain taxable according to the law of each Contracting State, due regard being
had to the other provisions of this Convention. ARTICLE
14 - Capital gains - 1. Gains from the alienation of immovable
property, as defined in paragraph (2) of article 6 may be taxed in the
Contracting State in which such property is situated. 2. Gains
from the alienation of movable property forming part of the business property
of a permanent establishment which an enterprise of a Contracting State has in
the other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing professional services, including such gains from
the alienation of such a permanent establishment (alone or together with the
whole enterprise) or of such a fixed base, may be taxed in that other State. 3.
Notwithstanding the provisions of paragraph (2) gains by an enterprise of a
Contracting State from the alienation of ships and aircraft which it operates
in international traffic and movable property pertaining to the operation of
such ships and aircraft shall be taxable only in that State. 4. Gains
from the alienation of (a) shares of a company, the property of which
consists principally of immovable property situated in a Contracting State, and (b) interest in a partnership or a trust, the
property of which consists principally of immovable property situated in a
Contracting State,
may
be taxed in that State. For the purposes of this paragraph the term immovable
property includes the shares of a company referred to in sub-paragraph (a)
or an interest in a partnership or a trust referred to in sub-paragraph (b). (5)
Gains derived by a resident of a Contracting State from the alienation of any
property other than those mentioned in paragraphs (1), (2), (3)
and (4) shall be taxable only in that State. ARTICLE
15 - Management and professional fees - 1. Management or
professional fees arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in that other State. 2. However,
such management or professional fees may be taxed in the Contracting State in
which they arise, and according to the law of that State, but the tax so
charged shall not exceed 17 per cent of the gross amount of the management or
professional fees. 3. The
term management or professional fees as used in this article means payments
of any kind to any person, other than to an employee of the person making the
payments, in consideration for any services of a managerial, technical,
professional or consultancy nature. 4. The
provisions of paragraph (2) shall not apply if the recipient of the management
or professional fees, being a resident of a Contracting State, has in the
other Contracting State in which the management or professional fees arise a
permanent establishment with which the services giving rise to the management
or professional fees are effectively connected. In such a case the provisions
of article 7 shall apply. 5.
Management or professional fees shall be deemed to arise in a Contracting State
when the payer is that Contracting State itself, a political sub-division, a
local authority or a resident of that State. Where, however, the person paying
the management or professional fees, whether he is a resident of that State or
not, has in a Contracting State a permanent establishment in connection with
which the liability to pay the management or professional fees was incurred and
such management or professional fees are borne by such permanent establishment
then such management or professional fees shall be deemed to arise in the
Contracting State in which the permanent establishment is situated. 6. Where,
owing to a special relationship between the payer and the beneficial owner of
the management or professional fees or between both of them and some other
person, the amount of the management or professional fees paid, having regard
to the service for which they are paid, exceeds the amount which would have
been agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this article shall apply only to the
last-mentioned amount. In that case the excess part of the payment shall remain
taxable according to the law of each Contracting State, due regard being had to
the other provisions of this Convention. ARTICLE
16 - Independent personal services - 1. Income derived by a resident
of a Contracting State in respect of professional services or other independent
activities of a similar character shall be taxable only in that State unless (a) he has a fixed base regularly available to him
in the other Contracting State for the purposes of performing his activities,
in which case so much of the income may be taxed in that other State as is
attributable to that fixed base; or (b) he is present in the other Contracting State
for the purpose of performing his activities for a period or periods exceeding
in the aggregate 183 days in the calendar year concerned in the case of Kenya
or the previous year concerned in the case of India, in which case so much of the
income may be taxed in that other State as is attributable to the activities
performed in that other State. 2. The
term professional services includes independent scientific, literary,
artistic, educational or teaching activities, as well as the independent
activities of physicians, lawyers, engineers, architects, dentists and
accountants. ARTICLE
17 - Dependent personal services - 1. Subject to the provisions of
articles 18, 19, 20, 21, 22 and 23, salaries, wages and other similar
remuneration derived by a resident of a Contracting State in respect of an
employment shall be taxable only in that State unless the employment is
exercised in the other Contracting State. If the employment is so exercised,
such remuneration as is derived therefrom may be taxed in the other State. 2.
Notwithstanding the provisions of paragraph (1), remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the
other Contracting State shall be taxable only in the first-mentioned State if (a) the recipient is present in the other State
for a period or periods not exceeding in the aggregate 183 days in the fiscal
year concerned, and (b) the remuneration is paid by, or on behalf of,
an employer who is not a resident of the other State, and (c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the other State. 3.
Notwithstanding the preceding provisions of this article, remuneration in
respect of an employment exercised aboard a ship or aircraft in international
traffic, may be taxed only in the Contracting State in which the place of
effective management of the enterprise is situated. ARTICLE
18 - Directors fees - Directors fees and similar payments derived
by a resident of a Contracting State in his capacity as a member of the board
of directors of a company which is a resident of other Contracting State may be
taxed in that other State. ARTICLE
19 - Artistes and athletes - 1. Notwithstanding the provisions of
articles 7, 16 and 17, income derived by public entertainers, such as theatre,
motion picture, radio or television artistes, and musicians, and by athletes,
from their personal activities as such may be taxed in the Contracting State
in which those activities are exercised. 2.
Notwithstanding anything contained in this Convention, where the services of
public entertainer or an athlete mentioned in paragraph (1) are provided in a
Contracting State by an enterprise of the other Contracting State, the profits
derived by that enterprise from providing those services may be taxed in the
first-mentioned State. 3. The
provisions of paragraphs (1) and (2) shall not apply to services of public
entertainers and athletes. If their visit to a Contracting State is supported
wholly or substantially from public funds of the other Contracting State. ARTICLE
20 - Government service - 1. (a) Remuneration, other than a
pension, paid by a Contracting State or a political sub-division or a local
authority thereof to any individual in respect of services rendered to that
State or sub-division or local authority thereof shall be taxable only in that
State. (b)
However, such remuneration shall be taxable only in the Contracting State of
which the recipient is a resident if the services are rendered in that State
and the recipient did not become a resident of that State solely for the
purpose of performing the services. 2. The
provisions of paragraph (1), shall not
apply to remuneration in respect of services rendered in connection with any
trade or business carried on by one of the Contracting States or a political
sub-division or a local authority thereof. ARTICLE
21 : Pensions - 1. Any pension [other than a pension of the kind
referred to in paragraph (2) of this article] and any annuity, derived from
sources within a Contracting State by an individual who is a resident of the
other Contracting State may be taxed in the first-mentioned Contracting State,
but if the individual is subject to tax in the other Contracting State in respect
of the pension or annuity the tax so charged in the first-mentioned Contracting
State shall not exceed the lower of (a) 5 per cent of the pension or annuity; or (b) the amount of tax chargeable on the pension or
annuity in the other Contracting State. 2.
Pensions paid by, or out of funds created by, a Contracting State to an
individual for services rendered to that Contracting State in the discharge of
governmental functions may be taxed only in
that Contracting State. 3. The
term annuity means a stated sum payable periodically at stated times, during
life or during a specified or ascertainable period of time, under an obligation
to make the payments in return for adequate and full consideration in money or
moneys worth. ARTICLE
22 - Students and apprentices - 1. A student or business apprentice
who is or was immediately before visiting a Contracting State a resident of the
other Contracting State and who is present in the first-mentioned Contracting
State solely for the purposes of his education or training shall be exempt from
tax in the first-mentioned Contracting State on payments made to him by persons
residing outside that first-mentioned Contracting State for the purposes of
his maintenance, education or training. 2. The
benefits of this article shall extend only for such period of time as may be
reasonably or customarily required to complete the education or training
undertaken, but in no event shall any individual have the benefits of this
article for more than three consecutive years. ARTICLE
23 - Professors and teachers - 1. A professor or teacher who visits
a Contracting State for a period not exceeding one year for the purpose of
teaching or conducting research at a University, College, School or other
Educational institution in that Contracting State and who is, or was
immediately before such visit, a resident of the other Contracting State shall
be exempt from tax in the first-mentioned Contracting State on any remuneration
for such teaching or research in respect of which he is subject to tax in the
other Contracting State. However, any remuneration for such work received from
sources outside the State shall not be deductible in the first-mentioned State. 2. This
article shall not apply to income from research if such research is undertaken
primarily for the private benefit of a specific person or persons. ARTICLE
24 - Income not expressly mentioned - 1. Items of income of a
resident of a Contracting State which are not expressly mentioned in the
foregoing articles of this Convention in respect of which he is subject to tax
in that State shall be taxable only in that State. 2.
However, if such income is derived by a resident of a Contracting State from
sources in the other Contracting State, such income may also be taxed in the
State in which it arises, and according to the law of that State. ARTICLE
25 - Method of elimination of double taxation - 1. The laws in force
in either of the Contracting States will continue to govern the taxation of
income in the respective Contracting States except where provisions to the
contrary are made in this Convention. 2. (a)
The amount of Kenyan tax payable under the laws of Kenya and in accordance with
the provision of this Convention, whether directly or by deduction, by a
resident of India, in respect of income from sources within Kenya which has
been subjected to tax both in India and in Kenya, shall be allowed as a credit
against the Indian tax payable in respect of such income, provided that such
credit shall not exceed the Indian tax (as computed before allowing any such
credit) which is appropriate to the income derived from sources within Kenya;
so, however, that where such resident is a company by which surtax is payable
in India, the credit aforesaid shall be allowed in the first instance against
income-tax payable by the company in India, and as to the, balance, if any,
against surtax payable by it in India; (b)
For the purposes of the credit referred to in sub-paragraph (a) above,
the term Kenyan tax payable shall be deemed to include any amount which would
have been payable as Kenyan tax for any year but for: (i) any investment
deduction granted under paragraph 24 of the Second Schedule to the Income-tax
Act, cap. 470; (ii) the lower corporation rate of income-tax provided by
paragraph 2(b) of the Third
Schedule to the Income-tax Act, cap. 470; (iii) any other provisions
which may subsequently be enacted granting an exemption or reduction of tax
which the competent authorities of the Contracting States agreed to be for the
purpose of economic development. 3. (a)
The amount of Indian tax payable, under the laws of India and in accordance
with the provisions of this Convention, whether directly or by deduction, by a
resident of Kenya, in respect of income from sources within India which has
been subjected to tax both in India and Kenya, shall be allowed as a credit
against Kenyan tax payable in respect of such income provided that such credit
shall not exceed the Kenyan tax (as computed before allowing any such credit)
which is appropriate to the income derived from sources within India. (b)
For the purposes of the credit referred to in sub-paragraph (a) above,
the term Indian tax payable shall be deemed to include any amount by which
Indian tax has been reduced by the special incentive measures set forth in the
following sections of the Income-tax Act, 1961: (a) sections 10(4),
10(4A), 10(6)(viia), 10(15)(iv), 10A, 32A,
33A, 35B, 35CC, 80HH, 80-I, 80K, 80L, and (b) any other provisions,
which may subsequently be enacted granting a deduction from taxable income or
exemption from or reduction of tax which the competent authorities of the
Contracting States agree to be for the purposes of economic development. 4. Where
under this Convention a resident of a Contracting State is exempt from tax in
that Contracting State in respect of income derived from the other Contracting
State then the first-mentioned Contracting State may, in calculating tax in the
remaining income of that person apply the rate of tax which would have been applicable
if the income exempted from tax in accordance with this Convention had not been
so exempted. ARTICLE
26 - Non-discrimination - 1. - The nationals of a Contracting State
shall not be subjected in the other Contracting State to any taxation or any
requirement connected therewith which is other or more burdensome than the
taxation and connected requirements to which nationals of that other State in
the same circumstances are or may be subjected. 2. The
taxation on a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall not be less favourably levied in
that other State than the taxation levied on enterprises of that other State
carrying on the same activities. 3.
Nothing in this article shall be construed as obliging a Contracting State to
grant to residents of the other Contracting State any personal allowances,
reliefs and reductions for taxation purposes on account of civil status or
family responsibilities which it grants to its own residents. 4.
Enterprises of a Contracting State, the capital of which is wholly or partly
owned or controlled, directly or indirectly, by one or more residents of the
other Contracting State, shall not be subjected in the first-mentioned State to
any taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which other similar
enterprises of that first-mentioned State are or may be subjected. 5. In
this article the term taxation means taxes which are the subject of this
Convention. 6.
Notwithstanding the provisions of the foregoing paragraphs, a company which is
a resident of India and which has a permanent establishment in Kenya shall
remain subject to an additional rate of tax in accordance with the provisions
of Kenyan law, but such additional rate shall not exceed 7.5 per cent. however,
such a company will not be subjected to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation and
connected requirements to which other similar enterprises of that
first-mentioned State are or may be subjected. ARTICLE
27 - Mutual agreement procedure - 1. Where a resident of a
Contracting State considers that the actions of one or both of the Contracting
States result or will result for him in taxation not in accordance with this
Convention, he may, notwithstanding the remedies provided by the national laws
of those States, present his case to the competent authority of the State of
which he is a resident. The case must be presented within three years of the
date of such action or the latest of such actions as the case may be. 2. The
competent authority shall endeavour, if the objection appears to it to be
justified and if it is not itself able to arrive at an appropriate solution, to
resolve the case by mutual agreement with the competent authority of the other
Contracting State, with a view to the avoidance of taxation not in accordance
with this Convention. Any agreement reached shall be implemented
notwithstanding any time limits in the national laws of the Contracting States. 3. The
competent authorities of the Contracting States shall endeavour to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or
application of this Convention. They may also consult together for the
elimination of double taxation in cases not provided for in this Convention. 4. The
competent authorities of the Contracting States may communicate directly with
each other for the purposes of applying the provisions of this convention. When
it seems advisable in order to reach agreement to have a normal exchange of
opinions, such exchange may take place through a commission consisting of
representatives of the competent authorities of the Contracting States. ARTICLE 28 - Exchange of information - 1. The competent
authorities of the Contracting States shall exchange such information as is
necessary for the carrying out of this Convention or for preventing fraud or
fiscal evasion concerning taxes covered by this Convention insofar as the
taxation thereunder is in accordance with this Convention. Any information so
exchanged shall be treated as secret and shall not be disclosed to any persons
or authorities other than those concerned with the assessment or collection of
the taxes which are the subject of this Convention. 2. In no case shall the provisions of paragraph (1) be
construed so as to impose on one of the Contracting States the obligation (a) to
carry out administrative measures at variance with the laws or the
administrative practice of that or of the other Contracting State; (b) to
supply particulars which are not obtainable under the laws or in the normal
course of the administration of that or of the other Contracting State; (c) to
supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or information, the
disclosure of which would be contrary to public Policy. ARTICLE 29 - Diplomatic and consular officials - Nothing in
this Convention shall affect the fiscal privileges of diplomatic or consular
officials under the general rules of international law or under the provisions
of special agreements. ARTICLE 30 - Entry into force - 1. This Convention shall
come into force on the date when the last of all such things shall have been
done in India and Kenya as are necessary to give the Convention the force of
law in India and Kenya respectively. 2. The contracting States shall notify each other of the
completion of the requirements mentioned in paragraph (1) of this article. The
exchange of diplomatic notes certifying that this requirement has been
completed shall take place at..... 3. Upon the exchange of such diplomatic notes, this
convention shall have effect (a) in
Kenya, (i) in
respect of taxes withheld at the source on amounts paid or credited to
non-residents on or after 1st January in the calendar year following the year
in which all the required formalities are completed; (ii) in
respect of other taxes on income arising for the year of income commencing on
or after the 1st January in the calendar year in which all the required
formalities are completed; (b) in
India, in respect of income assessable for any assessment year commencing on or
after 1st day of April, in the year in which all the required formalities are
completed. ARTICLE 31 - Termination - This Convention shall continue
in effect indefinitely but either of the Contracting States may, on or before
the thirtieth day of June in any calendar year beginning after the expiration
of a period of five years from the date of its entry into force, give the other
Contracting State, through diplomatic channels, written notice of termination
and, in such event, this Convention shall cease to have effect (a) in
Kenya, (i) in
respect of taxes withheld at the source on amounts paid or credited to
non-residents on or after the 1st day of January in the calendar year next
following that in which the notice is given; (ii) in
respect of other taxes on income arising for the year of income next following
that in which the notice of termination is given, and subsequent years; (b) in
India, in respect of income assessable for the assessment year commencing on
the 1st day of April in the second calendar year next following the calendar
year in which the notice is given, and subsequent years. In witness whereof the undersigned, being duly
authorised thereto, have signed the present Convention. Done in duplicate at Nairobi this
12th day of April, 1985, in the English and Hindi languages but in the event of
any dispute, the English text shall prevail.
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