The Korea-Kenya Tax Treaty became effective from April 3, 2017 after the formal agreement of both countries on July 8, 2014 and ratification by the National Assembly on September 7, 2016.

The salient features of the tax treaty include:

■ Taxes Covered (Article 2)

Korea taxes covered by the treaty include individual income tax, corporate income tax, special tax for rural development and local income tax in Korea.  In the case of Kenya, the covered tax includes income tax.

■ Permanent Establishment (Article 5)

A construction project constitutes a permanent establishment if it lasts for more than 12 months.

■ Reduced withholding tax rates (Article 10~12)

(1) Dividends: the withholding tax rate on dividends is limited to 8% if the beneficial owner is a company (excluding partnership) that holds directly at least 25% of the shares in the company paying the dividends or 10% in other cases.

(2) Interest: The withholding tax rate on interest is limited to 12%

(3) Royalties: The withholding tax rate on royalties is limited to 10%

Please note that for the above provisions, they take effect in Korea for the amount payable on or after January 1, 2018 in case of withholding tax at source. Also, please note that in respect of other taxes, the treaty takes effect for the taxable years beginning on or after January 1, 2018.

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