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TMI BlogConvention between India and Kenya for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on incomeX X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (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. CONVENTION BETWEEN INDIA AND KENYA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME. 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 PERSONNEL 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 existi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise " 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 terms not otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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, oilwell, quarry or other place of extraction of natural resources; (g) a farm, plantation or other place where agricultural forestry, 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 mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, 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 propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing State by reason of the mere purchase of goods or mechandise 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, interest on funds directly connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 indebtedeness 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, owing 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 busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 money's 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 purpose 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 agree 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 the 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 " s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing in this Convention shall affect the fiscal privilege 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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