Kenya and China on Thursday signed an agreement on the avoidance of double taxation that aims to boost bilateral commercial ties, Kenyan officials said.
Cabinet Secretary in the National Treasury Henry Rotich told a media briefing in Nairobi that the deal will create certainty to the tax payers on the taxation of various cross-border incomes derived from either country.
"The agreement aims to boost trade and investments between China and Kenya by ensuring investors who pay tax in one jurisdiction should not pay tax again in the other jurisdiction," Rotich said.
The tax treaty was negotiated and concluded during a meeting by top officials of both nations that was held in Beijing in November 2016.
Rotich said that the deal will increase the flow of Chinese capital into Kenya as Chinese investors will find Kenya as a favorable taxation regime.
He noted that the agreement comes at an ideal time when Kenya is wooing Chinese investors looking for low cost manufacturing destinations.
"Through the National Trade Policy we have developed polices that aim to create incentives for foreign manufacturers including those from China to set up operations in Kenya," he said.
The Treasury official noted that benefits of the agreement will far outweigh the loss of tax revenue.
Chinese Ambassador to Kenya Liu Xianfa said that the tax agreement will enhance Kenya's position as a favorite destination for Chinese investments.
"I believe more Chinese will invest in Kenya and in the process create more employment opportunities and skill transfer to locals," Liu added.
Liu noted that the agreement will strengthen existing cooperation between the tax administrations of both nations through capacity building and exchange programs.