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 Kenyans for their views before Kenya 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 the Kenya National Bureau of Statistics (KNBS) last month showed Kenya’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.
China accounted for 20.27 per cent, or Sh446.65 billion, of Kenya’s Sh2.2 trillion import bill in the review period, which is a 15.23 per cent growth from Sh387.61 billion in the prior year.
Kenya has however increased earnings from its exports to China which grew at a rate of 26.09 per cent to Sh21.48 billion.
China is also Kenya’s second-largest external lender after the World Bank. By the end of May this year, Kenya owed Sh1.19 trillion to the World Bank and Sh796.46 billion to China.
A review of the intended Double Taxation Agreement (DTA) between Nairobi and Beijing showed it would focus on trade and investment, education and research as well as 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.
This provision will also apply to apprentices and business trainees seeking further training in the Asian nation.
