New double tax agreement between Mauritius and Kenya

Following a tumultuous start, a new Double Taxation Agreement (DTA) has been ratified between Kenya and Mauritius. While some details still need to be finalised, this bodes well for investors who want to diversify their portfolios into Africa.

Background: Why the previous treaty was not finalised
The original treaty became the subject of a lawsuit brought by Tax Justice Network Africa (TJNA) which declared that the DTA was unconstitutional. On 7 May 2012, a DTA and an Investment Promotion & Protection Agreement (IPPA) were both signed by the Kenyan and Mauritius governments. In most cases, DTAs are bilateral agreements designed to allocate taxing rights between multiple jurisdictions and the 2012 treaty was put in place to eliminate the double taxation of income that arises in one jurisdiction (e.g. Kenya) and is paid out to residents in the other jurisdiction (e.g. Mauritius).

This treaty was supposedly ratified by Kenya through a legal notice published in the Kenya Gazette on 23 May 2014.  However, the DTA never came into force as the Kenyan government did not notify the Mauritian government of the completion of the ratification procedures in compliance with normal formalities.

The TJNA requested that the Legal Notice of 2014 be declared null and void since the underlying DTA was not drafted, negotiated and ratified in accordance with the principles and values of the Constitution of Kenya 2010.

What the new agreement entails
Following these actions, the High Court of Kenya in Nairobi delivered judgement on 15 March 2019 declaring that the Legal Notice of 2014 was indeed not properly laid out before Parliament in accordance with their local legislation. It was therefore declared null and void.

After the nullification, a new Kenya-Mauritius tax treaty was signed on 10 April 2019, which was one of six other agreements signed during a visit by the Kenyan President Uhuru Muigai Kenyatta to Mauritius.

It is important to note that, since the new Kenya-Mauritius treaty has not yet been made public, it is unknown whether the previously disputed provisions included in the nullified 2012 treaty will be included in the new treaty.

Mauritius expanding its African footprint
With the ratification of the new Kenya-Mauritius DTA, Mauritius has acquired one of the greatest networks of DTAs and IPPAs within the African continent.

Considering the continuous increase of bilateral agreements with African countries, Mauritius is perceived as a safe, trusted and well-established international financial centre for investors looking at doing business and investing into Africa. The new DTA will benefit this network in several ways, including promoting trade and investment between African countries and further improving economic trade and exchanges between both Mauritius and Kenya.

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We will notify you of any developments as soon as the new treaty becomes available.