Tax Residency in Kenya
1. Criteria for Determining Tax Residency in Kenya
According to the Income Tax Act (ITA) of Kenya, an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in Kenya for more than 183 days in a calendar year.
- Domicile in Kenya, which is established by a person's permanent home or place of habitual residence.
- Ordinary residence in Kenya, which implies a more continuous and permanent presence beyond mere physical presence.
For companies and other entities, tax residency is determined based on their place of incorporation or management and control.
2. Impact of International Tax Treaties on Tax Residency Criteria
Kenya has entered into several double taxation agreements (DTAs) with other countries to prevent double taxation and promote cross-border trade and investment. These DTAs may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For example, the DTA between Kenya and the United Kingdom provides that an individual is considered a resident of Kenya if they are liable to tax in Kenya by reason of their domicile, residence, place of management, or any other criterion of a similar nature. The DTA also includes tie-breaker rules for individuals who are considered residents of both Kenya and the UK under each country's domestic law.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Kenya and the other country to facilitate tax compliance and enhance economic cooperation.
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