Kenya - Legal Draft

Double Taxation

Avoidance AgreementConvention Between

India And Kenya For The Avoidance Of Double Taxation And The Prevention Of

Fiscal Evasion With Respect To Taxes On IncomeNotification

F. No. G.S.R. 665(E), dtd. 20.08.1985Whereas

the Government of India and the Government of Kenya have concluded a

Convention, as set out in the Annexure hereto, for the avoidance of double

taxation and the prevention of fiscal evasion with respect to taxes on income;And

whereas all the requirements have been completed in India and Kenya as are

necessary to give the said Convention the force of law in India and Kenya

respectively, as required by paragraph 1 of Article 30 of the said Convention;And

whereas the diplomatic notes to this effect have been exchanged between the

said two Governments, as required by paragraph 2 of Article 30 of the said

Convention.Now,

therefore, in exercise of the powers conferred by section 90 of the Income-tax

Act, 1961 (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 he 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 INCOMEThe

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

1PERSONNEL

SCOPEThis

Convention shall apply to persons who are residents of one or both of the

Contracting States.Article

2TAXES

COVERED1. 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 existing taxes to

which the Convention shall apply are, in particular:a. In the case of India:The

income-tax including any surcharge thereon imposed under the Income-tax Act,

1961 (43 of 1961); and the surtax imposed under the Companies (Profits) Surtax

Act, 1964 (7 of 1964) (hereinafter referred to as "Indian tax")a.b. In the case of Kenya:The

income taxes imposed under the Income-Tax Act (Cap. 70) (hereinafter referred

to as "Kenyan Tax").1.2.3.4. This Convention shall

apply also to any identical or substantially similar taxes on income which are

imposed after the date of signature of this Convention in addition to, or in

place of, the existing taxes. The Contracting States shall notify each other of

significant changes which have been made in their respective taxation laws.Article

3GENERAL

DEFINITIONS1. In this Convention

unless the context otherwise requires:a. The term " Kenya

" means the Republic of Kenya, including any area outside the territorial

waters or Kenya which, in accordance with international law, has been or may be

designated, under the laws or Kenya concerning the Continental Shelf, as an

area over which Kenya may exercise sovereign rights with respect to the

exploration for and exploitation of natural resources;b. The term " India

" means the territory of India and includes the territorial sea and

airspace above it as well as any other maritime zone referred to in the

Territorial waters, Continental Shelf, Exclusive Economic Zone and other

Maritime Zones Act, 1976 (Act No. 80 of 1976), in which India has certain

rights and to the extent that these rights can be exercised therein as if such

maritime zone is a part of the territory of India;c. the terms " a

Contracting State " and " the other Contracting State " mean

Kenya or India as the con text requires;d. the term " tax

means Kenyan tax or Indian tax " as the context requires, but shall not

include any tax which is payable in respect of any default or omission in

relation to the taxes to which this Convention applies or which represents a

penalty imposed relating to those taxes;e. the term "

person " means an individual, a company and any other body of persons

treated is an entity for tax purposes;f. the term "

company " means any body corporate or any entity which is treated as a

body corporate for tax purposes;g. the terms "

Kenyan enterprise " 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:i.

in

the case of Kenya the Minister of Finance or his authorised representative;ii.

In

the case of India the Ministry of Finance (Department of Revenue).a.b.c.d.e.f.g.h.i.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.1.2. In the application of

the provisions of this convention by a Contracting State any terms not

otherwise defined herein shall unless the context otherwise, requires, have the

meaning which it has under the laws in force in that Contracting State relating

to the taxes which are the subject of the present Convention.Article

4FISCAL

DOMICILE1. For the purpose of

this Convention, the term " resident of a Contracting State " means

any person who, under the law of that State, is liable to taxation therein by

reason of his domicile, residence place of management or any other criterion of

a similar nature.2. There by reason of

the provisions of paragraph 1 an individual is a resident of both Contracting

States, then his residential status shall be determined in accordance with the

following rules:-a. he shall be deemed to

be a resident of the, Contracting State in which he has a permanent home avail

able to him. It he has a permanent home available to him in both Contracting

States, he shall be deemed to be a resident of the Contracting State with which

his personal and economic relations are closer (hereinafter referred to as his

centre of vital interests ");b. if the Contracting

State in which he has his Centre of vital interests cannot be determined, or if

he does not have a permanent home available to him in either Contracting State,

he shall be deemed to be a resident of the Contracting State in which he has an

habitual abode;c. if he has an habitual

abode in both Contracting States or in neither of them, he shall be deemed to

be a resident of the Contracting State of which he is a national;d. if he is a national

of both Contracting States or of neither of them, the Competent authorities of

the Contracting States shall settle the question by mutual agreement.1.2.3. Where by reason of

the provisions of paragraph 1 a company is a resident of both Contracting

States, then this case shall be determined in accordance with the following

rules:a. it shall be deemed to

be a resident of the Contracting State of which it is a national;b. if it is a national

of neither of the Contracting States then it shall be deemed to be a resident

of a Contracting State in which its place of effective management is situated.1.2.3.4. Whereby reason of the

provisions of paragraph 1 a person other than an individual or a company is a

resident of both Contracting States, it shall then be deemed to be a resident

of the Contracting State in which its place of effective, Management is

situated.ARTICLE

5PERMANENT

ESTABLISHMENT1. 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, oil well,

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.1.2.3. 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 maintenance of a

stock of goods or merchandise belonging to the enterprise solely for the

purpose of processing by another enterprise;d. the maintenance of a

fixed place of business solely for the purpose of purchasing goods or

merchandise, or for collecting information for the enterprise;e. the maintenance of a

fixed place of business solely for the purpose of advertising, for the supply

of information, for scientific research or for similar activities which have a

preparatory or auxiliary character for the enterprise.1.2.3.4. A person acting in a

Contracting State for or on behalf of an enterprise of the other Contracting

State--other than an agent of an independent status to whom the provisions of

paragraph 6 apply--shall be deemed to be a permanent establishment in the first

mentioned State if:a. he has, and

habitually exercises in that State, an authority to conclude contracts for or

on behalf of the enterprise, unless his activities are limited to the purchase

of goods or merchandise for the enterprise; orb. he maintains in that

first mentioned State a stock of goods or merchandise belonging to that enterprise

from which he regularly fulfils orders on behalf of that enterprise.1.2.3.4.5. An insurance

enterprise of a Contracting State shall be deemed to have a permanent

establishment in the other Contracting State if it collects premiums in that

other State or insures risks therein through an employee or through a

representative who is not an agent of independent status within the meaningly

of paragraph 6.6. An enterprise of a

Contracting State shall not be deemed to have a permanent establishment in the

other Contracting State merely because it carries on business in that other

State through a broker, general commission agent or any other agent of an

independent status, where such persons are acting in the ordinary course of

their business. However, where the activities of such an agent are devoted

wholly or almost wholly on behalf of that enterprise, he would not be

considered an agent of an independent status within the meaning of this

paragraph.7. The fact that a

company which is a resident of a Contracting State controls or is controlled by

a company which is a resident of the other Contracting State, or which carries

on business in that other State (whether through a permanent establishment or

otherwise), shall not of itself constitute either company, a permanent

establishment of the other.ARTICLE

6INCOME

FROM IMMOVABLE PROPERTY1. 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

paragraph 1 and 3 shall also apply to the income from immovable, property of an

enterprise and to income from immovable property used for the performance of

professional services.Article

7BUSINESS

PROFITS1. The profits of an

enterprise of a Contracting State shall be taxable only in that State unless

the enterprise carries on business in the other Contracting State through a

permanent establishment situated therein. If the enterprise carries on or has

carried on business as aforesaid, the profits of the enterprise may be taxed in

the other State but only so much of them as is attributable to: (a) that

permanent establishment, (b) seals in the other State of goods or merchandise

of the same or similar kind as those sold through that permanent establishment,

or (c) other business activities carried on in that other State of the same or

similar kind as those effected through that permanent establishment.2. Where an enterprise

of a Contracting State carries on business in the other Contracting State

through a permanent establishment situated therein, there shall in each

Contracting State be attributed to the permanent establishment the profits

which it might be expected to make if it were a distinct and separate

enterprise engaged in the same or similar activities under the same or similar

conditions and dealing wholly independently with the enterprise of which it is

a permanent establishment.3. In the determination

of the profits of a permanent establishment there shall be allowed as deduction

expenses which are incurred for the purposes of the business of the permanent

establishment including executive and general administrative expenses so

incurred, whether in the State in which the permanent establishment is situated

or elsewhere.4. In so far as it has

been customary in a Contracting State, according to its law, to determine the

profits to be attributed to a permanent establishment on the basis of an

apportionment of the total profits of the enterprise to its various parts,

nothing in paragraph 2 shall preclude that State from determining the profits

to be taxed by such an apportionment as may be customary; the method of

apportionment adopted shall, however, be such that the result shall be in

accordance with the principles laid down in this Article.5. No portion of any

profits arising to an enterprise of a contracting State shall be attributed to

a permanent establishment situated in the other Contracting State by reason of

the mere purchase of goods or merchandise within that other State for

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

8AIR

TRANSPORT1. 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 with the operation of

aircraft in international traffic shall be regarded as income from the

operation of such aircraft, and the provisions of Article 12 shall not apply in

relation to such interest.Article

9SHIPPING1.

Profits

derived by an enterprise of a Contracting State from the operation of ships in

international traffic may be taxed in both Contracting States according to the

law of each Contracting State:Provided

that where such an enterprise derives profits from such operation in the other

Contracting State:a. such profits shall be

deemed to be an amount not exceeding five per cent of the full amount received

by the enterprise on account of the carriage of passengers or freight embarked

in that other State;b. the tax chargeable in

that other State shall be reduced by an amount equal to fifty per cent thereof.ARTICLE

10ASSOCIATED

ENTERPRISES1. Wherea. an enterprise of a

Contracting State participates directly or indirectly in the management,

control or capital of an enterprise of the other Contracting State, orb. the same persons

participate directly or indirectly in the management, control or capital of an

enterprise of a Contracting State and all enterprise of the other Contracting

State, and in either case conditions are made or imposed between the two

enterprises in their, commercial or financial relations which differ from those

which would be made between independent enterprises, then any profits which

would, but for those conditions, have accrued to one of the enterprises, but by

reason of those conditions, have not so accrued, may be included in the profits

of that enterprise and taxed accordingly.1.2. Where profits on

which an enterprise of a Contracting State has been charged to tax in that

State are also included in the profits of an enterprise of the other

Contracting State and taxed accordingly, and the profits so included are

profits which would have accrued to that enterprise of the other State, if the

conditions made between the enterprises had been those which would have been

made between independent enterprises, then the first-mentioned State shall make

an appropriate adjustment to the amount of tax charged on those profits in the

first-mentioned State. In determining such an adjustment due regard shall be

had to the other provisions of this Convention in relation to the nature of the

income.Article

11DIVIDENDS1. 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 in that other State professional

services from a fixed base situated therein and the holding by virtue of which

the dividends are 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.5. Where a company which

is a resident of a Contracting State derives profits or income from the other

Contracting State, that other State may not impose any tax on the dividends

paid by the company except insofar as such dividends are paid to a resident of

that other State or insofar as the holding in respect of which the dividends

are paid is effectively connected with a permanent establishment or a fixed

base situated in that other State, nor subject the company's undistributed

profits to a tax on the company's undistributed profits, even if the dividends

paid or the undistributed profits consist wholly or partly of profits or income

arising in such other State.Article

12INTEREST1. Interest arising in a

Contracting State and paid to a resident of the other Contracting State may be

taxed in that other state.2. However, such

interest may be taxed in the Contracting State in which it arises, and

according to the law of that State, but the tax so charged in the Contracting

State in which the interest arises shall, not exceed 15 per cent of the gross

amount of the interest.3. Notwithstanding the

provisions of paragraph 2, interest arising in a Contracting State and paid to

the Government of the other Contracting State or local authority thereof, the

Central Bank of that other Contracting State, or any agency wholly owned by

that Government or local authority, shall be exempt from tax of the

first-mentioned Contracting State. The competent authorities of the Contracting

State may determine by mutual agreement any other governmental institution to

which this paragraph shall apply.4. The term "

interest " as used in this Article means income from Government

securities, bonds or debentures, whether or not secured by mortgage and whether

or not carrying a right to participate in profits, and other debt-claims of

every kind as well as all other incomes assimilated to income from money lent

by the taxation law of the Contracting State in which the income arises.5. The provisions of

paragraph 2 shall not apply in the recipient of the interest, 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 indebtedness on which the interest

is paid was incurred, and that interest is home 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 recipient or between both of

them and some other person, the amount of the interest paid, having regard to

the debt-claim for which it is 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 payment shall remain taxable according to

the law of each Contracting State, due regard being had to the other provisions

of this Convention.Article

13ROYALTIES1. Royalties arising in

a Contracting State and paid to a resident of the other Contracting State may

he taxed in that other State.2. However, such

royalties may be taxed in the Contracting State in which they arise, and

according to the law of that State, but the tax so charged in the Contracting

State in which the royalties arise shall, not exceed 20 per cent of the gross

amount of the royalties.3. The term "

royalties " as used in this Article means payments of any kind received as

a consideration for the use of, or the right to use, any copyright of literary,

artistic or scientific work (including cinematograph films, and films or tapes

for radio or television broadcasting), any patent, trade mark, design or model,

plan, secret formula or process, or for the use of, or the right to use,

industrial, commercial or scientific equipment, or for information concerning

industrial, commercial or scientific experience.4. The provisions of

paragraph 2 shall not apply if the recipient of the royalties, being a resident

of a Contracting State, carries on business in the other Contracting State in

which the royalties arise through a permanent establishment situated herein, or

performs in that other State professional services from a fixed base situated

therein, and the right or property in respect of which the royalties are 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.5. Royalties, 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 royalties, 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 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 payment shall

remain taxable according to the law of each Contracting State, due regard being

had to the other provisions of this Convention.Article

14CAPITAL

GAINS1. 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 situated.2. Gains from the

alienation of movable property forming part of the business property of a

permanent establishment which an enterprise of a Contracting State has in the

other Contracting State or of movable property pertaining to a fixed base

available to a resident of a Contracting State in the other Contracting State

for the purpose of performing professional services, including such gains from the

alienation of such a permanent establishment (alone or together with the whole

enterprise) or of such a fixed base, may be taxed in that other State.3. Notwithstanding the

provisions of paragraph 2 gains by an enterprise of a Contracting State from

the alienation of ships and aircraft which it operates in international traffic

and movable property pertaining to the operation of such ships and aircraft

shall be taxable only in that State.4. Gains from the

alienation of-a. shares of a company,

the property of which consists principally of immovable property situated in a

Contracting State, andb. interest in a

partnership or a trust, the property o which consists principally of immovable

property situated in a Contracting State,may be taxed in that State. For the purposes of this paragraph the term "

immovable property " includes the shares of a company referred to in

sub-paragraph (a) or an interest in a partnership or a trust referred to in

sub-paragraph (b).1.2.3.4.5. Gains derived by a

resident of a Contracting State from the alienation of any property other than

those mentioned in paragraphs 1, 2, 3 and 4 shall be taxable only in that

State.Article

15MANAGEMENT

AND PROFESSIONAL FEES1. Management or

professional fees arising in a Contracting State and paid to a resident of the

other Contracting State may be taxed in that other State.2. However such

management or professional fees may be taxed in the Contracting State in which

they arise, and according to the law of that State, but the tax so charged

shall not exceed 17 1/2 per cent of the gross amount of the management or

professional fees.3. The term "

management or professional fees " as used in this Article means payments

of any kind to any person, other than to an employee of the person, making the

payments in consideration for any services of a managerial, technical,

professional or consultancy nature.4. The provisions of

paragraph 2 shall not apply if the recipient of the management or professional

fees, being a resident of a Contracting State, 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, having regard to the

service for which they are paid, exceeds the amount which would have been

agreed upon by the payer and the beneficial owner 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 payment shall remain

taxable according to the law of each Contracting State, due regard being had to

the other provisions of this Convention.Article

16INDEPENDENT

PERSONAL SERVICES1. Income derived by a

resident of a Contracting State in respect of professional services or other

independent activities of a similar character shall be taxable only in that

State unless:a. he has a fixed base

regularly available to him in the other Contracting State for the purposes of

performing his activities, in which case so much of the income may be taxed in

that other State as is attributable to that fixed base; orb. he is present in the

other Contracting State for the purpose of performing his activities for a

period or periods exceeding in the aggregate 183 days in the calendar year

concerned in the case of Kenya or the previous year concerned in the case of

India, in which case so much of the income may be taxed in that other State as

is attributable to the activities performed in that other State.1.2. The term

"professional services" includes independent scientific, literary,

artistic, educational or teaching activities, as well as the independent

activities of physicians, lawyers, engineers, architects, dentists, and

accountants.Article

17DEPENDENT

PERSONAL SERVICES1. Subject to the

provisions of Articles 18, 19, 20, 21, 22 and 23, salaries, wages and other

similar remuneration derived by a resident of a Contracting State in respect of

an employment shall be taxable only in that State unless the employment is

exercised in the other Contracting State. If the employment is so exercised,

such remuneration as is derived therefrom may be taxed in the other State.2. Notwithstanding the

provisions of paragraph 1, remuneration derived by a resident of a Contracting

State in respect of an employment exercised in the other Contracting State

shall be taxable only in the first-mentioned State if:a. the recipient is

present in the other State for a period or periods not exceeding in the

aggregate 183 days in the fiscal year concerned, andb. the remuneration is

paid by, or on behalf of an employer who is not a resident of the other State,

andc. the remuneration is

not borne by a permanent establishment or a fixed base which the employed has

in the other State.1.2.3. 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 Contracting State in which the place of effective management of the

enterprise is situated.Article

18DIRECTORS'

FEESDirectors'

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

19ARTISTES

AND ATHLETES1. 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 the services of public entertainer

or an athlete mentioned in paragraph 1 are provided in a Contracting State by

an enterprise of the other Contracting State, the profits derived by that

enterprise from providing those services may be taxed in the first-mentioned

State.3. The provisions of

paragraphs 1 and 2 shall not apply to services of public entertainers and

athletes. If their visit to a Contracting State is supported wholly or

substantially from public funds of the other Contracting State.Article

20GOVERNMENT

SERVICE1.a. Remuneration, other

than a pension, paid by a Contracting State or a political sub-division or a local

authority thereof to any individual in respect of services rendered to that

State of sub-division or local authority thereof shall be taxable only in that

State.b. (b)However, such

remuneration shall be taxable only in the Contracting State of which the

recipient is a resident if the services are rendered in that State and the

recipient did not become a resident of that State solely for the purpose of

performing the services.2. The provisions of

paragraph 1 shall not apply to remuneration in respect of services rendered in

connection with any trade or business carried on by one of the Contracting

States or a political sub-division or a local authority thereof.Article

21PENSIONS1. Any pension [other

than a pension of the kind referred to in paragraph (2) of this Article] and

any annuity, derived from sources within a Contracting State by an individual

who is a resident of the other Contracting State may be taxed in the

first-mentioned Contracting State, but if the individual is subject to tax in

the other Contracting State in respect of the pension or annuity the tax so

charged in the first-mentioned Contracting State shaft not exceed the lower ofa. 5 per cent of the

pension or annuity; orb. the amount of tax

chargeable on the pension or annuity in the other Contracting State.1.2. Pensions paid by, or

out of funds created by, a Contracting State to an individual for services

rendered to that Contracting State in the discharge of governmental functions

may be taxed only in that Contracting State.3. The term

"annuity" means 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

22STUDENTS

AND APPRENTICES1. 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 firstmentioned 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

23PROFESSORS

AND TEACHERS1. A professor or

teacher who visits a Contracting State for a period not exceeding one year for

the purpose of teaching or conducting research at a University, College, School

or other Educational Institution in that Contracting State and who is, or was

immediately before such visit, a resident of the other Contracting State shall

be exempt from tax in the first-mentioned Contracting State on any remuneration

for such teaching or research in respect of which he is subject to tax in the

other Contracting State. However, any remuneration for such work received from

sources outside the State shall not be deductible in the first-mentioned State.2. This Article shall

not apply to income from research if such research is undertaken primarily for

the private benefit of a specific person or persons.Article

24INCOME

NOT EXPRESSLY MENTIONED1. Items of income of a

resident of a Contracting State which are not expressly mentioned in the

foregoing articles of this Convention in respect of which he is subject to tax

in that State shall be taxable only in that State.2. However, if such

income is derived by a resident of a Contracting State from sources in the

other Contracting State, such income may also be taxed in the State in which it

arises, and according to the law of that State.Article

25METHOD

OF ELIMINATION OF DOUBLE TAXATION1. The laws in force in

either of the Contracting States will continue to govern the taxation of income

in the respective Contracting States except where provisions to the contrary

are made in this Convention.2.a. The amount of Kenyan

tax payable, under the laws of Kenya and in accordance with the provision of

this Convention, whether directly or by deduction, by a resident of India, in

respect of income from sources within Kenya which has been subjected to tax

both in India and in Kenya, shall be allowed as a credit against the Indian tax

payable in respect of such income, provided that such credit shall not exceed

the Indian tax (as computed before allowing any such credit) which is

appropriate to the income derived from sources within Kenya; so, however, that

where such resident is a company by which surtax is payable in India, the

credit aforesaid shall be allowed in the first instance against income-tax

payable by the company in India, and as to the balance, if any, against surtax

payable by it in India;b. For the purposes of

the credit referred to in sub-paragraph (a) above, the term " Kenyan tax

payable " shall be deemed 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.1.2.3.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 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 " shall be deemed to include any amount by which Indian tax has

been reduced by the special incentive measures set forth in the following

Sections of the Income-tax Act, 1961:---i.

Sections

10(4), 10(4A), 10(6) (viia), 10(15) (iv), 10A, 32A, 33A, 35B, 35CC, 80HH, 201,

80K, 80L, andii.

any

other provisions which may subsequently benacted granting a deduction from

taxable income or exemption from or reduction of tax which the competent

authorities of the Contracting States agree to be for the purposes of economic

development.1.2.3.4. Where under this

Convention a resident of a Contracting State is exempt from tax in that

Contracting State in respect of income derived from the other Contracting State

then the firstmentioned Contracting State may, in calculating tax in the

remaining income of that person apply the rate of tax which would have been

applicable if the income exempted from tax in accordance with this Convention

had not been so exempted.Article

26NON-DISCRIMINATION1. The nationals of a

Contracting State shall not be subjected in the other Contracting State to any

taxation or any requirement connected therewith which is other are more

burdensome than the taxation and connected requirements to which nationals of

that other State in the same circumstances are or may be subjected.2. The taxation on a

permanent establishment which an enterprise of a Contracting State has in the

other Contracting State shall no be less favourably levied in that other State

than the taxation levied on enterprises of that other State carrying on the

same activities.3. Nothing in this

Article shall be construed as obliging a Contracting State to grant to

residents of the other Contracting State any personal allowances, reliefs and

reductions for taxation purposes on account of civil status or family

responsibilities which it grants to its own residents.4. Enterprises of a

Contracting State, the capital of which is wholly or partly owned or controlled

directly or indirectly, by one or more residents of the other Contracting

State, shall not be subjected in the first-mentioned State 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.5. In this Article the

term "taxation" means taxes 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

27MUTUAL

AGREEMENT PROCEDURE1. 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, it the objection appears to it to be justified and

if it is not itself able to arrive at an appropriate solution, to resolve the case

by mutual agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation not in accordance with this

Convention. Any agreement reached shall be implemented notwithstanding any time

limits in the national laws oft the Contracting States.3. The competent

authorities of the Contracting States shall endeavour to resolve by mutual

agreement any difficulties or doubts arising as to the interpretation or

application of this Convention. They may also consult together for the

elimination of double taxation in cases not provided for in this Convention.4. The competent

authorities of the Contracting States may communicate directly with each other

for the purposes of applying the provisions of this Convention. When it seems

advisable in order to reach agreement to have an oral exchange of opinions,

such exchange may take place through a commission consisting of representatives

of the competent authorities of the contracting States.Article

28EXCHANGE

OF INFORMATION1. The competent

authorities of the contracting States shall exchange such information as is

necessary for the carrying out of this Convention or for preventing fraud or

fiscal evasion concerning taxes covered by this Convention in so far as the

taxation there under is in accordance with this Convention. Any information so

exchanged shall be treated as secret and shall not be disclosed to any persons

or authorities other than those concerned with the assessment or collection or

the taxes which are the subject of this Convention.2. In no case shall the

provisions of paragraph 1 be construed so as to impose on one of the

Contracting States the obligation.a. to carry out

administrative measures at variance with the laws or the administrative

practice of that or of the other Contracting Stated;b. to supply particulars

which are not obtainable under the laws or in the normal course of the

administration of that or of the other contracting State;c. to supply information

which would disclose any trade, business, industrial, Commercial or

professional secret or trade process, or information, the disclosure of which