THE DOUBLE TAXATION ARCHITECTURE CONCEPTUALISED UNDER SECTION 41 (5) OF THE INCOME TAX ACT; CHAPTER 470, LAWS OF KENYA

Abstract

This article analyses section 41(5) of the Kenyan Income Tax Act with a specific focus on the different categories of tax reliefs that are availed. I argue that, although the section provides for the methods of tax relief, they are not used. I also argue that the method of relief used is as provided for in the bilateral tax treaties negotiated in the country.  There is thus, a disconnect between the law as is and the law as practiced within the country. Further, the bilateral treaties with Kenya that refer to taxation, are largely based on external models which may not favour developing countries.  As a result, a binary system is created, and instances of double taxation continue to occur, and this affects taxpayers, investors and Foreign Direct Investment (FDI) in the country. This article argues for reform in the law on double taxation; including the methods of relief from double taxation used in Kenya.