Kenya has officially agreed to follow a treaty designed to stop multinational companies from using tax loopholes to avoid paying taxes. This confirmation was made by the Organization for Economic Cooperation and Development (OECD).
Details of The Treaty:
The treaty, called the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), is a tool that helps countries update their existing tax agreements to close gaps that allow tax avoidance and Kenya is now part of over 85 countries that have approved this treaty.
Together, these nations have used the treaty to amend more than 1,600 tax agreements, making it harder for companies to exploit them. The BEPS treaty will officially come into effect in Kenya in May 2025, signalling Kenya’s commitment to addressing tax issues related to multinational enterprises.
The OECD explained that Kenya has pledged to stop companies from misusing tax treaties. By ratifying this agreement, Kenya is showing it is serious about preventing multinational companies from avoiding taxes through complex strategies.
Also, Kenya will improve its ability to settle tax disputes, especially because 33 other countries in the treaty have agreed to use arbitration to resolve disagreements. The treaty was created under the guidance of G20 finance ministers and Central Bank governors and has been in action since July 2018. What You Should Know
BEPS (Base Erosion and Profit Shifting) refers to strategies multinational companies use to move their profits to countries with very low or no taxes. This helps them avoid paying taxes where they actually generate their income.
The treaty aims to stop this behaviour. In East Africa, only Kenya and the Democratic Republic of Congo (DRC) have signed the treaty. However, the DRC has not yet completed its ratification process, leaving Kenya as the only East African country fully committed to the treaty so far.
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