Kenya has ratified a treaty that blocks multinational firms from abusing taxation loopholes and shifting profits, the Organization for Economic Cooperation and Development (OECD) has confirmed.
- •The treaty dubbed ‘The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS)’ helps countries to update bilateral tax treaties and seal opportunities for tax avoidance.
- •Kenya joins more than 85 countries that have approved the convention, which has modified over 1,600 existing agreements.
- •The BEPS convention will enter into force in Kenya beginning May 2025.
“Kenya deposited its instrument of ratification for the multilateral convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS Convention), underlining its strong commitment to prevent the abuse of tax treaties by multinational enterprises,” OECD reported.
The convention was negotiated under the mandate from finance ministers and Central Bank governors from G20 member states and actively began its role in July 2018.
Domestic tax base erosion and profit shifting (BEPS) relates to tax planning strategies that multinational enterprises use to exploit loopholes in tax rules to artificially shift profits to low or no-tax locations as a way to avoid paying tax.
-OECD
The ratification will leverage Kenya’s capacity to resolve tax disputes. This is because 33 countries that have approved the convention took upon mandatory binding arbitration as an option.
Kenya and the Democratic Republic of Congo (DRC) are the only East African countries that have negotiated for the treaty, but Kinshasa is yet to ratify it.