Kenya - Dividend

Article 10 Dividends

1.Dividends paid by a company which is a 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 laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed

a)10% of the gross amount of the dividends in case the company paying the dividends is a resident of Kenya; and

b)15% of the gross amount of the dividends in case the company paying the dividends is a resident of the Netherlands.

3.Notwithstanding the provisions of paragraph 2, the Contracting State of which the company is a resident shall not levy a tax on dividends paid by that company, if the beneficial owner of the dividends is:

a)a company the capital of which is wholly or partly divided into shares and which is a resident of the other Contracting State and holds directly at least 10 per cent of the capital of the company paying the dividends; or

b)a pension fund that is recognised and controlled according to the statutory provisions of the other Contracting State.

4.The provisions of paragraphs 2 and 3 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

5.The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

6.The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner 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 independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or a fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

7.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 in so far as such dividends are paid to a resident of that other State or in so far 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.

8.No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with an assignment of the dividends, or with the creation or assignment of the shares or other rights in respect of which the dividend is paid, or with the establishment, acquisition or maintenance of the company that is the beneficial owner of the dividends and the conduct of its operations, to take advantage of this Article.

Protocol:

XIII.Ad Article 10

The provisions of paragraph 3 of Article 10 shall apply as long as, under the provisions of the Income Tax Laws of the Contracting State of which the company that beneficially owns the dividends is a resident applies a full tax exemption to dividends which that company receives from a company which is resident of the other Contracting State.

XIV.Ad Article 10

The determination of the purpose referred to in paragraph 8 of Article 10 shall be based on all facts and circumstances including:

a)the nature and volume of the activities of the company in its country of residence in relation to the nature and volume of the dividends;

b)both the historical and the current ownership of the company; and

c)the business reasons for the company residing in its state of residence including the extent to which the company that beneficially owns the dividends would be entitled to treaty benefits comparable to those afforded by this Convention if it had been a resident of the state of residence of the majority of its shareholders.

The competent authority of the Contracting State which has to grant the benefits shall consult with the competent authority of the other Contracting State before denying the benefits under paragraph 8 of Article 10.

XV.Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

XVII.Ad Articles 10 and 13

1.Notwithstanding the provisions of paragraphs 1, 2 and 7 of Article 10 dividends paid by a company whose capital is divided into shares and which under the laws of the Netherlands is a resident of the Netherlands, to an individual who has a qualified shareholding in that company and who is a resident of Kenya may be taxed in the Netherlands in accordance with its own laws.

2.Notwithstanding the provisions of paragraph 4 of Article 13, the Netherlands may, in accordance with its own laws, including the interpretation of the term “alienation”, levy tax on gains derived by an individual who has been a resident of the Netherlands and has become a resident of Kenya from the alienation of shares in, “jouissance” rights or debt-claims on a company whose capital is divided into shares and which, under the laws of the first-mentioned Contracting State is a resident of that State, and from the alienation of part of the rights attached to the said shares, “jouissance” shares or debt-claims, provided that such individual has a qualified shareholding in that company.

3.The term “qualified shareholding” means a shareholding by an individual – either alone or with his or her spouse – or one of their relations by blood or marriage in the direct line directly or indirectly of at least 5 per cent of the issued capital of a particular class of shares in a company.

XVIII.Ad Articles 10 and 13

1.It is understood that income received in connection with the (total or partial) liquidation of a company or a purchase of own shares or a purchase or redemption of own profit sharing certificates by a company, such income is treated as income from shares and not as capital gains.

2.Notwithstanding paragraphs 1, 2 and 3 of Article 10 and paragraph 4 of Article 13, the Netherlands may apply the following provisions relating to the prevention of tax avoidance:

Article 17, paragraph 3, subparagraph b in connection with article 17a, paragraph 1, subparagraph c of the Corporate Income tax act 1969, or any identical or substantially similar provisions replacing these articles.