Kenya to Examine Tax Reforms to Maximize Trade Deals With China

24 September 2023

Nairobi — The Kenyan government has set foot in signing trade deals with Chinese exhibitors as it seeks to create a window of business opportunities, capacity building, and knowledge transfer to Kenyans.

Ushering in the sixth Kenya International Industrial Expo 2023, Chinese exhibitors are delicately looking forward to setting up businesses in Kenya, aiming to spur the Kenyan economy by increasing export commodities to China.

Ronald Meru, the chair of economic diplomacy and vice chairman of the Kenya National Chamber of Commerce and Industry (KNCCI)- Nairobi said that the government is particularly interested in tax reform, a plan that will avoid severe taxation on income and prevent investors from over taxation.

As one of the Bottom-Up Economic Transformative Agenda (BETA), the comprehensive tax mend will see a reduction of tax compliance certificates issued in counties to a minimum of one.

"One of our pillars as Kenya National Chamber of Commerce is advocacy..., So, we work very closely with the government to push policies to ensure that we are given a very good conducive tax environment"

"I know we already engaged with even the parliamentary trade committee to see how we can put a level playing field in terms of even having one tax regime such that when you go to the counties you only have one tax-compliant certificate..., you don't have to have several tax certificates", he said.

The KNCCI's conventional move on tax reform is a clear indicator that the duo (China-Kenya) is on tangible dispense to thrust the industrial commerce in Kenya.

A recent report on tax compliance shows that the China-Kenya is on a deal to sign a Double Taxation Avoidance Agreement, DTA, creating a space for investors to invest locally and exempt them from double taxation.

The signing of the Double Taxation Avoidance Agreement (DTA) between Kenya and China will reduce operational costs for Chinese investors in Kenya, which will also apply to Kenyan companies doing business in China.

This agreement will facilitate rapid growth in trade and investment between the two countries and will continue to strengthen the development of friendly bilateral relations between Kenya and China.

"We want to have a unified licensing and tax and licensing model, and these are the things we want to take down not only to the business community that is doing high trade, but we're looking at even the small and medium businesses", Mr. Ronald lauded the government move which he termed as a great step that will bring a positive trajectory in the business ecosystem.

China is Kenya's main trading partner and the trade deficit between the two countries has widened as China's exports to Kenya have increased year on year.

Statistics released by the Kenya National Bureau of Statistics (KNBS) last month showed that the Kenyan trade deficit with China widened to KES 425.17 billion in the year to March 2022 from KES 370.58 billion a year earlier, an increase of 15 percent year-on-year; and that the value of China's goods accounted for 20.27 percent of Kenya's import bill, an increase of 15.23 percent year-on-year.

Notably, Kenyan total exports to China have also continued to increase, growing by 26.09% year-on-year to a total value of Sh21.48 billion.

As an expansion of the business and strengthening the bilateral ties between China and Kenya, the Kenya National Chamber of Commerce said is building an office in China to enable "Kenyan businessmen to be able to transact and do business in China"

As a key player and a hub of the East African business, many investors have trooped to Kenya to look for potential business opportunities.

Since 2018 to date, the Kenya International Industrial Export has registered an enormous number of companies that aim to invest in products to export to the China market and other countries.

Gao Wei, the Managing Director of Africa Export Kenya Limited, confirmed that the number of registered companies has largely grown and still looking forward to accommodate more exhibitors.

"We find our exhibition is really growing..., recalling 2018, we only had 60 companies, and now we have increased from 60 companies to 200 plus", he noted.

Mr. Gao Wei added that the exhibitors getting into the country could possibly find means to partner and deliberately invest in the Kenyan market for better business expansion within and outside the country.

"Maybe the investors will have an interest in going ahead to registering their companies to look for partnerships and invest in Kenya, and now at the moment, we have introduced investment and trade, which I think is very important for pushing our exhibition to go to another higher level", he said.

Meanwhile, the exhibitors currently registered with the Kenya International Industrial Expo include construction, machinery, auto parts, green energy, and chemicals among other sectors.

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