Kenya: CMA Seeks Lower Tax to Attract Investors
DOUBLE taxation for companies and individual investors at the securities market could be scrapped in 2016, if a plan by the Capital Markets Authority is adopted.
In a move to attract and grow investments, the Capital Markets Authority has initiated talks on a transparent tax regime, to eliminate multiple taxes by reviewing the current system.
CMA said a working committee has been established under the stewardship of Vision 2030 delivery board to review the existing taxes within the financial markets.
“What we want is transparency and reduction in double taxation so that where we have a security held by an individual through a market intermediary or a custodian, we make sure that taxation only applies once,” CMA acting chief executive Paul Muthaura told reporters on Friday.
“Those are some of the discussions that are ongoing to open up the opportunities for operation of some of these new products.”
The income tax reforms by the vision 2030 committee with membership from the Treasury and Kenya Revenue Authority are aimed at promoting interest in derivatives, Real Estate Investment Trusts, asset backed securities and holding companies.
Five fund managers-UAP, Stanlib, Fusion, CIC and Centum- have been cleared by the CMA to manage REITs.
CMA has further received interest from at least three entities including the Nairobi Securities Exchange seeking licences to trade in futures contracts-agreements to buy specific commodity at a pre-determined price in future.
“The tax treatment of the holding companies is one of the issues under discussion,” he said.
“A number of companies are now looking to achieve more efficiencies through diversification of risks by listing a holding company and this will improve the quality of assets available to investors.”
Equity Bank, the largest lender by deposit accounts, will today seek shareholders’ approval at an extraordinary general meeting to incorporate a holding company while mortgage lender Housing Finance has lined up a similar exercise on December 5.
The new facilitative tax regime, expected to be in place by 2016, is part of the CMA’s master plan 2014-2023 that seeks to position Nairobi as a preferred a financial hub for the burgeoning investments into Africa.
It is hoped that Nairobi will play in the league of leading financial gateways like Johannesburg, London, New York, Tokyo, Zurich and Dubai by the year 2024.
Five centres of excellence have been earmarked including commodities derivatives for agricultural produce and minerals, REITs for the booming construction sector and leveraging on technology services for financial inclusion.
Other targeted areas include infrastructure finance and other financial services including asset management, financial derivatives and Islamic finance like bonds named sukuk.
