Kenya has officially ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS Convention), a significant step in its fight against tax avoidance by multinational enterprises.
The Organisation for Economic Cooperation and Development (OECD) announced on Wednesday that the convention will come into effect for Kenya on May 1, 2025.
“Kenya deposited its instrument of ratification for the BEPS Convention, underlining its strong commitment to prevent the abuse of tax treaties and base erosion and profit shifting (BEPS) by multinational enterprises,” stated the OECD.
The BEPS Convention, developed under the OECD/G20 BEPS Project, is designed to modernise bilateral tax treaties and curb practices that erode national tax bases.
Key measures within the convention target treaty abuse, the avoidance of creating a “permanent establishment,” and hybrid mismatch arrangements.
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Additionally, it enhances the tax treaty dispute resolution process through an optional provision on mandatory binding arbitration, adopted by 33 jurisdictions.
According to the OECD, “as of today, 88 jurisdictions have either ratified, accepted, or approved the BEPS Convention, resulting in the modification of over 1,600 treaties. Around 350 additional treaties will be modified once the BEPS Convention will have been ratified by all Signatories.”
The convention represents one of the most significant achievements of the G20 Finance Ministers and Central Bank Governors, with over 100 countries contributing to its development.
It aims to strengthen global tax systems and reduce opportunities for multinationals to exploit treaty loopholes.
Kenya’s ratification highlights its dedication to ensuring fair taxation and reducing revenue losses attributed to tax avoidance strategies by large corporations.
The move is expected to align the country’s tax treaties with global standards and foster a more transparent and equitable tax regime.
