Mr. Maji Mengi knows very little about double taxation agreements. He is a consultant, who works in many countries and in many cases, he has ended up paying taxes on the same income more than once.

Required:

Explain to Mr. Maji Mengi the concept of double taxation treaty. (6 marks)

(b) For the year of income 1999, Maji Mengi earned an equivalent of Ksh.5,000,000 from employment in Canada where he paid tax equivalent to Ksh.400,000. In Kenya, he earned consultancy fee of sh.2,000,000 and employment income of sh.900,000 (PAYE sh.220,000). His Kenyan employer has provided his family with accommodation where rent paid is sh.85,000 per month. He is married to two wives and has 10 children. The wives do not earn any income.

Required:

The tax liability for Maji Mengi for the year of income 1999. (12 marks)

(c) What is the tax position on double taxation agreements in relation to non-residents?

(2 marks)

(Total: 20 marks)