Question 2 Dasani Ltd is considering establishing operation in Uganda. It is undecided whether to establish a branch or a wholly owned subsidiary. Also, the company is wondering the impact of undertaking the work needed to be performed in Uganda from Kenya. This would involve sending its Kenyan staff to Uganda for a period of 3 months in 2023. However, it is possible that the Kenyan staff may need to be in Uganda longer, but at this point it’s unclear. If the option of sending staff is adopted there would be no need to set up a branch or subsidiary. However, the company is concerned about the tax impactof doing this. Uganda taxes income of resident companies at a rate of 30% and branch companies at a rate of 35%. It also withholds taxes at a flat rate of 10% on dividends paid by resident companies to companies in Kenya. Kenya has income tax rate of 30% on income earned worldwide but gives a tax credit for taxes paid to another country. Foreign dividends in Kenya are not taxable. Required a) Based on the above information, is a branch or subsidiary the recommended form to establish the operations? Justify your answer. b) Explain the concept of a Permanent Establishment (PE) c) Would sending the Kenyan employees to Uganda expose the company to any tax considerations in Uganda. Please discuss this in detail explaining the impact of the same to both the Kenyan employees and on the company
Question 2
Dasani Ltd is considering establishing operation in Uganda.
It is undecided whether to establish a branch or a wholly owned subsidiary.
Also, the company is wondering the impact of undertaking the work needed to be performed in
Uganda from Kenya. This would involve sending its Kenyan staff to Uganda for a period of 3 months in 2023. However, it is possible that the Kenyan staff may need to be in Uganda longer, but at this point it’s unclear. If the option of sending staff is adopted there would be no need to set up a branch or subsidiary. However, the company is concerned about the tax impactof doing this.
Uganda taxes income of resident companies at a rate of 30% and branch companies at a rate of 35%. It also withholds taxes at a flat rate of 10% on dividends paid by resident companies to companies in Kenya. Kenya has income tax rate of 30% on income earned worldwide but gives a tax credit for taxes paid to another country. Foreign dividends in Kenya are not taxable.
Required
a) Based on the above information, is a branch or subsidiary the recommended form to establish the operations? Justify your answer.
b) Explain the concept of a Permanent Establishment (PE)
c) Would sending the Kenyan employees to Uganda expose the company to any tax considerations
in Uganda. Please discuss this in detail explaining the impact of the same to both the Kenyan employees and on the company
Step by step
Solved in 4 steps
