PROFESSIONAL SERVICES IN RESPECT OF SOLAR ENERGY PROJECT IN KENYA

Some of the Services we offer in respect of solar energy projects in Kenya include:

SN	PARTICULARS OF POTENTIAL INSTRUCTIONS
1.	Handling all emerging legal issues relating to the project
2.	Legal Advice on Undertaking a Solar Energy Development Project in Kenya by either a foreigner or foreign company
3.	Legal Advice on Acquisition of Land Interests in Kenya by either a foreigner or foreign company
4.	Legal Advice on Incorporation of Companies in Kenya under the recently enacted Companies Act of 2015
5.	Preparing a Joint Venture Agreement between the investors
6.	Preparing a Project Finance Agreement between the financier on one hand and the investors on the other hand
7.	Preparing Security Agreement between the financier on one hand and the investors on the other hand
8.	Conveyancing (Land) services including: -          negotiating the purchase or lease terms for the identified land -          due diligence on the property -          preparing sale agreements -          preparing transfer documents -          attending to execution, stamping and registration of interests in the land in favour of the client
9.	Incorporation of the Special Purpose Vehicle through which the project will be undertaken
10.	Preparing the Shareholders’ Agreement for the shareholders in the SPV
11.	Preparing Board Resolutions Authorizing Various actions by the SPV or its appointed agents
12.	Drafting Various Agreements between the SPV and third party service providers, if any
13.	Drafting the relevant parts of the Expression of Interest (EOI) documentation
14.	Assisting with the conduct of the pre-feasibility studies as may be required by the client
15.	Obtaining the necessary Environment Impact Assessment Licenses from NEMA
16.	Participating in the Power Purchase Agreement (PPA) negotiations
17.	Availing energy consultant for purposes of pre-feasibility studies
18.	Nominee director Services
19.	Nominee Shareholder Services
20.	Registered Office and Local Agent Services
21.	Company Secretarial Services
22.	Custodian Services – safe custody of important documents of the investors, the SPV such as Certificate of Incorporation, Pin Certificates, Company Seal, Title Deeds and Various Agreements
23.	Comprehensive Legal Advice on how best to Manage Tax issue for the Group including suitable tax structuring approaches
24.	Legal advice on employment law in Kenya and how best to manage employment and labour issues for the Group
25.	Processing Work Permits for the investors and/or the foreign staff
26.	Accompanying the client for meetings with third parties as and when requested by the client
27.	Attending to General enquiries from the client, either over the phone or email.
28.	Attending to such other related legal and quasi-legal services as the client may require

Please contact us should you require our assistance in respect of any of these services.

For: Strategic Legal Solutions Group Ltd

Teddy OKELLO

Managing Director

ceo@stralexgroup@co.ke /stralexgroup@gmail.com 

INCOME TAX LIABILITY ON INTELLECTUAL PROPERTY

First, it is important to appreciate the nature of income tax in Kenya. Under the provisions of the Income Tax Act, Cap 470, Laws of Kenya (“the Act”) at section 3 income tax is imposed upon all income of a person, if the same was accrued in or derived from Kenya. Further, the principles of worldwide and source basis apply to individuals. This simply means, Kenyan residents are taxed on their worldwide income while non-residents are taxed on the income from a source within the territory.

Generally, the treatment of tax on income related to intellectual property is dependent on the nature of income and the activity generating the income, who owns the property, and who makes the payment. A transfer or a license of intellectual property depends on whether all the rights to the property have been transferred. Income from a transfer or licensing of intellectual property may subsequently give rise to a capital gain or loss as well as withholding tax. If the income is accrued to or received by an individual in the furtherance of a business, it may then attract ordinary income tax liability with certain tax deductions and rebates while if in the course of employment, depending on the nature of the employment contract, to ordinary income tax.

Amounts received by individuals who create intellectual property may be royalties or compensation, depending whether they own and license the property or create it for an employer. However, the Act seemingly compounds such amounts as royalties for purposes of income tax.

The definitive section of royalty defines Royalty as:

1.      Consideration for the use or right to use:

(a)   A copyright of a literary, artistic or scientific work; or

(b)   A cinematography film, including film or tape for radio or television broadcasting; or

(c)    A patent, trade mark, design or model, plan, formula or process; or

(d)   Any industrial, commercial or scientific equipment,

2.      Consideration for information concerning industrial, commercial or scientific equipment; or

3.      Consideration for experience, and gains derived from the sale or exchange of any right or property giving rise to that royalty.

The provisions of Section 10 of the Act deem payments in respect of royalties, among others stated under the said section, from a resident or a person having a permanent establishment in Kenya to any other person, to be income which has accrued in or derived from Kenya.

Two salient features arise from the provisions of section 10:

·                     That the payment of the amount constituting the income must be from a resident or a person having a permanent establishment in Kenya.

This is in line with the OECD Model Tax Treaty Principles where the source of royalties is based on the tax residence of the party paying the royalties or on royalties having an economic link with a permanent establishment. This removes any focus on the party creating, devising or developing intellectual property and instead focuses on the party making the payment and thus, if the party paying the royalty is a resident or a person having a permanent establishment in Kenya, then source of such income is said to be from within the Republic.

A Permanent Establishment is defined in the Act as a fixed place of business in which that person carries on business. A building site, or a construction or assembly project, which has existed for six months or more is deemed to be a fixed place of business.

·                     That such payment is made to any person, resident or not;

The main problem arising from this is double taxation. This may come about where a person who has received such payment, not being a resident, is liable to tax in Kenya on source basis while the jurisdiction where he/she is a tax resident imposes tax on a worldwide income.

TAX ADMINISTRATION

The taxes are deducted at source as withholding tax and are at the rate of 5% for payments to a resident and 20% for payments to a non-resident. The deductions are carried out by the person making the payment and shall according to section 35 of the Act, be remitted to the Commissioner together with a return in writing of the amount of the payment, the amount of tax deducted, and such other information as the Commissioner may specify. He/she shall also indicate the person to whom the payment is made with a Certificate stating the amount of the payment and the amount of the tax deducted. 

EXEMPTION

The Minister (in charge of Treasury) may, by notice in the Gazette, provide that income or a class of income which accrued in or was derived from Kenya to be exempt from tax to the extent specified in the notice.

Part 1 of the First Schedule to the Act provides at Section 11 that the income of a person from a management or professional fee, royalty or interest may be exempt from tax when the Cabinet Secretary certifies that it is required to be paid free of tax by the terms of an agreement to which the Government is a party either as principal or guarantor and that it is in the public interest that the income be exempt from tax.

*Note that exemptions are not guaranteed and are solely the decision of the minister in charge.

CONCLUSION

We trust that the above presentation on Income Tax Liability on Intellectual Property at a glance will be useful in your decision making processes. However, should you have any further queries regarding issues arising herein, any other tax matter and intellectual property concerns, please do not hesitate to contact us at info@stralexgroup.co.ke or on + 254 715 310 677 for clarification.

Prepared for Strategic Legal Solutions Group Limited, by:

Taxlex Consulting, and Intellectual Property East Africa LLP (participating consultancy firms in the SLS Group of consultancies) and Victor KIAMBA

info@stralexgroup.co.ke

OVERVIEW OF AIR POLLUTION AS AN ENVIRONMENTAL ISSUE IN KENYA

Air Pollution is the introduction of particulates, biological molecules or other harmful substances, at higher concentrations into the atmosphere and consequently posing a threat to the health of humans, animals and plants after continuous and long period of exposure.

Air Pollutant is a substance in the air that can have adverse effects on humans and ecosystems. Air pollutants are either introduced into the atmosphere naturally or facilitated by humans through various means. Air pollutants are classified either as:

-          Primary Air Pollutants; or

-          Secondary Air Pollutants.

Primary Pollutants are introduced directly into the atmosphere while Secondary Pollutants are formed in the air as primary pollutants react or interact. Primary pollutants include:

-          sulfur oxides;

-          nitrogen oxides;

-          carbon oxides;

-          volatile organic compounds;

-          particulate matter;

-          free radicals; and

-          toxic metals such as methyl mercury, odours,  chlorofluorocarbons, ammonia and radioactive pollutants.

Secondary Air Pollutants majorly include photochemical smog and ground level ozone and peroxyacetyl nitrate (PAN) both from nitrogen oxides and volatile organic compounds.

Dispersal of air pollutants is affected by Thermal Inversion, Wind Dispersion and “Grasshopper effect”.

Thermal Inversion occurs when a stable layer of warm air overlays cool air, and consequently:

a)      reversing the normal temperature decline with increasing height;

b)      preventing Convection Currents from dispersing pollutants, thus limiting dilution of air pollutants.

Wind also facilitates dilution of air pollutants by evenly dispersing them, which then reduces higher concentrations in certain areas.

Grasshopper Effect Principle is whereby volatile organic compounds evaporate from warmer areas then condense and precipitate in the cooler areas.

Anthropogenic sources of air pollution include:

1.      Combustion of coal, oil and oil products in industries and poorly maintained motor vehicles which release nitrogen oxides and sulfur oxides into the atmosphere;

2.      Electric power generation releases nitrogen oxides into the atmosphere;

3.      Use of aerosols and smoking release particulate matter into the atmosphere;

4.      Construction also release particulate matter into the atmosphere from the cement used and also asbestos fibers (serpentine and amphiboles) from breaking of asbestos used for roofing;

5.      Strip Mining and Rock Crushing release particulate matter into the atmosphere as dust;

6.      Leaks around industrial valves and pipes release volatile organic compounds and toxic metals into the atmosphere;

7.      Open combustion of solid wastes also pollutes the air; and

8.      Combustion of mined fuels releases heavy metals into the atmosphere such as leaded gasoline which release lead during combustion.

Natural sources of air pollution include volcanic eruptions that release ash, crystalline silica, acid mists, pyroclasts and hydrogen sulfide, plants that release volatile organic compounds (Terpenes and Isoprenes), Dust Storms which cause wind erosion and swamps and dairy animals that are responsible for 66% of the atmospheric methane.

Air pollution is a great challenge facing both developing and underdeveloped countries due to inadequate finances, technology, policies and framework that hinder air pollution control. Pollution has several detrimental effects to health of humans, animals and plants, that is, the ecosystem as a whole.

Sulfuric (IV) Oxide is oxidized in the air to form Sulfur Trioxide, which then reacts with water to form Sulfuric Acid which leads to acid rain.  Acid Rain corrodes iron sheets and other metallic structures and also causes lung damage from acidic sulfate ions. Acid rain also lowers the soil’s pH which in turn reduces the bioavailability of essential nutrients to plants and mobilizes heavy metals such as lead, arsenic into the groundwater through catalyzing weathering in the respective bearing rocks.

Nitrogen Oxide is oxidized to Nitrogen Dioxide, which then reacts with water to form Acid Rain which leads to Eutrophication in aquatic ecosystems. This then causes Algal Blooms and thus lowering dissolved oxygen in aquatic ecosystems which further leads to death of aquatic life forms through suffocation and also provides conducive conditions for incubation of disease-causing micro-organisms. Nitrogen Oxide (N2O) also absorbs ultraviolet rays modifying the climate.

Carbon Oxides cause global warming by permitting maximum absorption of the incoming short-wave solar radiation on the earth and permitting minimum emission into the atmosphere which is indirectly heated, thus leading to rise in atmospheric temperatures.

Carbon Monoxide also combines with hemoglobin to form carboxyhemoglobin since hemoglobin has a high affinity for carbon monoxide than oxygen thereby causing suffocation which leads to vertigo, fainting, cardiovascular problems, collapse of respiratory system and death. Particulate matter reduces air visibility and leaves dirty deposits on windows, painted surfaces and textiles.

Respirable particulatessmaller than 2.5 micrometers such as crystalline silica cause damage to respiratory tissues when inhaled. Asbestos fibers and cigarette smoke are very dangerous when inhaled since they are carcinogenic in nature.

Diesel Fumes are also highly toxic since they contain benzene, dioxins and mercury which pose a great threat to the health of humans and animals.

Lead from leaded gasoline is a metabolic poison and neurotoxin.

Mercury (Methyl Mercury) emitted by volcanoes, smoke stacks, power plants and medical incinerators is extremely toxic and kills the brain cells.

Photochemical Smog formed by the reaction of nitrogen oxides and hydrocarbons in the presence of ultraviolet radiation is a strong oxidizing agent which damages vegetation, building materials and sensitive tissues such as the eyes and lungs. It however forms the ozone layer which protects the earth from direct ultraviolet rays which are harmful to humans, animals and plants. Persistent inhalation of irritant air pollutants causes mucus buildup, painful cough and involuntary muscle spasms that constrict airways thus causing bronchitis.

CONCLUSION

Air pollution has adverse effects and should therefore be limited or eradicated by all means in order to protect humans, animals and plants that are all dependent on air for survival. Air pollution can be reduced through switching to clean energy sources (such as solar energy, wind energy, nuclear energy and tidal energy) and abandoning coal and fossil fuels that pollute the atmosphere immensely.

Developing better public transportation systems that reduce the emissions from associated transport means to minimum quantities possible can also lead to reduction in air pollution.

Modern technology such as electrostatic precipitators, baghouses, cyclones, scrubbers and catalytic converters can also be used in cleaning of emissions released through the smoke stacks.

Planting trees remains one of the surest ways of reducing the level of carbon oxides concentrations in the atmosphere as plants absorb carbon dioxide during photosynthesis to manufacture their own food.

Air Pollution Control can also be achieved by heavily fining industries that do not comply with Emission Standards Code and also by regulation of industrialization. Air pollution can also be controlled by banning or restricting importation of vehicles that do not meet emission code standards in order to reduce vehicle emissions.

Prepared for Strategic Legal Solutions Group Limited, by:

Anita OWITI, & Centre for Environmental Law & Policy (a participating consultancy firm in the SLS Group of consultancies).

REFERENCES

1.      2009-2016 Conserve Energy Future http://www.conserve-energy-future.com/cause-effects-solutions-of-air-pollution.php

2.      25^th March 2014 World Health Organization Report http://www.who.int/mediacentre/news/releases/2014/air-pollution/en

3.      30^th April 2014 Phoenix Air Quality Report http://www.azcentral.com/story/news/local/phoenix/2014/04/30/report-phoenix-air-quality-rankings-dip/8499045/

4.      April 2015The Guardian ,London, UK, “Air pollution may cause  more UK death than previously thought, say scientists” http://www.theguardian.com/environment/2015/apr/02/air-pollution-may-cause-more-uk-deaths-than-previously-thought-say-scientists

5.      EPA , May 2004 “Clean Air nonroad Diesel Rule” https://www3.epa.gov/otaq/documents/nonroad-diesel/420f04032.pdf

6.      BC Lung Association. 2005. Health and air quality 2005. Phase 2: Valuation of health impacts from air quality in the lower Fraser Valley airshed. 127pp. Available at www.bc.lung.ca/pdf/health_and_air_quality_2005.pdf

7.      Joan Leslie Aron, Jonathan Patz, 2001. Ecosystem Change and Public Health: A global perspective (page 379-400). The Johns Hopkins University Press, Baltmore and London https://books.google.co.ke/books?hl=en&lr=&id=_FjXiPOFcs8C&oi=fnd&pg=PA379&dq=dispersal+of+air+pollutants+through+thermal+inversion,+grasshopper+effect+and+wind&ots=7YlAU0dX32&sig=XeCZp06rFtkd7gf135KtYYgslnU&redir_esc=y#v=onepage&q&f=false