CAPITAL GAINS TAX AND HOW IT AFFECT LAND TRANSFER TRANSACTIONS IN KENYA

The Finance Act CAP 16 of 2014 was assented by the president on September 2014; section 23 of the said Act has amended the Eighth Schedule of the Income Tax Act CAP 470 to require that the sale of property be subjected to Capital gains tax. The tax which was suspended in 1985 has now been re-introduced and was effective from 1st January 2015; the tax is 5% of the net gain from the transfer of property (Section 3(2)f of the Income Tax Act). Capital Gains Tax is a tax chargeable on the whole of a gain which accrues to a company or an individual on or after 1st January, 2015 on the transfer of property situated in Kenya, whether or not the property was acquired before 1st January, 2015 . The net gain is calculated as the excess of the transfer value over the adjusted cost of the property that is being transferred. The Transfer Value provided for in section 7(1) of the Income Tax Act is the amount or value of consideration or compensation for transfer of the property less incidental costs on such transfer. The Adjusted Cost as stated in the Income Tax act section 8(1) is the sum of the cost of acquisition or construction of the property; expenditure for enhancement of value and/or preservation of the property; cost of defending title or right over property, if any; and the incidental costs of acquiring the property . The adjusted cost shall be reduced by any amounts that have been previously allowed as deductions under Section 15(2) of the Income Tax Act. That is: Capital gains Tax= (Transfer Value – Adjusted Cost) x 5% The tax is paid by the person who transfers the property, the transferor. It can be a legal person or corporate body. A transfer takes place where a property is sold, exchanged, conveyed or disposed of in any manner (including by way of gift) or on the occasion of loss, destruction or extinction of property whether or not compensation is received or on the abandonment, surrender, cancellation or forfeiture of, or the expiration of rights to property . It is considered a final tax and cannot be offset against other income taxes. Where the transfer value cannot be ascertained, the market value is used. Incidental costs are deductible in determining the transfer value of property. These costs include: a) stamp duty; b) legal fees; c) advertising cost; and d) any costs of the acquisition or transfer of property which consist of expenditure wholly and exclusively incurred by the person acquiring the property or the transferor for the purposes of the transfer. Transfers of property as provided by the Eighth Schedule paragraph 6(2) of the Income Tax Act are not considered transfers for the purpose of CGT. These includes: a) transfer through inheritance; b) transfer of property as security for a debt; c) issuance by a company of its own shares or debentures; d) transfer of an asset between spouses or former spouses, as part of a divorce settlement or bona fide separation agreement . Effects if Reintroduction of the Capital Gains Tax 1. The reintroduction of the Capital Gains Tax will increase the cost of land transactions because most investors and land owners and developers will try to pass on the costs to buyers. The process of paying this additional tax will add up to the already strenuous work of transfer of land transaction. 2. The Finance Act does not specifically provide guidelines on how the CGT relating to the transfer of property shall be paid. It is expected that the CGT will be payable in the same manner as the stamp duty such that, evidence of payment of CGT may be required for the transfer of property to be registered . Although KRA has not outlined the procedure that will be applied the Capital gains it says that plans are underway to ease the process of payment of CGT by developing a module within the iTax system that will allow taxpayers to make electronic declarations. 3. Raising tax rates on high income individuals dissuades them from doing productive things – that is to say, it causes them to cut back on working and investing . 4. It may lower Kenya’s appeal as an investment destination but this is debatable since Kenya’s CGT rate is among the lowest in Africa compared to some countries like Tanzania which charges 20% Capital Gain Tax and Uganda which charges 30%. 5. Concerns have been raised that the new tax is likely to push up the cost of housing, and that it could be difficult to administer. “The net effect will be an increase in property prices as sellers look to pass on the tax to buyers. This may result in an adjustment in the sector, particularly for individuals or small developers,” said Timothy Kamau, the head of investor relations at Home Afrika, a NSE-listed real estate company . Recent debates have suggested that the Capital Gains Tax may encourage people to hold property for longer periods and to promote better capital allocation. However inventory is not taxed: after buying land or property for your business premises and selling it after one year, it will not be taxed . This is because inventory is not considered a capital asset. Those whose land is compulsorily acquired by the State will be exempt from the tax . Taxpayers will also have to review transactions involving the transfer of property where the transaction is expected to take place on or after 1 January 2015 . The effect it will have on the real estate sector will get clear when the modalities of how the tax will be administered are released and even clearer when the same is implemented. But generally speaking, this is one additional hurdle and complication in home ownership and everyone will be affected directly or indirectly. And since the government will now get more from the industry, the cost of the industry is more likely to increase than decrease, for the simple reason that someone has to bear the additional cost. Taxing the income from capital income has the potential to reduce savings and investment incentives as well as being a disincentive to entrepreneurship. This dampens the nation's entrepreneur spirit as well as long term prospects for increased productivity and economic growth . Banks and other financial institution may exercise more caution before taking land as security for loans because of the uncertainty and controversy surrounding the reintroduction of the capital gains tax. The Income Tax of 2010 section 72D states that where any amount of tax remains unpaid after the due date a penalty of twenty percent shall immediately become due and payable. On the other hand the Kenya Revenue Authority provides that non payment where no deduction is made could attract a penalty of up to 200% or a fine or imprisonment but where a declaration is made the penalties are 20% and 2% interest per month until the amount is paid in full. In conclusion the Capital Gain Tax is only 5% at the moment and has not been fully implemented. It is therefore difficult to measure the effect it will have on land transfer transactions in the country. However, it is clear that if this percentage is raised the government risk losing income whether as stamp duty or registration costs associated with property transactions because it has real prospects of making Kenya unattractive to investors. For further clarification on tax issues, please contact us. Christine GITONGA For: Taxlex Consulting Group – a participating consultancy firm in the SLS Group of consultancies

A BRIEF ON PLAGIARISM AND COPYRIGHT INFRINGEMENT

Plagiarism has been said to involve the use of another’s work without attribution, as if it were one’s own original work. A more detailed definition has been given as, ‘the deliberate or reckless representation of another’s words, thoughts or ideas as one’s own without attribution in connection with submission of academic work, whether graded or otherwise.’ What is key in both definitions is the use of another’s work and the lack of attribution. Plagiarism appears to raise an ethical issue as opposed to a legal one with educational institutions being so averse to it that it has resulted in harsh disciplinary measures being taken against those found to have engaged in it. Academic institutions in dealing with this have not spared even professors. For instance, Marks Chabedi, a professor, plagiarized Kimberly Lanegran’s work and submitted it as his own work. Upon discovery, he was fired from his professorship and his Ph.D. was revoked. This is just one example of the adverse impact plagiarism can have on a person’s reputation. Unfortunately it has become the norm rather than the exception. Noting that plagiarism involves the use of another’s work, it is important to distinguish it from copyright infringement. This is because copyright is the legal term used to describe the right that creators have over their literary and artistic works which include books, music, paintings among others. The Kenya Copyright Act provides for instances where copyright infringement is said to arise. It is important to note that ‘a copyright shall be infringed by a person who, without the licence of the owner of the copyright- (a) Does, or causes to be done, an act the doing of which is controlled by the copyright; or (b) Imports, or causes to be imported, otherwise than for his own private or domestic use, an article which he knows to be an infringing copy.’ When it comes to copyright infringement, since it is a right that is protected under statute, a copyright holder can sue for its breach. An example of this was in the Kenyan case of JOHN BONIFACE MAINA v SAFARICOM LIMITED [2013] eKLR in which the Court found that the plaintiff had copyright to his recording which the defendant was offering to the public for a profit. It therefore granted him an ANTON PILLER ORDERS to ensure that his statutory rights of copyright were salvaged at that point of trial since it must preserve vital evidence necessary during trial. In view of the above, we see that the type of works that are capable of being plagiarized are also capable of being protected by copyright and hence can be infringed. Despite this similarity some few differences may be noted between the two. Firstly, for there to be copyright infringement the plaintiff must illustrate that their work is protected by copyright. This requirement does not attach to plagiarism. Secondly, in respect of copyright, if a person has permission to use the work then he cannot be liable for copyright infringement. With plagiarism, the only consideration is whether or not there is an acknowledgement of the author. Therefore, a person may have permission to use another’s work but if they do not acknowledge the author are present it as their own idea then one is liable for plagiarism. Thirdly, with copyright infringement a person has recourse to legal remedies but this is not the case with plagiarism. Lastly, it has been said that whereas copyright infringement is a construct of the law, plagiarism is a construct of ethics. Feel free to contact us at intellectualpropertyeastafrica@gmail.com for more information or guidance on Copyright and other forms of intellectual property. FOR: INTELLECTUAL PROPERTY EAST AFRICA LLP

PATENTABILITY TEST IN KENYA

The World Intellectual Property Organization (WIPO) has defined a Patent as an exclusive right granted for an invention. A further explanation has been given that a Patent provides the Patent Owner with the right to decide how or whether the invention can be used by others and in exchange, the Patent Owner avails technical information about the invention to the public. The Industrial Property Act Chapter 509 of the Laws of Kenya grants this right for a period of TWENTY (20) YEARS from the filing date of the application. This then begs the question, what must one prove to attain these rights over their invention? The first issue that needs to be determined is what criteria are to be used for something to be considered to be an invention under our laws. This criterion is found under Section 21 (1) of the Industrial Property Act which defines it as a solution to a specific problem in the field of technology. Despite this definition, we find that there are things that fall within this definition but which the law does not consider to be inventions. These include discoveries, scientific theories, mathematical methods, schemes, rules or methods for doing for doing business, performing purely mental acts or playing games, methods for treatment of the human or animal body through surgery or therapy among others. Having established what may be considered to be an invention, we now then interrogate inventions that are patentable and those that are not. It is important to establish this from the onset as a guideline to anyone who wishes to patent their invention. Patentable inventions are: - inventions that are new; - involve an inventive step; and - are industrially applicable or are a new use. On the other hand the following inventions cannot be patented: - plant varieties as provided for in the Seeds and Plant Varieties Act; and - inventions that are contrary to public order, morality, public health among others. PATENTABILITY TEST This will be looked on the basis of the patentable inventions. The first to be considered is the NOVELTY TEST which is the consideration of whether or not an invention is new. An invention is thus considered to be new if it is not anticipated by prior art. What the law considers as PRIOR ART is everything that is made available to the public anywhere in the world by means written or oral disclosure, use, exhibition or any other non-written means. The next is the INVENTIVE STEP which involves attempting to determine whether a given invention is obvious to a person skilled in the art having regard to the state of the art at the filing of the relevant patent application. In this regard, a person skilled in the art is presumed to be a skilled practitioner in the relevant field of technology, who is possessed of average knowledge and ability and is aware of what was common knowledge in the art at the relevant date. The final step is that of INDUSTRIAL APPLICABILITY. The Act provides that an invention is considered industrially applicable if it can be used in any kind of industry, including agriculture, medicine, fishery and other services. It is therefore important for a person who wishes to patent their invention to ensure that it meets the laid out criteria. Signed: For: Intellectual Property East Africa LLP

OPTIMAL AND A TAX EFFICIENT BUSINESS MODEL IN KENYA

When setting up business n Kenya, it is advisable to set up with an OPTIMAL AND A TAX EFFICIENT BUSINESS MODEL, which necessitates professional and structured guidance.

As such, EVEN BEFORE a local or foreign investor INCORPORATES A COMPANY, we would advise that one obtains Business Setup and Tax Structuring & Business Model Optimization Advisory.

You may call us on +254 715 310 677 or email us on info@stralexgroup.co.ke for guidance.

For: Strategic Legal Solutions Group LLP

TAXLEX CONSULTING GROUP - a participating tax and accounting consultancy firm in the SLS GROUP of consultancies

LEGAL, POLICY AND INSTITUTIONAL FRAMEWORK FOR CARBON/EMISSIONS TRADING IN KENYA

INTRODUCTION

This paper is concerned with the legal, policy and institutional framework for carbon trading in Kenya. It seeks to interrogate the law and regulations governing carbon trading and the institutions involved in the actualization of carbon trading.

Carbon trading as a concept can be traced from the negotiation and eventual signing of the Kyoto Protocol. The Kyoto Protocol is an international law that legally binds all its signatories to reduce emissions into the atmosphere. It was first adopted in December 1997 and entered into force in February 2005.The first commitment period applied between 2008 to 2012, the second commitment period applies to emissions between 2013 to 2020.The amended Kyoto protocol that includes the second commitment period has not yet entered into force. It however has the legal strength that was in the initial protocol[1].The protocol establishes three means through which all signatories are obligated to meet their targets. These are:

·         Clean Development Mechanisms;

·         Joint Implementation; and

·         International Emissions Trading, the latter being the subject concern of this analysis.

Clean Development Mechanisms

Clean Development Mechanisms is provided for under Article 12 of the Kyoto Protocol. It allows for Annex B parties (developed states) to implement projects in developing states that reduce emission. These projects earn credits that are equal to one tonne on carbon dioxide and can be counted towards meeting the target in the Protocol. It provides for developed countries an alternative means of reducing their emissions[2].

Joint Implementation

This is provided for in Article 6 of the Protocol. It permits for Annex B parties to implement projects individually or in partnerships with developing states that aim to increase the number of emissions sinks. These projects include the increase of forest cover and earn the Annex B parties emission reduction units. These units are used to offset emissions that are in excess of the emission targets set[3].

International Emissions Trading

Parties under the Protocol have obligations assigned to them according to their levels of emissions; those with commitments to reduce emissions are provided for in Annex B. These commitments to reduce emissions are expressed in the form of allowed emissions or assigned amount units^[4]. Emissions’ Trading is carried out under a market approach called ‘CAP and TRADE’. All parties that have obligations to reduce their individual amount of emissions set a cap on their emissions .This means that once a party exceeds its cap, it will have to purchase the difference between their cap and their emission. This is the ‘cap’ aspect of the market approach. The ‘trade’ aspect of the market approach is instanced where those parties who have managed to emit less than their cap have emission units to sell. Carbon is the most emitted greenhouse gas in the world this has led to the notion that it is the only gas emitted. This is how the term ‘carbon trading’ in reference to emissions trading came about.

HOW DOES EMISSION TRADING WORK

In the international arena, Emission Trading is provided in the Kyoto Protocol’s Article 17[5]. Emission targets for developed countries are expressed as levels of allowed emissions or assigned amounts.These amounts are expressed in tonnes known informally as ‘Kyoto Units’[6]. The unit of trade in the emission trading is known as carbon credits. As carbon financial instruments, they can be bought and sold in international markets at the prevailing market prices[7].Carbon credits are what are generated by developing parties and are bought by developed parties who have exceeded their assigned amounts.

There are two kinds of markets:

1.       the compliance market; and

2.       the voluntary markets.

In the Compliance Market, obligated parties are bound by the Protocol to buy carbon credits to offset their exceeded assigned amounts.

The Voluntary Market is mostly used by large multinational companies who do not have the obligation to offset any excess assigned amounts. However, they buy carbon credits because of their carbon footprint and for corporate social responsibility reasons[8].

LEGAL FRAMEWORK FOR CARBON TRADING IN KENYA

There are legislations operational in Kenya that establishes the legal framework for carbon trading. These are:

a)       The Constitution of Kenya (2010);

b)       Kyoto Protocol to the United Nations Framework Convention on Climate Change (“Kyoto Protocol”);

c)       Energy Act(No. 12 of 2006) and Energy Management Regulations (2012); and

d)      Environmental Management and Coordination Act (No. 8 of 1999) (EMCA)

THE CONSTITUTION OF KENYA

There is no express mention of carbon trading in the Constitution of Kenya. However:-

·         Article 2(6) provides that every treaty and convention that Kenya is a party are part of the law of Kenya. This includes the Kyoto Protocol and well as the United Nations Framework Convention on Climate Change, ‘UNFCC’ under which the Kyoto Protocol was concluded.

·         Article 42 provides that every person has the right to a clean and healthy environment, while Article 69(1) provides for protection of the environment for the benefit of future generations. These rights and protections are to be achieved through the State’s sustainable exploitation and conservation that ensures not only protection but also the accrual of benefits that are to be shared out equitably. When read together with the Energy Act (2006), these provisions are understood to make reference to carbon emission trading as well as other means of sustainable utilization of the environment.

THE KYOTO PROTOCOL

Kenya ratified the Kyoto Protocol to the UNFCC in February 2005. The Protocol came into force on 26^th May 2005. The Protocol establishes an opportunity for carbon trading in its various provisions some of which are highlighted below:-

·         Article 3 provides that developed states (Annex 1 parties) shall have a duty to ensure that their carbon emission do not surpass their assigned amounts;[9]

·         Article 6 provides that carbon emission credits can be bought, transferred or sold amongst parties to the Protocol[10]. Kenya as a Developing State does not have an assigned amount; it is only obligated by the Protocol to ensure that there is utilization of renewable sources of energy. These include the use of solar and geothermal energy instead of hydroelectric power, use of energy efficient charcoal stoves as well as reforestation among others. Kenya is therefore able to generate carbon credits that it can sell to developed states that need the credits to offset their excess carbon emissions;

·         Article 12 provides for the clean development mechanism under which carbon credits maybe traded from environmental friendly projects. This Article also provides for the elaboration of modalities and procedures with the objective of ensuring transparency, efficiency and accountability through independent auditing and verification of the said projects’ activities; and

·         Article 17 also provides for the provision of relevant principles, modalities, rules and guidelines in particular for verification, reporting and accountability for emissions trading. This Article also cautions that carbon trading is merely supplemental to other domestic actions for the purpose of meeting quantified emission limitation and reduction commitments.

THE ENERGY ACT (2006) AND THE ENERGY MANAGEMENT REGULATIONS (2012)

The Energy Act 2006 in section 103(2) (g) avails to the Minister (now Cabinet Secretary) of energy and petroleum, the power to harness opportunities for clean energy. This includes the various forms of generation of carbon credits and their sale in the world market. Whereas the Act does not specify in what form this generation should take place, various stakeholders in the energy sector have implemented projects that have successfully generated credits. The Kenya Electricity Generating Company (KENGEN) for example has registered six CDM projects. These projects will ensure the displacement of 0.66 million tonnes of carbon dioxide annually. The projects were documented to have earned the company up to 500 million shillings annually until 2012[11].

The Energy Regulations provides for clean development mechanisms which permit the roll out of emission reducing projects in developing states. Section 8(2) that “An owner or occupier to whom these Regulations apply may investigate the inclusion of the relevant components of an energy investment plan into a project to be registered under the clean development mechanisms or any other carbon finance mechanism which may be in place from time to time,” It is notable that although it provides for the creation of carbon credits, it is neither mandatory nor is it enforceable against energy producers who fail to do so. These projects are expected to earn the developing states carbon credits that can be traded in world markets the returns of which are beneficial to a production state (non Annex B party)[12].

ENVIRONMENTAL MANAGEMENT AND COORDINATION ACT (EMCA)

The Environmental Management and Coordination Act (EMCA) establish the National Environmental Management Authority. NEMA is tasked with the coordination of various environmental activities that will ensure sustainable utilization of environmental resources[13].The Act enables the Authority to do this through the requirement that all projects that have a bearing on the environment proceed after issuance of an Environment Impact License[14]. The license is issued after an environmental impact assessment in which NEMA investigates the benefits and possible hazards that the project may have on the environment. This ensures that NEMA is cognizant of ongoing projects and can monitor them in order to ensure sustainable and beneficial utilization of the environment. The Act however makes no reference to carbon emission credits generation but works hand in hand with other legislations that make reference to carbon credits generation.

POLICY FRAMEWORK OF CARBON TRADING IN KENYA

The Ministry of Finance in fiscal year 2011/2012 prepared a National Policy on Carbon Investments and Emission Trading. This was in response to the advancements that were being made in the carbon credits trade and the need to have a mode of regulation of carbon trading that was already ongoing. The ministry of finance circular that was issued on carbon trading thereafter laid out the following strategy:

·         That all new carbon credit eligible projects in all sectors must be implemented in accordance with Clean Development Mechanisms. This was  in order to facilitate the project’s approval by  the executive board of the United Nations Framework Convention on Climate Change;

·         All carbon credits generated would be used for the recapitalization of the projects and could only be traded in with the direct approval of the Treasury[15].

This policy strategy was aimed at ensuring that the Treasury remained in control of carbon trading in Kenya and had a centralized database of all projects that were capable of generating carbon credits.

The National Policy on Carbon Investments and Emission Trading also recognized the need to have a forum for the private investors’ involvement in carbon trading in Kenya and Africa. This led to the establishment of Africa Carbon Exchange (ACX) headquartered in Nairobi in 2010. The ACX was founded in order to:

·         provide the players in the carbon market with an opportunity to exchange ideas on the best practices of the trade;

·         to build and utilize capacity in the carbon trade industry;

·         to collectively gather, analyze and disseminate information to the industry players; and

·         to offer interactive forums between governments and agencies involved in the formulation and implementing of climate change policies[16]

INSTITUTIONAL FRAMEWORK

There are both public and private industry players in the carbon trading industry: the government and private companies respectively. The Government through the various ministries is responsible for the projects proposals implementation and sale of carbon credits. The Ministry of Finance is in charge of the overall regulation of carbon trading because it is the ministry charged with overall financial system in the country.

The National Environmental Management Authority (NEMA) established by the Environmental Management and Coordination Act (EMCA) is Kenya’s Designated National Authority. It is the national authority responsible for assessing whether a prospective project contributes to sustainable development under the Clean Development Mechanism (CDM). NEMA alongside the Ministry of Finance ensures that a project is a viable venture to generate carbon credits. In addition, NEMA maintains an updated website with background information on the CDM[17].

PARTICIPATION IN CARBON TRADING

Any person who wishes to sell carbon credits has to have a project registered under the UNFCC as CDM Project. The process of registration of a project undergoes the following broad steps:- [18]

·         Project Development;

·         Project Validation;

·         Project Registration;

·         Project Implementation;

·         Project Monitoring;

·         Project Verification;

·         Credit Issuance; and

·         Commercialization

The review and guidance of a project to qualify as a CDM Project is carried out by UN third party project auditors referred to as Designated Operational Entities.  This is in co-ordination of NEMA as Kenya’s Designated National Authority.

  

CONCLUSION

It is commendable that there has been progress in carbon emissions trading and that Kenya is a pioneer in East and Central Africa region. Carbon trading offers great prospects for social and economic empowerment of the people of Kenya especially in areas where no viable agriculture can take place. For these reasons, the legal, policy and institutional framework for carbon trading should be streamlined. It is recommended that stakeholders initiate discussions towards the drafting and eventual enactment of an independent legislation expressly dealing with carbon emissions trading.

We trust that the above will be useful in your decision making processes regarding carbon/emissions trading. However, should you have any further queries regarding carbon/emissions trading in Kenya, please do not hesitate to contact us at info@stralexgroup.co.ke or on + 254 715 310 677 for clarification.

Yours faithfully,

For: Strategic Legal Solutions Group Limited

 

 

Teddy Okello, through Centre for Environmental Law & Policy – a participating consultancy firm in the SLS Group of consultancies. 

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[1] http://unfccc.int/kyoto_protocol/items/2830.php accessed 23rd September 2013 0800hrs

[2]http://unfccc.int/kyoto_protocol/mechanisms/joint_implementation/items/1674.php 23rd  September 2013 0800hrs

[3]Supra note 2

[4]http://unfccc.int/kyoto_protocol/mechanisms/emissions_trading/items/2731.php -accessed 24th September 2013 at 1045hrs

[5]The Conference of the Parties shall define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading. The Parties included in Annex B may participate in emissions trading for the purposes of fulfilling their commitments under Article 3. Any such trading shall be supplemental to domestic actions for the purpose of meeting quantified emission limitation and reduction commitments under that Article.

[6]http://unfccc.int/kyoto_protocol/registry_systems/items/2723.php-accessed 24th  September 2013 1045hrs

[7]http://www.danfonds.com/index.php?id=52 accessed  September 24^th 2013 105hrs

[8]http://www.carbonafrica.co.ke/our-services/carbon-markets.html - accessed 23rd September 1000hrs

[9] The Parties included in Annex I shall, individually or jointly, ensure that their aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases listed in Annex A do not exceed their assigned amounts, calculated pursuant to their quantified emission limitation and reduction commitments inscribed in Annex B and in accordance with the provisions of this

Article, with a view to reducing their overall emissions of such gases by at least 5 per cent below 1990 levels in the commitment period 2008 to 2012

[10] For the purpose of meeting its commitments under Article 3, any Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy, provided that:

(a) Any such project has the approval of the Parties involved;

(b) Any such project provides a reduction in emissions by sources, or an enhancement of removals by sinks, that is additional to any that would otherwise occur; It does not acquire any emission reduction units if it is not in compliance with its obligations under Articles 5 and 7; and

(d) The acquisition of emission reduction units shall be supplemental to domestic actions for  the purposes of meeting commitments under Article 3.

[11] http://www.kengen.co.ke/index.php?page=business&subpage=cdm

[12] Definitions: 3.In these Regulations, unless the context otherwise requires—“clean development mechanism” means a mechanism that allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits each equivalent to one tonne of CO2, which can be traded and sold, and used by industrialized countries to  meet a part of their emission reduction targets under the Kyoto Protocol

[13] Section9(2)(a)

[14] Section 63

[15] Treasury circular no. 9/2011: carbon projects preparation and carbon credits trading

[16] www.acxafrica/features-accordion.html -accessed 24th September 1530hrs

[17] http://www.ke.boell.org/downloads/Can_Carbon_Credits_Help_Kenya_Become_Green.indd.pdf-accessed  24th September 2013 1540hrs

[18] http://carbonmarketwatch.org/learn-about-carbon-markets/cdm-project-cycle/