The rules regarding the taxation of foreign and local based companies that engage in trade in two or more states has been consolidated through treaty law as a way to mitigate the possibility of double taxtion. The U.K. and Kenya have entered into such an agreement dubbed the double taxation agreement between Kenya and the United Kingdom. The agreement is also governed by the OECD Model Convention on taxation that provides the general rules of operation between countries that engage in trade with each other. 1 The tax treaty between Kenya and U.K. was signed at Nairobi on July 31, 1973 by Antony Duff (on behalf of the Government of the United Kingdom of Great Britain and Northern Ireland) and Mwai Kibaki on behalf of the Government of the Republic of Kenya. The agreement came into force:  1. in the U.K. as respects income tax and capital gains tax, for any year of assessment beginning on or after 6 April, 1973 and as respects corporation tax, for any financial year beginning on or after April 1, 1973; and  2. in Kenya as respects income arising for the year of income 1973 and subsequent years. 2 Formation of the real estate construction advisory firm, management and control issues, residency, taxation of profits Stefan and Hans need to consider several policy and structural concerns that affect the creation and formation of the company in question. Hans is the majority shareholder of the company but does not have a majority stake in the company since he has only one third of the voting rights in the company. Stefano despite making a lesser contributuion to the company has a right to appoint a third director who he has appointed as his wife. This, therefore, means that he has a majority vote in the company. 3 Under Article 18 any directors’ fees or similar remuneration derived by any of the two, Lucia and Hans, as well as the third director appointed by Stefan, will be subject to tax by the U.K. or Kenya depending on where the respective director or member of the board of directors is resident 4 . The Article specifically provides for the taxation of the benefits that accrue to the directors of a company for any services rendered by them to the company. The agreement provides that these incomes are to be taxed by the other contracting state if such board of directors is a resident of the other contracting state. 5 Stefan, who is responsible for the daily activities of the company, will receive management fees arising from the operations in Kenya will be taxed in Kenya inline with Article 14 of the agreement that allows the management fees to be taxed in both countries. The Article provides that the tax to be charged in Kenya be limited to 12.5 percent of the company’s gross management fees if Stefano is to be taxed in the U.K.also. On the other hand, if the management fees are not to be taxed in the U.K. then such fees will be considered as if they were from a permanent establishment in line with Article 5 of the agreement. The tax deductible from the fees will therefore be considered as though they were profits attributable to these establishments. In effect the agreement requires that the amount of tax that is to be deducted should be limited to 75 percent of