Corporate Tax in Kenya: A concise guide

Overview

Kenya taxes corporate income at the company level. Resident companies are taxed on profits earned from business activities in Kenya, while non-resident companies are taxed on Kenyan-sourced income. The standard rate is broadly in the 30% range, and the tax landscape includes deductions, allowances, incentives, and rules for transfer pricing and international taxation. Compliance is administered by the Kenya Revenue Authority (KRA), with returns filed electronically through the iTax system.

Resident vs non-resident status

Residence generally depends on where central management and control sits, and for some entities on incorporation. Residents may be taxed on worldwide income with relief for foreign taxes, while non-residents are taxed on Kenyan-sourced income only.

Taxable income and deductions

Taxable income equals chargeable profits after allowable deductions and adjustments. Core deductions include ordinary and necessary business expenses, depreciation allowances for capital assets, and losses carried forward, subject to specific rules. Some expenses, like fines or certain entertainment costs, may be non-deductible.

Tax rates and regimes

General rate

The general corporate income tax rate for resident companies is about 30% of chargeable profits. Non-residents are taxed on Kenyan-sourced income according to the same principles, with withholding taxes applying to certain payments to non-residents.

Incentives and special regimes

Kenya offers sector- and location-specific incentives, such as tax holidays or reduced rates for certain manufacturing activities or export-oriented investments, subject to compliance with conditions set by the tax authorities.

Minimum tax and other regimes

A minimum tax regime exists in Kenya, intended to ensure a baseline level of revenue even if profits are low or negative. Details such as thresholds and applicability can change; check current guidance from KRA.

Compliance and filing

Filing and payment

Tax returns are filed with the Kenya Revenue Authority, typically via the iTax platform. Taxes are paid in accordance with the applicable schedule and accounting period.

Record-keeping and audits

Businesses should maintain books and records to support income, deductions, and credits, and be prepared for audits or reviews by tax authorities.

International considerations

Transfer pricing

Kenya requires documentation of related-party transactions to reflect arm's-length pricing and to prevent shifting profits to low-tax jurisdictions.

Tax treaties and relief from double taxation

Kenya has double taxation agreements and operates relief mechanisms for foreign taxes paid, subject to treaty terms and domestic law.

Common questions

What counts as Kenyan-sourced income?

How is an accounting period treated for tax purposes?

Can losses be carried forward or backward?