Resident companies are taxable in Kenya on income accrued or derived from Kenya. Resident companies with business activities outside Kenya are also taxed on income derived from business activities outside of Kenya.
Non-resident companies are subject to Kenya corporate income tax (CIT) only on the trading profits attributable to a Kenyan PE.
The corporate tax rate for resident companies, including subsidiary companies of foreign parent companies, is 30%. The rate for branches of foreign companies and PEs is 37.5%..
Transfer Price Rules are provided in Legal Notice No:67 of 2006 within the Income Tax Act, which heavily borrows from the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines.
There has been subsequent legislation amendment on section 18(3) and other related sections:
In 2010, the section was amended to eliminate the statement that required the Commissioner to prove that the transactions were arranged in such a way to reduce taxable profit.
To minimize tax leakage through transfer pricing, section 18(6) was also amended in 2010 to include transactions between individuals who are related by consanguinity or affinity.
Through Legal Notice No. 54 of 2012, the Commissioner may issue guidelines on application of the transfer pricing methods set out in the Transfer Pricing Rules.
The Finance Act 2014 expanded the scope to include the dealings between a non-resident and its permanent establishment (PE).
The Finance Act 2017, introduced section 18A, that brought transactions with taxpayers in preferential regimes within the scope of Transfer pricing (in line with BEPS action 5 on Harmful Tax practices)