- Updated
- October 2025
- Sections
- 15
- Questions
- 39
Key Facts
Core Framework
Income Tax Act, Section 18(3)
When there is no specific guidance given under the domestic law international best practice takes precedence including guidance given by the OECD/UN transfer pricing guidelines. Based on Kenyan court jurisprudence, OECD TPG are used for guidance and interpretation.
Since Kenya’s transfer pricing rules does not have extensive guidance on comparability analysis, we tend to rely on the guidance provided under the TPG UN/OECD.
This is largely due to lack of domestic external comparable companies.
This is as per the guidance provided under the TPG and Article 47(2) of the constitution of Kenya on fair administration.
Application of the arm’s length range and other statistical measures are used based on the UN/OECD TPG.
Documentation
Section 18B to 18F of the Income Tax Act.
Section 18B to 18F of the Income Tax Act.
Section 18B to 18F of the Income Tax Act.
Section 18E of the Income Tax Act and the Tax Procedures Act apply.
The domestic transfer pricing framework imposes general penalties but does not provide for specific transfer pricing penalties or transfer pricing documentation penalties. For instance failure to submit transfer pricing documentation is an offence which is subject to penalties prescribed in the Tax Procedures Act.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Kenya Dispute Resolution Profile Part X of the Tax Procedures Act. Section 18G of the Income Tax Act as updated by the Finance Act (2025)
The domestic law allows for issuance of private and public rulings. Guidance on MAP is in place and the MAP profile has been updated with the information. The domestic law provides for APAs.
Kenya Dispute Resolution Profile Part X of the Tax Procedures Act. Section 18G of the Income Tax Act as updated by the Finance Act (2025)
The domestic law allows for issuance of private and public rulings. Guidance on MAP is in place and the MAP profile has been updated with the information. The domestic law provides for APAs.
Simplifications
Kenya is still evaluating whether it will adopt Amount B.
Special Topics
Full OECD Questionnaire
Legal ReferenceIncome Tax Act, Section 18(3)
When there is no specific guidance given under the domestic law international best practice takes precedence including guidance given by the OECD/UN transfer pricing guidelines. Based on Kenyan court jurisprudence, OECD TPG are used for guidance and interpretation.
Legal ReferenceIncome Tax Act, Section 18(6), and Section 2
For the purposes of section 18 subsection (6), a person is related to another if - (a) either person participates directly or indirectly in the management, control or capital of the business of the other; or (b) a third person participates directly or indirectly in the management, control or capital of the business or both. (c) an individual, who participates in the management, control or capital of the business of one, is associated by marriage, consanguinity or affinity to an individual who participates in the management, control or capital of the business of the other. Section 2 of the Income Tax Act “related person” means, in the case of two persons, either of the persons who participates directly or indirectly in the management control or capital of the business of the other person, and in the case of more than the two persons— (a) any other person who participates directly or indirectly in the management, control or capital of the business of the two persons;
Legal ReferenceThe Transfer Pricing Rules are in Legal Notice No:67 of 2006 within the Income Tax Act
Such other method as may be prescribed by the Commissioner from time to time, where in his opinion and in view of the nature of the transactions, the arm’s length price cannot be determined using any of the methods contained in the transfer pricing rules (i.e. any of the 5 methods recommended by the OECD TPG)
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Most appropriate method
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
Since Kenya’s transfer pricing rules does not have extensive guidance on comparability analysis, we tend to rely on the guidance provided under the TPG UN/OECD.
This is largely due to lack of domestic external comparable companies.
This is as per the guidance provided under the TPG and Article 47(2) of the constitution of Kenya on fair administration.
Application of the arm’s length range and other statistical measures are used based on the UN/OECD TPG.
We rely on the guidance provided under the OECD TPG.
Kenya has adopted the BEPS Action 4. Interest above 30% of EBITDA in relation to loans borrowed from non-resident persons are disallowed in computing taxable income.
Legal ReferenceOECD TPG
Yes. Kenya follows the guidance in Chapter VIII of the TPG.
Legal ReferenceSection 18B to 18F of the Income Tax Act.
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (selected)
Legal ReferenceSection 18C and 18D of the Income Tax Act Section 23 and 70 of the Tax Procedures Act.
The submission of the Action 13 three-tier documentation and the notification is as follows: • The CBC report Notification should be made not later than the last day of the reporting financial year of the MNE group. • The CBC report should be submitted 12 months after the last day of the reporting financial year of the MNE group. • The Master File and Local File should be submitted 6 months after the last day of the reporting financial year of the MNE group. All records are to be maintained in any of the official languages (i.e. either English or Kiswahili). Otherwise, they should be translated.
Legal ReferenceSection 18E of the Income Tax Act and the Tax Procedures Act apply.
The domestic transfer pricing framework imposes general penalties but does not provide for specific transfer pricing penalties or transfer pricing documentation penalties. For instance failure to submit transfer pricing documentation is an offence which is subject to penalties prescribed in the Tax Procedures Act.
Legal ReferenceSection 18D of the Income Tax Act
MNE groups that have not attained the annual Ksh. 95 Billion turnover threshold are not required to submit Notifications or CbC reports.
Legal ReferenceKenya Dispute Resolution Profile Part X of the Tax Procedures Act. Section 18G of the Income Tax Act as updated by the Finance Act (2025)
The domestic law allows for issuance of private and public rulings. Guidance on MAP is in place and the MAP profile has been updated with the information. The domestic law provides for APAs.
- Rulings (selected)
- Enhanced engagement or cooperative compliance programmes (not selected)
- Advance Pricing Agreements (APA) (selected)
- International Compliance Assurance Programme (ICAP) (not selected)
- Mutual Agreement Procedures (selected)
Kenya is still evaluating whether it will adopt Amount B.
- N/A (selected)
- N/A (selected)
- N/A (selected)
Kenya is still evaluating its position on this.
- N/A (selected)
Legal ReferenceSection 31 of the Tax Procedures Act Section 16 of Income Tax Act
As part of our tax procedures the Commissioner is allowed by law, to open an assessment of a taxpayer for a reporting year and make amendments to ensure that the taxpayer is liable to the correct amount of tax payable.
Legal ReferenceSection 18(3) of the Income Tax Act Income Tax (Transfer Pricing) Rules, 2006
Kenya's transfer pricing rules allow but do not mandate year-end adjustments. This practice is also consistent with OECD Guidelines.
Legal ReferenceSection 7 of the Income Tax Act
Section 7(b)(v) of the ITA deems any increase in taxable income or reduction in assessed loss as a result of a transfer pricing adjustment to constitute a dividend payment to a non-resident shareholder thus subject to a withholding tax.
Legal Referencehttps://www.treasury.go.ke/agreements/
Kenya has 12 treaties containing Article 7 as it read before 2010 and 3 treaties containing Article 7 as it reads after 2010.
- Article 7 as it read before 2010. (selected)
- Article 7 as it reads after 2010. (selected)
Legal ReferenceSection 18(3) and Transfer Pricing Rules, 2006 Section 18(5) and Transfer Pricing Rules, 2006
Kenya's domestic transfer pricing framework, as outlined in Section 18(3) of the Income Tax Act (Cap 470) and the Income Tax (Transfer Pricing) Rules, 2006, does not adopt the AOA. Instead, it treats a PE as a separate and distinct entity for tax purposes, requiring that transactions between the PE and its head office or related entities be conducted at arm's length.
1. Regulations on implementation of APAs to be published by 31st December 2025. 2. Revised Transfer Pricing Rules are awaiting publication.
We are in the process of reviewing the Transfer Pricing Rules (2006). The Rules will be published for the public once the internal approvals are completed.
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