Transfer Pricing in Kenya - Mgi Alekim LLP
Transfer Pricing in Kenya

Transfer Pricing refers to the value which is attached to the goods or services transferred between related parties. It is the price that is paid for goods or services transferred from one unit of an organization to its other units situated in different countries.

Transfer pricing regulations in Kenya necessitate that transactions involving Kenyan resident individuals and non-resident affiliated parties must be conducted on an arm’s length basis. This regulation extends to transactions between a Kenyan branch and its non-resident parent company or any other non-resident affiliates.

Effective January 1, 2023, the scope of transactions falling under transfer pricing regulations include those between a Kenyan resident individual and:

  • A related resident individual operating under preferential tax conditions;
  • A non-resident individual situated in a preferential tax jurisdiction;
  • An affiliate enterprise of a non-resident individual; or
  • A non-resident individual’s permanent establishment.

Preferential tax regime defined as:

  1. Any Kenyan legislation, regulation or administrative practice which provides a preferential rate of tax to such income or profit, including reductions in the tax rate or the tax base; or
  2. A foreign jurisdiction which:
  • Does not tax income;
  • Taxes income at a rate less than 20%;
  • Does not have a framework for the exchange of information;
  • Does not allow access to banking information; or
  • Lacks transparency on corporate structure, ownership of legal entities located therein, beneficial owners of income or capital, financial disclosure or regulatory supervision.

Emerging trends

The finance bill 2024 proposes to introduce Advance Pricing Agreements in the Kenyan Transfer Pricing regime marking a significant step towards addressing challenges experienced in Kenya’s transfer pricing regime/ related party transactions.  This will ensure certainty in TP methodology and issues, reduced compliance costs, reduced risks of TP audits and disputes as well as reduced risks of double taxation.

At MGI Alekim, we have a team of experts with vast knowledge and experience in Transfer Pricing matters. Our team will help you in various ways ranging from defending your transfer prices before tax authorities, offer guidance on the preparation of transfer pricing documentation among other matters.

Contact Us @ MGI Alekim for expert advice and further analysis

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