doing business in Kenya

country profile international treaties and memberships

government • Executive: The president is both chief of state and head of government. international • African Continental Free Trade Area Agreement
structure The president and deputy president are directly elected on the same ballot and regional • African Development Bank Group
by qualified majority popular vote for a five-year term and are eligible for a organisations • African Union
second term. Cabinet is appointed by the president, subject to and customs • Common Market for Eastern and Southern Africa (“COMESA”)
confirmation by the national assembly. unions • Commonwealth of Nations
• Legislative: Kenya has a bicameral Parliament. • East African Community (“EAC”)
• Judicial: The superior courts are the Supreme Court (the highest court), • Group of 15
the Court of Appeal and the High Court (including the Employment and • Group of 24
Labour Relations Court and the Environment and Land Court). The • Group of 77
subordinate courts are the Magistrates' Courts, Kadhi’s Courts and the • Intergovernmental Authority on Development
Court Martial.
• International Monetary Fund
• Next Presidential elections: August 2027.
• Nile Basin Initiative
economic • Nominal GDP (USD billions): 113.78 • Organisation of African, Caribbean and Pacific States
data • GDP per capita (USD): 2 234.37 • United Nations
• Inflation rate (% change): 5.00 • World Bank Group
• Government revenue (% of GDP): 16.48 • World Customs Organization
• Government net debt (% of GDP): 73.33 • Kenya receives preferential treatment under the following agreements:
http://ptadb.wto.org/Country.aspx?code=404
*Source: IMF (October 2022 estimates)
bilateral • Kenya has bilateral investment treaties in force with Burundi, Finland,
investment France, Germany, Japan, Kuwait, the Netherlands, Republic of Korea,
• Kenya is the economic, financial, and transport hub of East Africa. The treaties Switzerland, the United Arab Emirates and the United Kingdom.
country’s real GDP growth has averaged 5% for the last decade.
• Treaties have been signed with China, Iran, Libya, Mauritius, Qatar,
• Agriculture remains the backbone of the Kenyan economy, contributing
Singapore, Slovakia and Turkey but these have not yet entered into force.
one-third of the country’s GDP. Over 75% of agricultural output is from
small-scale, rain-fed farming or livestock production. investment- • African Growth and Opportunity Act
• Tourism also holds a significant place in Kenya’s economy, although related • Cotonou Agreement
earnings dropped by 43.9% in 2020 due to the COVID-19 pandemic. agreements / • Multilateral Investment Guarantee Agency
• Kenya’s main export partners are Uganda, the United States, the institutions • United States-Kenya Strategic Trade and Investment Partnership
Netherlands, Pakistan, the United Kingdom, the United Arab Emirates and • World Trade Organization
Tanzania. The main export commodities include tea, cut flowers, refined
petroleum, coffee, and titanium. dispute • Convention on the Settlement of Investment Disputes (ICSID Convention)
• Kenya’s main import partners are China, the United Arab Emirates, India, resolution • Permanent Court of Arbitration
Saudi Arabia and Japan. The main import commodities include refined • United Nations Commission on International Trade Law (“UNCITRAL”)
petroleum, cars, packaged medicines, wheat and iron products. • United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention)
risk ratings • IHS Markit (now a part of S&P Global) Overall Country Risk (2022):
138/211 intellectual • A comprehensive list of IP-related treaties signed by Kenya is available at:
• Corruption perceptions index (2021): 128/180 property https://wipolex.wipo.int/en/legislation/members/profile/KE?collection=treati
(“IP”) treaties es
• See the trade marks section below for further detail.

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doing business in Kenya

legal regime turnover or assets (whichever is higher) of the merging parties does not
exceed KES500-million; or (ii) where the merger meets the COMESA
applicable • Kenya’s legal system is based on English common law, Islamic law and
legal regime Competition Commission merger notification threshold and at least two-
customary law.
thirds of the turnover or assets (whichever is higher) is not generated or
dispute • Dispute resolution in Kenya can be resolved either through court litigation, located in Kenya.
resolution arbitration, court-annexed mediation, and conciliation for employment and • Filing fees for mandatory notifications are payable on a sliding scale
economic disputes. between KES1-million and KES4-million. Applications for exclusion carry
• Under the High Court, the Commercial and Tax Division of the Milimani no filing fee obligation.
High Court handles commercial litigation. • The CAK will consider public interest, amongst others, in making a
• Kenya's Arbitration Act, 1995 embodies most of the provisions contained determination on the merger.
in the UNCITRAL model. • Kenya has a pre-implementation regime, therefore approval must be
sought from the Kenyan competition authorities prior to implementation of
land • According to the Constitution of Kenya, 2010, land in Kenya is classified the proposed transaction.
acquisition, as public, community or private. • Any person who implements a merger in contravention of the Competition
planning and • Unless land is classified as agricultural, there are no restrictions on Act commits an offence and is liable on conviction to imprisonment for up
use foreign-owned companies either leasing or owning land or real estate. to five years or to a fine not exceeding KES10-million, or both. The
However, foreigners can only hold land on the basis of leasehold tenure, authority may impose a penalty of an amount not exceeding 10% of the
and any such lease is limited to a maximum of 99 years. A foreigner may combined gross annual turnover (during the preceding year) in Kenya of
not own agricultural land, except with presidential discretion, which is the undertaking or undertakings in question.
rarely granted. • Kenya is a member of the regional competition bodies, COMESA and the
• There is also a tried and tested mechanism for foreigners to own EAC. While the EAC has an operational competition law regime and a
agricultural land through a non-private company. partially operational regulator, it is understood that its merger control
regime is not yet functional. It is understood that the attention of the EAC
competition competition regulator is currently focused on investigating potential
merger control • The Kenyan Competition Act, 2010 regulates merger control in Kenya. anticompetitive practices and undertaking sectoral studies. COMESA has
• The Competition Act defines a merger as an acquisition of shares, merger control. Merger activities in Kenya should thus be conducted with
business or other assets, whether inside or outside Kenya, resulting in the these regional competition bodies in mind.
change of control of a business, part of a business or an asset of a
business in Kenya in any manner and includes a takeover. prohibited • The Competition Act prohibits horizontal and vertical agreements between
practices undertakings; decisions by associations of undertakings; and decisions by
• The Competition Act sets out examples of what constitutes control for the
purposes of merger regulation. undertakings or concerted practices by undertakings that have, as their
object or effect, the prevention, distortion or lessening of competition in
• In calculating merger thresholds, the Competition Authority of Kenya
trade in any goods or services in Kenya, or a part of Kenya, unless they
(“CAK”) has revised rules in 2019 which use financial thresholds based on
are exempt or fall part of a single economic entity.
turnover or asset value (whichever is higher), in Kenya.
• Cartel conduct (such as price fixing, market division and collusive
• Mandatory notification applies in a variety of circumstances, including in
tendering) and minimum resale price maintenance are prohibited by the
respect of transactions wherein undertakings have a minimum combined
Competition Act. The CAK has also recently operationalised an
threshold of KES1-billion, and the turnover of the target undertaking is
incentivised whistleblower regime.
above KES500-million.
• The Competition Act prohibits abuses of dominance and buyer power.
• Transactions involving undertakings where the combined turnover or
assets (whichever is higher) of the merging parties is between KES500- • The CAK operates a corporate leniency programme for a firm that
million and KES1-billion require a limited application to the CAK for the voluntarily discloses the existence of any agreement or practice that is
transaction to be excluded, and thus mandatory full notification will not prohibited by the Competition Act and cooperates with the authority in its
apply. investigations.
• The 2019 rules have also provided clarity in respect of transactions that • A firm that engages in a restrictive horizontal or vertical agreement or
require neither mandatory notification nor the submission of an application abuses its dominant position commits an offence and may be liable on
for exclusion. This pertains to transactions wherein: (i) the combined

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doing business in Kenya

conviction to imprisonment for up to five years or to a fine not exceeding foreign investment regime
KES10-million, or both. investment • The Investment Promotion Act, 2004 governs foreign investment in Kenya.
• The EAC is only partially operational, while COMESA regulates prohibited regime • The Kenya Investment Authority (“KenInvest”) promotes and facilitates
practices in the COMESA area. Activities in Kenya should be conducted
investment in Kenya by issuing investment certificates and assisting
with these regional competition bodies in mind.
investors to obtain required licences, permits and tax incentives or
employment exemptions.
immigration • Expatriates working in Kenya must hold a valid work permit (if employed registration / • A foreign investor investing at least USD100 000 in Kenya may apply to
for at least six months) or a special pass (if employed for less than six licensing KenInvest for an investment certificate in the prescribed form, but this is
months). Once a work permit has been issued, expatriates must apply for requirements not mandatory.
an alien card (residence permit). • A holder of an investment certificate is entitled to being issued with
• Employers are required to justify the appointment of an expatriate instead business licences applicable to his/her undertaking, a specified number of
of a Kenyan national. Expatriates should be understudied by local work permits for expatriate staff and certain tax incentives.
employees. Employers are also required to produce a list that indicates
the number and qualifications of expatriates in an employer’s employment. non-industry • The following general non-industry specific registrations / licences may
• The law allows a work permit to be granted for a period determined by the specific also be required:
Director-General of the Kenya Citizens and Foreign Nationals registration /
Management Service at his discretion, subject to a maximum period of five licences
years. In practice, however, most work permits are issued for two years. unified • Businesses operating in Kenya must hold a valid unified business permit
• The Immigration Act differentiates work permits in terms of class and business from the relevant City County (for businesses operating in Nairobi, the
sector which includes inter alia, mining, prescribed professions, permit Nairobi City County).
manufacturing, employment, consultancy etc. • The permit is applied for online and consolidates five permits (the single
business permit, fire clearance certificate, advertising signage, health
local • In terms of Kenyan employment legislation, an employee may be certificate and food hygiene) into one permit.
employment seconded to Kenya, as it is not a legal requirement for employees to be • The permit is to be displayed in a conspicuous place at the company’s
vs employed by a local entity.
premises and a separate permit is to be obtained in every region where
secondment • However, for immigration purposes, a Kenyan company must sponsor an the business operates.
individual’s work permit application and local employment may therefore
be required for this purpose. Local employment is not required where an Kenya • All taxpayers must register with the KRA and obtain a Personal
application is made for a special pass. Revenue Identification Number (“PIN”) through an online application process.
Authority • If an enterprise’s turnover exceeds the VAT registration threshold (see
fixed-term • Fixed-term contracts are allowed in terms of the Employment Act, 2007. (“KRA”) ‘tax’ below) it should also specifically apply for VAT registration.
contracts and However, a risk exists that fixed-term contracts for an extended period of
temporary time may be regarded as contracts for an indefinite duration. National • Every employer who employs one or more employees must register with
employment • Labour broking is allowed in Kenya, subject to the labour broker being Social Security the NSSF and register his/her employees as members of the fund.
services registered as an employment agency under the Labour Institutions Act, Fund (“NSSF”)
2007 and entering into a valid employment contract with the employee.
National • Participation in the NHIF is mandatory for any employer with employees.
payment in • Remuneration may be paid in foreign currency but must be nationally Hospital • Employers must register as employers and each employee must also be
local currency converted to pay the various taxes. Insurance registered individually.
Fund (“NHIF”)
restraint of • Restraint of trade agreements are valid and enforceable in Kenya, subject National • An employer must be registered with NITA within 30 days of becoming an
trade to being reasonable as described in Kenya’s Contracts in Restraint of Industrial employer.
agreements Trade Act, Cap 24. Factors such as geography, age and duration are Training • The application and supporting documents are submitted to the NITA
usually considered. In practice, restraint of trade agreements are generally Authority headquarters in Nairobi.
only enforced by the courts in cases of senior employees holding (“NITA”)
information of a confidential nature.

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doing business in Kenya

Directorate of • A company must obtain a certificate of registration of a workplace from the types of • Limited liability company (both private and public);
Occupational DOSHS in respect of each of the premises used by the company as a entities • branch office of a company registered outside of Kenya; and
Safety and workplace. available for • co-operative.
Health foreign
Services investment
(“DOSHS”) private limited liability company
industry- • Industry-specific licences may also be required. minimum • A minimum of one shareholder is required.
specific number of • There is generally no requirement for local shareholding, but it may be
licences shareholders required in specified industries such as insurance, banking,
incentives • Incentives include: telecommunications, financial advisory services, engineering, aviation,
• investment deduction of 150% on significant investments (at least maritime, private security and mining, as well as companies listed on the
KES2-billion – circa USD16.5-million) made outside of Nairobi City Nairobi Securities Exchange.
County or Mombasa County; minimum • There are no minimum share capital requirements for private companies in
• investment deduction of 100% on investments of at least KES250- share capital Kenya. However, minimum capital requirements may apply in specific
million – circa USD2.1-million) made outside of Nairobi City County regulated industries, such as banking, insurance and employment
or Mombasa County or on investments made in a special economic agencies.
zone;
• reduced corporate income tax rates for entities operating in special directors • A private company must have at least one director, who must be a natural
economic zones (“SEZs”) or export processing zones (“EPZs”) or person or a sole proprietorship.
businesses engaged in local assembly of motor-vehicles during the • There is no requirement to have a local director.
initial years of operation;
• import duty exemption on importation of equipment to be used for company • Every private company with paid-up share capital of at least KES5-million
manufacture; secretary must appoint a company secretary.
• supplies made to SEZ or EPZ entities are zero-rated. In addition, • Although there is no requirement for the company secretary of a private
importation of goods and services by EPZ or SEZ entities is not company to have any specific qualifications, it is best practice to appoint a
subject to VAT or import duties; certified public secretary holding a practising licence issued by the Institute
• no withholding taxes on dividend payments by SEZ entities. In of Certified Public Secretaries of Kenya.
addition, a reduced withholding tax rate of 5% applies on payments
auditor • A private company must appoint an auditor, unless the directors
by SEZ entities to non-residents in respect of interest, management
reasonably resolve otherwise on the basis that audited financial
fees, or royalties;
statements are unlikely to be required.
• no withholding taxes on payments made by an EPZ entity to a non-
• Dormant and small companies may be exempted from audits. A company
resident person during the first 10 years of operation;
is deemed to be small if it is:
• a tax rebate available to employers who employ at least 10
• not a public company;
university or technical and vocational training graduates as
apprentices for a period of six to 12 months during any year of • not listed on a securities exchange or other regulated market in
income; Kenya; or
• incentives under the special operating framework with the • does not carry on insurance or banking activity and in a particular
government as is provided under such agreement; and year, two or more of the following conditions are met:
• amnesty in respect of interest and penalties for companies listed on • it has a turnover of not more than KES50-million;
the growth segment of the securities exchange where a full • the value of its net assets is not more than KES20-million; and
disclosure is made for the two years immediately before the listing. • it does not have more than 50 employees.

exchange • There are no exchange control restrictions in Kenya, however, commercial

control banks are required to report significant foreign exchange transactions (all
regulation transactions in excess of USD10 000) to the central bank.

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doing business in Kenya

registered • Every company must have a registered office in Kenya to which all withholding WHT rate
address communications and notices may be addressed. tax (“WHT”)
payment to residents non-residents*
• A company may have its registered address at the office of the company’s rates
accountants, lawyers or a third party. branch profits N/A N/A
dividends 5% 15%
shelf • Shelf companies are available for purchase in Kenya.
companies 0% (shareholding or voting
rights of at least 12.5%)
registration • Companies are registered with the Registrar of Companies, and it takes
process between two to three weeks to complete registration once all required interest 10% (interest from bearer 25% (interest from
documents have been submitted. bonds of more than 10 bearer instruments
years) of at least two
tax years)
25% (interest on bearer
tax system • Kenya has a source-based tax system, in terms of which both residents certificates) 15% (interest on
and non-residents are subject to tax on income earned from a source in government
15% (interest on
Kenya. bearer bonds of at
government bearer bonds
of at least two years and least two years
corporate • A company is tax resident in Kenya if: and any other
residence • it is incorporated under Kenyan law; any other interest)
interest)
• the management and control of the affairs of the company are
exercised in Kenya in a particular year of assessment; or royalties 5% 20%
• it has been declared by the Cabinet Secretary of the National management or 5% (if the aggregate value 20%
Secretary by a notice published in the Kenya Gazette, to be a tax professional fees is at least KES24 000 in a
resident for any year of income. month)
corporate tax • Resident companies are subject to corporate income tax at the rate of *The withholding tax rate may be reduced in terms of a relevant double tax
rate 30%, whereas permanent establishments of foreign companies are taxed agreement.
at the rate of 37.5%. double tax • DTAs are in force with Canada, Denmark, France, Germany, India, Iran,
• Newly listed companies, companies operating in export processing zones agreements Norway, Qatar, Republic of Korea, Seychelles, South Africa, Sweden, the
and special economic zones, companies engaged in business under a (“DTAs”) United Arab Emirates, the United Kingdom and Zambia.
special operating framework arrangement with the government,
companies operating a plastic recycling plant, companies constructing at losses • Losses may be carried forward indefinitely.
least 400 residential units annually and companies engaged in the local • Losses may be set off against income from the same source only, and
assembly of motor vehicles qualify for reduced tax rates during specified capital losses are non-deductible.
periods.
• The Finance Act, 2020 introduced a minimum tax at the rate of 1% of transfer • In terms of Kenya’s transfer pricing rules, transactions between related
turnover in cases where the instalment tax payable by a person is lower pricing enterprises must be entered into on an arm’s length basis.
than the minimum tax. However, on 20 September 2021, the High Court • Enterprises are related if one of the enterprises participates directly or
declared the section that introduced the minimum tax unconstitutional. The indirectly in the management, “control” or capital of the other enterprise, or
KRA has appealed the High Court judgement at the Court of Appeal. a third person participates directly or indirectly in the management,
“control” or capital of both enterprises.
capital gains • Net capital gains accruing on the transfer of property situated in Kenya are • “Control” is extensively defined to include inter alia a situation where a
tax (“CGT”) generally subject to CGT at the rate of 5%. However, with effect from 1 person directly or indirectly holds at least 20% of the voting rights in a
January 2023, the applicable rate is 15% of the net gain. company or a person has the authority to appoint more than half the board
• The definition of property includes land, buildings and marketable of directors or at least one executive director.
securities.

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doing business in Kenya

limitations on • With effect from 1 January 2022 the limitation on deductible interest is stamp duty • Stamp duty is levied under the Stamp Duty Act, Cap 480 on a number of
interest restricted to 30% of the earnings before interest, taxes, depreciation and instruments, including conveyances or transfers on the sale of any
deductibility amortization (EBITDA) for all companies. The restriction applies property, sale of any stock or marketable security, sale of any immovable
irrespective of whether interest is paid to a related party or third party, but property, mortgages, bonds, debenture or covenants, and instruments of
banks and financial institutions licensed under the Banking Act, Micro- partnership.
Finance Act, 2006 or Hire Purchase Act are exempted from this restriction. • Stamp duty at the rate of 1% is payable on the transfer of shares on the
value of the sale. Shares listed on the Nairobi Stock Exchange are exempt
employee • The income tax rates applicable to resident individuals are: from stamp duty.
taxes • Stamp duty on the transfer of immovable property is levied at the rate of
chargeable income (KES) tax rate
4% for property within municipalities and 2% for property outside
up to 288 000 10% municipalities.
288 001 – 388 000 25%
value added
above 388 000 30% tax (“VAT”)
social • Employers and employees must make monthly social security taxable • VAT is levied on the supply of goods and services in Kenya and on the
security contributions to the NSSF. supplies importation of taxable goods and services.
contributions • Both the employer and employee contribution rate is 5% of the employee’s
gross pay up to a maximum of KES200 per month. VAT rate • 16%
• A two-tier contributions system introduced under the National Social • 8% (specified petroleum products)
Security Fund Act, 2013 became effective on 1 June 2014, but its
application has been stayed by a court order. registration • Any person who, in the course of his/her business, has supplied taxable
threshold goods or services to a value of at least KES5-million in a 12-month period
NHIF • Employees must contribute to the NHIF based on graduated rates must register for VAT purposes.
depending on the employee’s earnings but subject to a maximum
contribution of KES1 700.
VAT • Taxable supplies made by persons designated by the KRA are subject to
withholding withholding VAT at the rate of 2% of the taxable value.
National • Both the employer and the employee must contribute to the NHDF at a
Housing rate of 1.5% of the employees’ monthly gross earnings subject to a reverse VAT • Resident companies are required to account for output VAT in respect of
Development maximum of KES5 000 per month. on imported taxable imported services rendered by non-resident companies where the
services registered person would not be entitled to a tax credit for the full amount of
Fund • However, following a lawsuit instituted by the Central Organization of
(“NHDF”) Trade Unions (COTU), the levy has been suspended. input tax in terms of a reverse-charge mechanism.
levy • Non-residents without a permanent establishment in Kenya rendering
services through a digital market to persons in Kenya are required to
national • Employers are required to pay to the NITA a training levy at the rate of register for VAT (or appoint a tax representative to account for VAT on
industrial KES50 per employee per month. their behalf). This requirement exists even if the value of their supplies
training levy • Employers with less than 100 employees are exempted from paying the does not meet the KES5-million threshold.
training levy for a period of 12 months from the date of registration of the
business.

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doing business in Kenya

trade marks For more information or assistance please contact:

international • Madrid Agreement
Celia Becker
conventions, • Madrid Protocol
executive | Africa regulatory and business intelligence
treaties and • Nairobi Treaty [email protected]
arrangements • Paris Union
• Trade Mark Law Treaty This document contains general information and no information provided herein may in any way be
• World Intellectual Property Organization construed as legal advice from ENSafrica, any of its personnel and/or its correspondent firms.
• World Trade Organization / Trade-Related Aspects of Intellectual Property Professional advice must be sought from ENSafrica before any action is taken based on the information
Rights (TRIPS) provided herein, and consent must be obtained from ENSafrica before the information provided herein is
reproduced in any way.
classification • The International Classification of Goods and Services (Nice
Classification) applies. LAST UPDATED OCTOBER 2022
• A single application may cover any number of classes of goods and/or
services.
categories of • Provision is made for:
trade marks • goods and service marks;
• certification marks;
• defensive marks;
• series marks; and
• collective marks.
filing • Full particulars of the applicant;
requirements • Power of attorney, duly completed and simply signed;
• prints of the trade mark; and
• certified copy of the priority document (if applicable).
procedure • Applications are examined as to their inherent registrability and conflict
with prior existing registrations / applications. If accepted, applications are
published in the Industrial Property Journal or Kenya Gazette for
opposition purposes.
oppositions • Opposition may be lodged within 60 days following the date of
and non-use advertisement of the trade mark application.
cancellations • Extension of the opposition period is possible at the discretion of the
Registrar of Trade Marks, with the maximum extension being 90 days.
• If there is no opposition to the trade mark after the statutory 60 days
period from the date of publication or if opposition has been decided in
favour of the applicant, the mark will be registered, and the Kenya
Industrial Property Institute will issue a certificate of registration and enter
the registered mark in the register.
• A registered trade mark may be cancelled on action by an interested party
if it has not been used for a continuous period of five years after the date
of registration.
duration and • A trade mark is valid for 10 years from the filing date and thereafter
renewal renewable for further periods of 10 years.