KENYA Law and Practice Contributed by: Ombo Malumbe, Jack Ong’anya and Faith Ngarama O’Bang Law (Ong’anya Ombo Advocates LLP)
factors that are used to determine a PE are set out below. Fixed Place of Business A fixed place of business wholly or partly serves as a place of management, branch, workshop, office, mine, factory, oil/gas well, quarry, place of extraction/ exploitation, warehouse (providing storage facilities), farm, plantation or place for related activities and a sale outlet. For digital nomads, if they stay in Kenya for over 183 days or establish a significant presence, their activities could trigger a fixed place of business and create tax obligations in the country. This could impact both the nomad’s tax residency and the tax residence of their employer, potentially leading to dual tax obligations. Double tax agreements (DTAs) may provide relief in such cases, helping to allocate tax - ing rights between the home and host countries and reduce the chances of double taxation. Timeline-Based Activities 183 days Activities under this category include work on a build - ing site, a construction, assembly or installation pro - ject, or any supervisory activity linked to the site or project. There are, however, other factors such as aggregated timelines and related entities, that would be factored in to determine whether an entity is a PE. 91 days The provision of services or consultancies by a per - son through employees or other personnel in Kenya where such an activity continues for a period (includ - ing an aggregated period) exceeding 91 days within a 12-month period, commencing or ending in the year of income, is also a factor used to determine whether an entity is a PE. An installation or structure used in the exploration of natural resources for a period exceeding 91 days will also be considered to be a PE. Dependent agent A person that has a dependent agent in Kenya who assumes any role, including concluding contracts and playing the principal role in a business entity with no serious supervision, will be deemed to have a PE in Kenya. However, there are some limitations on apply -
ing the dependent agent provision, when the activi - ties are what could be defined by law as being of a preparatory or auxiliary nature. 1.4 Applicable Corporate and Individual Tax Rates The tax rates in Kenya vary depending on the struc - ture of the entity and certain regulatory factors, such as entities being in the Export Processing Zone (EPZ), Special Economic Zone (SEZ), or entities being involved in shipping, housing development companies or motor vehicle assembly, among other businesses, for which there are special arrangements with the gov - ernment. See 2.3 Special Incentives for further detail. General Tax Rates for Incorporated Businesses The general applicable rate is 30% for a resident entity and an additional repatriation tax of 15% for a non- resident entity. Some Sector-Specific Taxes for Incorporated Businesses • EPZ entities are exempt from paying any corpora - tion tax for a period of ten years from the date on which their EPZ business commenced, which will be revised to 25% upon the lapse of the exemption period for the next ten years. • SEZ entities are subject to corporation tax of 10% for the first ten years in which they are resident in the SEZ, after which, 15% tax will apply for the next ten years. • An entity engaging in the local assembly of motor vehicles will pay 15% corporate tax for the first five years from commencement of operations. This period will be extended for a further five years should the entity meet the local content require - ments. • If an entity has entered into an agreement with the government for a preferential tax rate, such tax rate will apply. • An entity engaged in the shipping business will pay 15% corporate tax for the first ten years from com - mencement of operations. • An entity engaged in operating a carbon market exchange or emission trading system that is certi - fied by the Nairobi International Financial Centre Authority will pay 15% corporate tax for the first ten years from the year of commencement.
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