KENYA Law and Practice Contributed by: Anne Kinyanjui and Bonface Abuya, DLA Piper Africa, Kenya (IKM Advocates)
would be subject to withholding tax (WHT) at the rates indicated below. A person making payments on dividends and interest to a resident (or non-resident entity with a branch/permanent establishment in Kenya) will pay: • 5% WHT on dividends paid to residents; and • 15% WHT on interest. A person making payments on dividends and interest to a non-resident will deduct 15% WHT for both the dividend and interest income. LLPs LLPs have gained traction as the real estate investment vehicles of choice, and are regulated by the LLP Act. LLPs have legal personality, and the liability of the partners is limited. LLPs may also own property, enter into contracts, and sue and be sued in the name of the LLP. An LLP has a minimum of two partners and at least one manager, who must be a natural per - son. An LLP is not recognised as a distinct person for the purposes of income tax even though it has legal personality. Accordingly, tax on income accrued in or derived from Kenya is account - ed for by the partners individually and not by the LLP. Each partner will therefore pay taxes on their share of the profit earned from the LLP based on the applicable income tax rates. REITs Following the enactment of the Capital Mar - kets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations (2013), REITs have gained traction as the premier vehicle for collective investment in real estate in Kenya.
They are licensed and regulated by the Capital Markets Authority (CMA). A REIT is structured as an unincorporated common law trust divided into units and established by way of a trust deed. REITs must have a licensed independent REIT trustee who holds the REIT assets on behalf of the investors and a licensed REIT manager who manages the day-to-day affairs of the REIT. A REIT scheme may be structured as follows: • In a development REIT (D-REIT), investors pool resources for the purposes of acquir - ing eligible real estate for development and construction. Upon the completion of con - struction, the D-REIT may be converted to an income REIT (I-REIT). • In an I-REIT, investors pool resources for the purposes of acquiring long-term income- generating real estate. The capital gain and rental income are distributed amongst the unit holders. • An Islamic REIT is a pool for investment in income-producing Sharia-compliant real estate products. REITs are beneficial to investors because they are professionally managed and there is mini - mal capital risk, despite the variety of real estate products available. REITs also enjoy tax exemptions (see 8.5 Tax Benefits ). 5.3 REITs REITs are available in Kenya (see 5.2 Main Fea- tures and Tax Implications of the Constitution of Each Type of Entity ). They may be unlisted or listed on the Nairobi Securities Exchange. Foreigners are allowed to set up and invest in REITs provided that they comply with the appli - cable laws. In order to register a REIT, the pre -
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