Type of Government
Forms of Business Organisation
- Private or public limited liability company
- Joint Venture
- External Company (ie a branch of a foreign company)
- Partnership/limited partnership
- Sole trader
Formation of a Business
Companies and external companies (branches) must be registered with the authorities in Nairobi.
A business has to register for various tax purposes, National Social Security Fund and National Hospital Insurance Fund. Business permits and trade licenses are required for most activities. Some businesses such as banks and insurance companies require special licenses.
Tax is levied on income of any person, whether resident or not, which is deemed to have accrued in or was derived from Kenya. From January 2002, tax credits are available to Kenyan citizens whose income was partly accrued or derived from another country. The top tax bracket is at 30%. The resident corporate tax rate is also at 30%. In addition, there is a resident withholding tax of 5% of the amount of qualifying dividend payable. The non-resident withholding tax rate on dividends is 10% of the amount payable and is 15% in respect of interest (except bearer instruments). The non-resident corporate tax rate is 37.5%. There are no withholding taxes on remittance of branch profits.
Capital gains tax has been suspended. There is, however, a dividend compensating tax which is required to be paid by a corporate body which pays dividends out of untaxed profits.
Valued added tax is charged at 18% on taxable supplies of goods and services.
Kenya has double tax agreements with Sweden, Denmark, United Kingdom, Norway, Zambia, Germany, Canada and India.
Foreign Investments & Exchange Control
Kenya welcomes foreign investment. All business activities are open to foreign investors. Only the insurance and telecommunications industries require any Kenyan co-ownership. Agricultural land may only be held by Kenya citizens. There are no exchange control restrictions. The Central Bank is responsible for supervision of the currency. Residents may hold foreign currency accounts. Foreign exchange for eligible transactions is purchased from the commercial banks without any control. Eligible transactions include payments in respect of dividends, capital and interest on loans, current account transactions and proceeds on disposal of investments.
There is an active Capital Markets Authority.
The Monopolies Commission regulates the creation or strengthening of monopolies including acquisitions and takeovers of businesses where a change in control occurs between independent persons engaged in similar activities. There are statutory Capital Markets Authority and Nairobi Stock Exchange regulations governing issues and dealings in securities listed on the Nairobi Stock Exchange.
The Communications Commission of Kenya regulates the newly liberalised telecommunications sector.
Protection is provided for by statute. Kenya is a signatory of the Paris and Berne Conventions, the TRIPS Agreement, the ARIPO (Harare) Protocol and the Madrid Agreement and Protocol.
There are public registries for lands, companies, trade and service marks, designs and patents.
Other than tax incentives with regard to companies established as developers or operators in export processing zones, there are no special tax incentives granted to foreign investors.
Membership of International & Regional Organisations
Kenya is a member of the East African Community (with Uganda and Tanzania), the Common Market for East and Southern Africa (COMESA), the African Union, United Nations Organisation and the British Commonwealth.
Settlement of Disputes
There is provision for enforcement in Kenya of certain foreign judgements and arbitration awards. Kenya is a signatory and has adopted the 1923 Protocol on Arbitration Clauses of the League of Nations and the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Arbitration Act 1995 is now operative and embodies most of the provisions of the UNICITRAL model law.