Kenya Corporate Tax Guide 2026

Overview — Corporate Tax in Kenya

Corporate tax in Kenya is governed by the Income Tax Act (Cap. 470) and administered by the Kenya Revenue Authority (KRA). A company is tax resident in Kenya if it is incorporated under Kenyan law or if its place of effective management is in Kenya. Resident companies are taxed on worldwide income; non-resident companies are taxed only on Kenyan-source income. The standard tax year is the calendar year (January to December), though companies may apply for a different accounting period with KRA approval. Companies must register for corporate tax via iTax and obtain a Personal Identification Number (PIN). Annual returns must be filed within 6 months of the end of the accounting period.

Standard Corporate Tax Rate — 30%

The standard corporate income tax rate in Kenya is 30% of taxable profits for resident companies. Non-resident companies with a permanent establishment in Kenya are taxed at 37.5% on Kenyan-source income. Taxable profit is calculated as gross revenue less allowable deductions including operating expenses, capital allowances (depreciation), interest costs (subject to thin capitalisation rules), and losses carried forward. Losses may be carried forward indefinitely for most companies, but loss utilisation is capped at 50% of taxable profits in any year for companies with over KES 5 billion turnover.

Newly Listed Companies — 25% for 3 Years

Companies newly listed on the Nairobi Securities Exchange (NSE) benefit from a reduced CIT rate of 25% for the first 3 years of listing. This incentive is designed to encourage companies to list on the NSE and deepen Kenya's capital markets. To qualify, the company must list at least 20% of its issued share capital on the NSE and maintain the listing for at least 3 years. The reduced rate applies to the entire taxable profit for the qualifying period.

EPZ and SEZ Enterprises — 15%

Export Processing Zone (EPZ) enterprises and Special Economic Zone (SEZ) enterprises benefit from a reduced CIT rate of 15% for the first 10 years of operation. After 10 years, EPZ/SEZ firms are taxed at 25% for the next 10 years, then graduate to the standard 30% rate. Additional incentives include exemption from VAT on inputs, withholding tax exemptions on dividends for the first 10 years, and exemption from stamp duty on land transactions for the zone.

Turnover Tax — 3%

The Turnover Tax (TOT) is a simplified tax for small businesses with annual turnover between KES 1 million and KES 50 million. The rate is 3% of gross turnover, and filing is done on a simplified annual basis via iTax. TOT replaces income tax, VAT, and other taxes for qualifying businesses. Expenses are not deductible under TOT — the 3% is applied to gross turnover. Businesses may opt out of TOT and be taxed under the standard CIT regime if they maintain proper accounting records. TOT is not available to rental income businesses, management/consulting services, or professional services.

Minimum Tax — 1% of Gross Turnover

Introduced in 2021, the minimum tax is a 1% levy on gross turnover for companies that consistently report losses or very low profits. It applies to all resident companies (except those in insurance, agriculture, and a few other exempt sectors). The minimum tax is creditable against future corporate tax liabilities — if the standard CIT computed is higher than 1% of turnover, only the standard CIT is payable. This measure was designed to prevent tax avoidance through persistent loss declarations.

Digital Services Tax — 1.5%

Kenya imposes a Digital Services Tax (DST) of 1.5% on income from digital services provided through online platforms, including ride-hailing, food delivery, freelancing, streaming, and e-commerce. The tax applies to both resident and non-resident digital service providers. For non-residents, the DST is the final tax; for residents, it is creditable against corporate tax. The DST is collected by KRA and must be remitted by the 5th working day following the month of income receipt. Non-resident digital platforms must register with KRA and file DST returns.

Depreciation — Capital Allowances

Kenya uses a capital allowance system (rather than depreciation) for tax purposes. Standard rates include: buildings 2.5% per annum (straight-line), machinery 12.5% (declining balance), computers 30% (declining balance), and motor vehicles 25% (declining balance). Investment deductions are available for manufacturing enterprises: 100% deduction for new buildings and 50% for new machinery in the first year.

FAQs

What is the penalty for late filing of corporate tax returns?

Late filing attracts a penalty of KES 10,000 or 5% of the tax due (whichever is higher). Late payment attracts interest at 1% per month on the unpaid tax. Non-compliance may result in KRA enforcement actions including agency notices to banks and debt collectors.

Can a foreign company have a branch in Kenya?

Yes, foreign companies may operate through a branch registered with the Registrar of Companies. The branch is taxed at 37.5% on its Kenyan-source profits. Foreign companies with a permanent establishment in Kenya are subject to the same CIT rules as resident companies.

Are dividends paid by a Kenyan company subject to withholding tax?

Dividends paid to residents are subject to 5% withholding tax (final tax for individuals). Dividends paid to non-residents are subject to 10% withholding tax, subject to treaty relief.

Does Kenya have general anti-avoidance rules?

Yes, the Income Tax Act includes a General Anti-Avoidance Rule (GAAR) that allows KRA to recharacterise transactions entered into for tax avoidance purposes. Kenya also has specific anti-avoidance rules for transfer pricing and thin capitalisation.

Disclaimer

This guide provides general information about Kenyan corporate tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Kenyan tax advisor or the Kenya Revenue Authority for advice specific to your situation. InvestmentKit does not provide tax advice.