Kenya Investment Income Guide 2026

Dividend Taxation

Dividends paid by Kenyan companies are subject to withholding tax at the following rates:

• Resident individuals: 5% WHT (final tax — dividends are not included in the PAYE return)
• Resident companies: 5% WHT (withholding tax is creditable against CIT, and excess may be refunded)
• Non-residents: 10% WHT (or 15% if the recipient is in a country without a DTA with Kenya)
• Dividends from EPZ/SEZ enterprises: Exempt from WHT for the first 10 years

For example, a resident individual receiving KES 100,000 in dividends from a Kenyan company receives KES 95,000 net, with KES 5,000 remitted to KRA as final tax. A non-resident shareholder in the UK (Kenya-UK DTA provides 10%) receives KES 90,000 net on a KES 100,000 dividend.

Interest Taxation

Interest income from various sources is subject to withholding tax as follows:

• Bank deposits (resident individuals): 10% WHT (final tax)
• Bank deposits (resident companies): 10% WHT (creditable against CIT)
• Non-residents: 15% WHT (or lower treaty rate)
• Government bonds: Interest from Treasury bills, Treasury bonds, and infrastructure bonds is exempt from tax
• Corporate bonds: 10% WHT for residents, 15% for non-residents
• SACCO dividends: Exempt from withholding tax up to KES 10,000 per year

The withholding tax is deducted by the paying institution (bank, company, or issuer) at the time interest is credited. For example, a resident individual earning KES 50,000 in bank interest receives KES 45,000 net.

Royalty Taxation

Royalties paid for the use of intellectual property, patents, trademarks, copyrights, and similar rights are subject to withholding tax:

• Resident recipients: 10% WHT (creditable against income tax if the recipient files a return)
• Non-resident recipients: 20% WHT (final tax), subject to reduction under applicable DTAs

Kenya's double tax treaties typically reduce the WHT on royalties to 10–15% for qualifying recipients. The treaty rate requires the recipient to provide a certificate of residence from their home tax authority.

Capital Gains on Securities

Capital gains from the sale of securities are subject to varying treatment depending on the type of security:

• NSE-listed shares (secondary market): Exempt from CGT
• Private company shares: Subject to CGT at 5% of the net gain
• Government bonds: Gains on sale are exempt from tax
• Corporate bonds: Gains on sale are subject to CGT at 5%

Government Bonds — Tax Exempt

Interest income and capital gains from Kenyan government securities are fully exempt from income tax. This includes Treasury bills (T-bills), Treasury bonds (T-bonds), and infrastructure bonds. The exemption applies to both resident and non-resident holders. This policy is designed to encourage investment in government debt and broaden the investor base for domestic capital markets. The exemption covers both the interest payments and any gains realised on sale or redemption. For example, an investor earning KES 200,000 in interest on a T-bond receives the full KES 200,000 with no tax deducted.

Nairobi Securities Exchange (NSE)

Trading on the NSE is not subject to any securities transaction tax or stamp duty on trades. This reduces transaction costs for investors. Capital gains from secondary market trading of NSE-listed shares are exempt from CGT. However, dividends received on NSE-listed shares are subject to the standard 5% WHT for residents. For example, an active trader on the NSE pays no tax on trading gains but pays 5% WHT on any dividends received.

Double Tax Treaties

Kenya has an extensive network of double tax treaties with over 30 countries, including the UK, Canada, Germany, France, Netherlands, South Africa, India, UAE, Qatar, and others. These treaties typically reduce WHT rates on dividends, interest, and royalties. For example, under the Kenya-UK DTA, dividends are limited to 10% WHT, and royalties are limited to 12.5%. Taxpayers claiming treaty benefits must submit a certificate of residence from the treaty partner's tax authority using KRA Form DT1.

FAQs

Is rental income considered investment income?

No, rental income is classified as property income and is subject to 10% withholding tax (see the rental income guide for details).

Are foreign dividends taxable in Kenya?

Kenyan tax residents must declare foreign dividend income in their annual return. A foreign tax credit may be available for taxes paid in the source country, limited to the Kenyan tax attributable to that income.

Can I reclaim excess withholding tax?

Yes, if tax has been withheld at a rate higher than the applicable treaty rate, the taxpayer may apply to KRA for a refund via iTax. The process requires documentation including a certificate of residence and evidence of the withholding.

Disclaimer

This guide provides general information about Kenyan investment income taxation 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.