Kenya: Transfer pricing and other tax-related measures in Finance Bill, 2022

Finance Bill, 2022 introduced at the National Assembly

Finance Bill, 2022 introduced at the National Assembly

The Finance Bill, 2022 was introduced at the National Assembly on 12 April 2022—released earlier than usual to facilitate its passing before the National Assembly takes a break to prepare for the general elections that are scheduled for August 2022.

Proposed changes to the transfer pricing provisions would:

  • Widen the scope of transactions falling within the ambit of transfer pricing by including non-resident persons operating within the preferential tax regime, effective 1 January 2023
  • Introduce a notification requirement in the context of country-by-country reporting for any multinational enterprise group or constituent entity resident in Kenya to notify the tax authority as to whether it is the ultimate parent entity (UPE) of the group or a surrogate parent entity (SPE), or if neither, the identity of the constituent entity which is the UPE or the SPE and tax residence of that constituent entity, effective 1 July 2022
  • Introduce Master file and Local file documentation requirements in line with the Organisation for Economic Cooperation and Development (OECD) base erosion and profit shifting (BEPS) Action 13 report

Additional proposed tax-related measures include:

  • Increase the capital gains tax rate from 5% to 15%
  • Increase the digital service tax rate from 1.5% to 3% of the gross transaction value
  • Exclude non-resident persons with a permanent establishment (PE) in Kenya from paying digital service tax
  • Various changes to excise duties and export levies
  • Various value added tax (VAT) related measures—Read TaxNewsFlash
  • New measures on the taxation of financial derivatives
  • Changes to the thin-capitalization rules
  • Limits on the application of the 100% investment deduction
  • Incentives to promote manufacturing and healthcare
  • Procedural measures to safeguard tax revenues
  • New procedures for refund of tax overpayments

Read an April 2022 report [PDF 1.96 MB] prepared by the KPMG member firm in Kenya

 

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