Corporate tax for Kenyan businesses is governed by the Income Tax Act, as amended by the Finance Act 2025 and the Finance Act 2026. This playbook summarises the rates, withholding taxes and anti-avoidance rules that most often drive commercial decisions, checked against the Kenya Law consolidation of the Act as at 1 July 2026. It is a summary and not tax advice, and the rules change with each Finance Act.
Corporate tax for Kenyan businesses: income tax rates
The Third Schedule to the Act sets the headline rate. A resident company pays tax at 30%. A non-resident company operating through a permanent establishment (a branch, for example) also pays 30% from 2024, so the old distinction in favour of resident companies no longer applies.
Lower or special rates apply to defined categories. The Schedule lists, among others:
- An export processing zone enterprise with no commercial activities: exempt for 10 years, then 25% for the next 10 years.
- A special economic zone enterprise: 10% for 10 years, then 15% for the following 10 years.
- A company constructing at least 400 residential units annually: 15%, with Cabinet Secretary approval.
- Local assembly of motor vehicles: 15% for 5 years, which can be extended by 5 years where 50% local content is met.
- A carbon market exchange, a certified Nairobi International Financial Centre company and a shipping business: 15% for 10 years, with conditions.
- Human vaccine manufacture: 10%.
The Schedule does not contain a general reduced rate for manufacturers. If you are told that manufacturing alone qualifies for 15%, ask for the paragraph relied on. Zone incentives for pharmaceutical producers are covered in our guide to pharmaceutical manufacturing licensing and EPZ incentives.
Withholding tax on payments to non-residents
Withholding tax is a cost the payer must collect and remit, and the payer carries the liability if it does not. The Third Schedule sets these non-resident rates:
- Management, professional, training, consultancy and contractual fees: 20%. Consultancy fees paid to citizens of East African Community states attract 15%, and fees paid by a special economic zone enterprise attract 5%.
- Royalties: 20%.
- Dividends: 15%.
- Interest and deemed interest: 15%, with the Act listing specific categories.
- Insurance premiums: 5%.
- Sales promotion, marketing, advertising and transport of goods: 20%.
- Digital content monetisation and digital marketplace payments: 20%.
A double tax agreement may reduce these rates, so check the treaty with the recipient’s country before paying.
Withholding tax on payments to residents
Residents are also withheld on many payments. The Third Schedule provides, for example: dividends 15% (5% for a qualifying dividend, which is a final tax); management and professional fees 5% where the aggregate is KES 24,000 or more a month; contractual fees 3%; royalties 5%; rent on immovable property 7.5%; sales promotion, marketing and advertising 5%; digital content monetisation and digital marketplace payments 5%; and payments for supplies to a public entity 0.5%. Qualifying interest is generally 15%, with 10% on housing bonds and 20% on bearer instruments.
Minimum top-up tax for large groups
Section 12G imposes a minimum top-up tax on a covered person, meaning a resident or a person with a permanent establishment in Kenya that belongs to a multinational group with consolidated turnover of EUR 750 million or more in at least two of the four preceding years. It is payable where the group’s combined effective tax rate in Kenya is below 15%. The tax is due by the end of the fourth month after the year end, and the excess profit calculation deducts 10% for employee costs and 8% for the net book value of tangible assets. The Act calls this a minimum top-up tax, and it lists exclusions. Groups near the threshold should model the position early, since the top-up applies to the Kenyan entities even where the parent pays tax elsewhere.
Deductions that the Act restricts
Three restrictions deserve attention in any corporate tax review.
Electronic invoices. Section 16(1)(c) denies a deduction for expenditure or loss where the invoice was not generated from an electronic tax invoice management system, except where the transaction is exempted under the Tax Procedures Act. Confirm that suppliers issue compliant invoices before you rely on a cost.
Interest paid to non-residents. Section 16(2)(j) disallows gross interest paid to a non-resident to the extent it exceeds 30% of earnings before interest, tax, depreciation and amortisation. It covers interest on all loans, payments economically equivalent to interest and finance-raising expenses. Licensed banks and financial institutions, micro and small enterprises and microfinance institutions are excluded, and a three-year carry-forward applies.
Deemed interest. Under section 16(2)(ja), deemed interest is not deductible where the person is controlled by a non-resident, alone or with up to four others, and is not a bank. Deemed interest is the average 91-day Treasury Bill rate, treated as paid by a resident on an interest-free loan provided or secured by a non-resident. We could not verify any fixed percentage in the Act, so check the current rate with the Kenya Revenue Authority.
Advance pricing agreements
Section 18G, introduced by the Finance Act 2025, allows an advance pricing agreement valid for a period not exceeding five consecutive years. It is void if obtained by misrepresentation, and the Act requires regulations within six months. The Act itself does not prescribe a fee or a pre-filing meeting, and we have not found regulations that do. Intragroup pricing is a frequent audit topic, so a business with material related-party payments should keep a transfer pricing file.
A practical checklist
Use this list as a starting point for corporate tax for Kenyan businesses of any size.
- Confirm the correct rate category for each entity, including any zone or sector incentive and its conditions.
- Map every cross-border payment to its withholding rate and the applicable treaty.
- Test the 30% EBITDA interest limit before the year end, not after.
- Review invoices against the electronic tax invoice requirement.
- For multinational groups, model the minimum top-up tax.
How We Can Help
Clay & Associates Advocates advises on corporate tax for Kenyan businesses and foreign investors, including structuring, cross-border payments and tax disputes, working with your accountants. See our corporate and commercial practice or contact us to review your position.
Sources: Income Tax Act, consolidated as at 1 July 2026 (Kenya Law); Finance Act, 2026 (Kenya Law).
Frequently asked questions
What is the corporate tax rate in Kenya in 2026?
The Third Schedule sets 30% for a resident company and 30% for a non-resident company with a permanent establishment, subject to the special rates for zones and listed sectors.
Do Kenyan manufacturers pay a 15% rate?
Not simply because they manufacture. The 15% rates in the Schedule apply to named categories, such as large-scale residential construction or local vehicle assembly.
What is the withholding tax on royalties?
Royalties paid to a non-resident attract 20%, and royalties paid to a resident attract 5%, before any treaty relief.
Who pays the minimum top-up tax?
A resident or permanent establishment in a multinational group with consolidated turnover of EUR 750 million or more in at least two of the four preceding years, where the combined effective rate is below 15%.
