Repatriating Profits From Kenya: Certificates, Rights and Tax for Foreign Tech Investors

A foreign investor who has put money into a Kenyan tech company eventually wants to know one thing plainly about repatriation: can the profit actually come home, and what does Kenya take on the way out. The mechanics sit across two different statutes that are easy to confuse because both use the word “certificate,” and the tax layer sits on top of both.

Two Different Certificates, Two Different Statutes

The Investment Promotion Act gives a foreign investor who commits at least USD 100,000 an “investment certificate,” which, as we cover in our guide to Class G investor permits, is mainly the route to entry permits for expatriate staff. It is a different, older instrument, the Foreign Investments Protection Act, that actually governs the right to send profit and capital out of the country.

Under section 3 of the Foreign Investments Protection Act, a foreign national who proposes to invest foreign assets in a Kenyan enterprise may apply to the Cabinet Secretary for a certificate that the enterprise is an “approved enterprise” for the purposes of that Act. Where satisfied that the enterprise would further the economic development of, or benefit, Kenya, the Cabinet Secretary may, in his discretion, issue the certificate, and the certificate records the foreign assets invested, divided between capital (the equity) and any loan.

Repatriation: The Right to Transfer, Once Certified

Section 7 of the Foreign Investments Protection Act is the operative provision for repatriation. Notwithstanding any other law in force, the holder of a certificate may transfer out of Kenya, in the approved foreign currency and at the prevailing rate of exchange, the profits arising from the investment, including retained profits not yet capitalised, after tax, and the capital itself as specified in the certificate. An increase in the capital value of the investment arising from selling assets or revaluing them is expressly carved out and is not treated as “profit” transferable under this provision. Section 7 contains no separate consent step: the right to transfer arises from holding the certificate. The certificate is what gives the investor a clear statutory right to rely on.

An investor who never applies for a Foreign Investments Protection Act certificate is not thereby barred from repatriating profit; a dividend can still be declared and paid under ordinary company law, subject to withholding tax. What the certificate adds is a specific statutory entitlement under section 7, on the terms set out in the certificate itself, to transfer profits and capital out of Kenya.

The Tax Taken Before It Leaves

Whether or not a certificate is in place, tax is due before profit crosses the border. A dividend paid to a non-resident shareholder attracts withholding tax at 15% under the Income Tax Act’s Third Schedule, reduced only where a tax treaty in force with the shareholder’s home country provides a lower rate; see our guide on checking whether your country’s treaty with Kenya is actually in force before assuming a reduction applies. The payer must remit the tax withheld to the Commissioner within five working days of deducting it (section 35(5)). Even where a treaty applies, section 41(2) denies its benefit to a recipient resident in the other state if 50% or more of its underlying ownership is held by non-residents of that state, unless the recipient is listed on a stock exchange there (section 41(3)). If the Kenyan operation is structured as a branch rather than a subsidiary, the mechanism is different again: section 7B of the Income Tax Act imposes a separate 15% tax on the branch’s repatriated income, calculated by a net-asset formula rather than triggered by a declared dividend, which we set out in full in our guide to how Kenya taxes a branch versus a subsidiary. Either way, the Foreign Investments Protection Act certificate governs the right to move the money; it does not itself reduce or exempt the tax due on it.

What This Means for a Tech Investor in Practice

For most foreign-backed Kenyan tech companies, the practical sequence is: incorporate and, if the investment size and immigration position justify it, obtain an Investment Promotion Act investment certificate for the permit benefits it carries; separately apply for a Foreign Investments Protection Act approved enterprise certificate to lock in the statutory right to transfer profits and capital on defined terms; declare dividends through the ordinary company law process; and account for withholding tax, or the branch repatriation tax, at the point of transfer. Treating these as one certificate, or assuming the immigration-focused investment certificate also secures the repatriation right, is a confusion worth avoiding.

Frequently asked questions

Is the Investment Promotion Act investment certificate the same as the Foreign Investments Protection Act certificate?
No. They are different instruments under different statutes. The investment certificate mainly unlocks entry permits for expatriate staff; the approved enterprise certificate under the Foreign Investments Protection Act is what secures the statutory right to transfer profits and capital out of Kenya.

Can we repatriate profit without either certificate?
A dividend can still be declared and paid under ordinary company law, subject to withholding tax, but without the Foreign Investments Protection Act certificate you have no specific statutory entitlement under section 7 to transfer profits or capital out of Kenya.

What tax applies when we send profit to our foreign shareholders?
15% dividend withholding tax under the Income Tax Act, reduced only where an in-force tax treaty applies, for a subsidiary. A branch instead pays a 15% tax on repatriated income under section 7B, calculated differently from a dividend.

Does the certificate reduce our tax bill?
No. The Foreign Investments Protection Act certificate governs the right to transfer money out of Kenya; it has no effect on the withholding tax or branch repatriation tax due on that transfer.

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.