Transfer pricing (TP) rules are tightening in Kenya, with the 2024 Finance Act introducing OECD-aligned documentation requirements for cross-border transactions. Kenyan companies with international affiliates—think exporters to Uganda or importers from China—must now prove arm’s-length pricing to avoid KRA adjustments and penalties up to 200% of underpaid tax.
Under Section 18 of the Income Tax Act, TP applies to controlled transactions like goods sales, services, or loans between related parties. The goal? Prevent profit-shifting to low-tax jurisdictions.
Key requirements:
- Master File and Local File: Annual submissions for groups with KSh 1 billion+ turnover.
- Methods: Use Comparable Uncontrolled Price (CUP) or Cost Plus for most Kenyan SMEs.
- Benchmarking: Databases like KTAB or RoyaltyRange for market rates.
Common pitfalls: Ignoring low-value services exemptions or failing Country-by-Country Reporting (CbCR) for multinationals. A Nairobi manufacturing client faced a KSh 50 million reassessment; our TP study resolved it with interquartile range analysis.
Stay compliant with advance pricing agreements (APAs). Our experts handle your TP policy.
