DOING BUSINESS IN KENYA IN 2021
Since 2003, Healy Consultants Group PLC assists multinational Clients doing business in Kenya including i) company registration ii) regulatory licences iii) nominee professional, passive resident director and shareholder and iv) Kenyan multi-currency corporate bank account opening v) employment visas and vi) office rental solutions.
|Compare different Kenya entities||LLC||Fast solution LLC||Free zone LLC||Branch office|
|Also known as||LLC||Fast solution LLC||EPZ company||Branch office|
|Best use of company?||All products/ svcs||Close client deal now||Manuf/ export trading||Short-term projects|
|How soon to invoice Clients?||4 weeks||2 weeks||10 weeks||7 weeks|
|How soon can you hire staff?||4 weeks||2 weeks||10 weeks||7 weeks|
|How soon can you sign a lease agreement?||4 weeks||2 weeks||10 weeks||4 weeks|
|How long to supply corporate bank a/c?||8 weeks||6 weeks||3 months||3 months|
|How long to supply co. reg / tax numbers?||4 weeks||2 weeks||10 weeks||7 weeks|
|Corporate tax rate on annual net profits?||30%||30%||0%||37.5%|
|Additional turnover tax rate? (turnover under US$48k)||3%||3%||0%||3%|
|Limited liability entity?||Yes||Yes||Yes||No|
|Government grants available?||Yes||Yes||Yes||Yes|
|Govt approval required for foreign owners?||No||No||No||No|
|Minimum paid up share capital?||US$2||US$2||US$2||none|
|Can bid for government contracts?||Yes||Yes||Yes||Yes|
|Corporate bank account location?||Barclays Bank Kenya||KCB||Standard Chartered||EcoBank|
|Can secure trade finance?||Yes||Yes||Yes||Yes|
|VAT payable on sales to local customers?||16%||16%||16%||16%|
|Average total business set up costs?||US$17,350||US$29,710||US$19,300||US$16,250|
|Average total engagement period?||3 months||2 months||5 months||4 months|
|Accounting and tax considerations||LLC||Fast solution LLC||Free zone LLC||Branch office|
|Statutory corporate tax payable?||30%||30%||0%||37.5%|
|Legally tax exempt if properly structured?||No||No||Yes||No|
|Group HQ tax incentives?||Yes||Yes||Yes||Yes|
|Must file an annual tax return?||Yes||Yes||Yes||Yes|
|Must file annual financial statements?||Yes||Yes||Yes||Yes|
|Must appoint an auditor?||Yes||Yes||No||Yes|
|Access to double taxation treaties?||14||14||14||14|
|WH tax on payments to foreign s/holders?||10%||10%||0%||10%|
|Company Registration||LLC||Fast solution LLC||Free zone LLC||Branch office|
|Min. number of shareholders/partners?||1||1||1||Parent company|
|Maximum shareholding for foreigners?||100%||100%||100%||100%|
|Minimum statutory paid up share capital?||US$2||US$2||US$2||none|
|Security deposit kept with government?||No||No||No||No|
|Shelf companies available?||Yes||Yes||Yes||No|
|Time to incorporate a new entity?||4 weeks||2 weeks||10 weeks||7 weeks|
|Can easily convert to a PLC?||Yes||Yes||Yes||No|
|Public register of s/holders and directors?||Yes||Yes||Yes||Yes|
|Can have preference shareholders?||Yes||Yes||Yes||No|
|Business Considerations||LLC||Fast solution LLC||Free zone LLC||Branch office|
|Good entity for trademark registration?||Yes||Yes||Yes||Yes|
|Can secure an import and export license?||Yes||Yes||Yes||Yes|
|Sponsorship by a local citizen required?||No|
|Our Client must travel to Kenya?||No|
|Temp. physical office solutions available?||Yes|
|You need local resident as bank signatory?||No|
|Can be wholly foreign owned?||Yes|
|The entity will likely be regulated by?||Business Registration Service|
|Minimum number of directors/managers?||1|
|Monthly VAT reporting to the government?||Yes|
|Tax agent required?||Yes|
|Sign office lease during incorporation?||No|
|S/holder/director docs attested/translated?||No|
|Foreign director needs personal tax no.?||Yes|
|Foreign director needs a residence visa?||No|
|Maximum number of staff allowed?||No maximum number for any entity|
|Expatriate to local staff ratio?||None|
|Can secure residence visa for business owner?||Yes|
|Other useful information|
|What will be included in my customer sales invoice?||Click link|
|Kenya has signed free trade agreements?||14|
|Kenya is a member of WIPO/TRIPS?||Yes|
|This country is a member of the ICSID?||Yes|
|Average custom duties suffered?||25%|
|Govt foreign investment approval required?||Yes|
|Average monthly office rent?(US$/sq m)||US$12|
|Minimum statutory monthly salary?||US$130|
|Average US$ salary for local skilled staff||US$1,400|
|US$ deposit interest rate (year average)?||7.82%|
|Overseas remittance currency controls?||Yes|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||Yes|
|Quality of e-banking platform?||Very Good|
|Crowd funding available in this country?||Yes|
Kenya business setup summary
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Kenya business setup summary
- Kenya is one of the most vibrant economies in East Africa, and is on the doorstep of a huge regional market. However, corruption levels are high. For risk averse entrepreneurs, Kenya is probably not worth the effort. However, for multinational Clients prepared to take a calculated gamble, there is significant upside potential.
- To streamline company set up formalities, the Kenyan government operates several ‘one stop shops’ across the country which assist with business registration, licensing and support services.
- Other government agencies involved in Kenya company set up and administration in Kenya include i) the Companies Registry ii) Kenya Investment Authority and iii) Kenya Revenue Authority.
- Several corporate entities are available to foreign investors under the Kenya Companies Act 2015. Most multinational Clients doing business in Kenya choose a private limited liability company (LLC) because it is simple to structure, requiring just one director and one shareholder, of any nationality, who need not be resident in Kenya. The LLC also has no minimum share capital requirement.
- Investors looking to establish large corporations with the intention of listing on the Nairobi Stock Exchange typically choose a public limited company.
- A limited liability partnership is perfect for skilled professionals, including lawyers and consultants.
- A branch office is ideal for foreign companies looking to do business in Kenya without the time and expense of setting up a subsidiary.
Benefits and problems
- Kenyan business set up is easy if you know how. Specifically:
- Within a month, a Kenyan LLC can be legally incorporated and receive a tax registration number;
- Only one director and one shareholder is required, there is no minimum paid up capital requirement and no travel requirement;
- All going well, within four weeks Healy Consultants Group PLC’s banking team can open a Kenya multicurrency corporate account with quality e-banking. Our Clients are not required to travel to meet the bank;
- For multinational Clients looking to fast secure a government contract in Kenya, we also offer a fast Kenya business set up solution.
- East Africa is the continent’s fastest-growing region. For example, Ethiopia registered 9% average annual GDP growth since 2010, while in 2019, Kenya’s economy grew 5.7%, one of the fastest in sub-Saharan Africa. The World Bank says growth was underpinned by a ‘stable macroeconomic environment, positive investor confidence and a resilient services sector’.
- Kenya is a gateway to serve regional markets because:
- Kenyan exporters enjoy low- or zero-tariff access to more than 20 countries and 450 million people because of the country’s membership of regional trade blocs including the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC);
- Compared to other countries in East Africa, Kenya has reasonable road, rail, airport and port networks including Mombasa Port, a new deep water port at Lamu under construction, and a new dry port at Naivasha, which opened in 2020.
- Kenya boasts seven Export Processing Zones (EPZ), ideal for export-orientated foreign investors, particularly manufacturers. A Kenyan EPZ company enjoys many benefits including:
- Being legally exempt from corporate income tax and withholding tax for up to 10 years;
- Indefinite exemption from VAT and customs import duties and stamp duties;
- Can operate with a single licence that will be approved within a month;
- Good infrastructure within the free zone compared to outside the zone, including modern ready-made factories, good security and serviced land.
- The Kenyan domestic market is also attractive for some multinational Clients because:
- Spending power among ordinary Kenyans is increasing. For example, in 2019 disposable personal income was US$79 billion, up from US$72 billion in 2018. The country’s population of 52 million is growing fast, thereby boosting demand for consumer goods such as electronics, cars etc;
- A major growth sector in Kenya is telecoms. In the coming years, there will be huge demand to expand the country’s telecoms networks. Kenya already ranks 3rd in Africa in terms of telecoms network quality. About one fifth of the country’s population currently has internet access;
- Kenya is also an emerging African e-commerce hub. More Kenyans are using e-payments and banking online via mobile phone. The Covid-19 situation in 2020 accelerated this trend.
- Compared with South Africa, running a business from Kenya is cost effective. For example:
- Water and electricity bills in Kenya are one third of those in South Africa, making it attractive for energy-intensive industries such as manufacturing;
- Communications tariffs (e g mobile and internet plans) are significantly cheaper in Kenya;
- The average monthly salary in Kenya is US$1,263, compared with US$2,088 in South Africa. Furthermore, grade A office space in Nairobi CBD is about half the going rate in Johannesburg.
- Kenya has the largest qualified talent pool in East Africa. For example i) an estimated 80% of the population is proficient in English, the second highest figure on the continent after South Africa. Foreign business owners in Kenya should therefore have little difficulty communicating with government workers, bank officers, customers, suppliers and fellow entrepreneurs. It is also easy to recruit English-speaking staff for a Kenyan business ii) three quarters of the population is computer literate, making employees more employable and productive and iii) skilled labour standards are the second best on the continent after South Africa.
Problems with Kenya company registration
- Outside free zones, Kenyan businesses suffer high taxes. For example i) corporate income tax is 30% ii) withholding tax is 20% and iii) VAT is 16%. The withholding tax burden on Kenyan companies is increased since Kenya has signed only seven double taxation treaties with other countries.
- Foreign ownership of Kenyan companies is restricted in aviation, insurance, telecommunications and agriculture. National resident shareholders are required.
- Although the World Bank ranks it one of Africa’s best places to do business, our multi-national Clients complain of:
- Challenges in everyday dealings with inefficient government departments. Examples of government inefficiency include i) taking an average of three months to secure a work visa for a foreign employee ii) taking four months to receive refunds for VAT and withholding taxes and iii) one month to obtain customs clearance;
- Corrupt public servants that raises the costs of doing business;
- A weak judicial system. Foreign investors receive little support in resolving disputes;
- Frequent project delays and frequent power cuts;
- Poor security for employees, exacerbated by regular deadly terror attacks by Al Shabab and high crime rates in general. Kenya has a high crime rate. In addition to taking care of their personal safety, investors often have to spend money on securing property, offices, land and their employees. Business insurance premiums are high;
- While infrastructure in Kenya is better than in most East African countries, it is nevertheless in poor shape and hinders movement of people and goods. Electricity supply is erratic, roads and railways are in varying condition, and telecoms networks are prone to outages. To run a modern, efficient office in Kenya, an investor will have to spend money.
- Getting a work permit for a skilled expatriate is difficult. Normally, a Kenyan company will have to deposit at least US$100,000 in a Kenyan bank account, or have an auditor’s report confirming that previously at least US$100,000 was invested, before the authorities will grant the visa. This unwelcome cash flow consideration impacts small businesses in particular.
- While in theory it is possible to freely repatriate money out of Kenya, in practice any transaction exceeding US$10,000 must be supported by documentary proof of the reason for the transfer.
- It is very difficult for a foreigner to acquire land in Kenya for a project. Land regulations are opaque, and the Ministry of Lands has cumbersome regulations.
- Kenyan business set up is easy if you know how. Specifically:
Best uses for a Kenya company
Business process outsourcing: Kenya’s low labour costs, English-speaking population and good educational standards make it an increasingly popular destination for business process outsourcing.
Being in the UTC+3:00 time zone, Kenya can serve both Europe and the Middle East on more convenient hours than other popular BPO locations like India.
Konza Technology City will provide office space, infrastructure and incentives to business process outsourcing companies when it is complete. KTC is being built as part of Kenya’s Vision 2030 initiative.
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Useful links for Kenya
Government and public authority websites: