Accounting and tax
- Both resident and non-resident corporations are subject to income tax of 30% on taxable income;
- A Kenya company formation is liable to pay a VAT rate of 16% on goods unless incorporated within an EPZ, in which case the VAT rate is reduced to 0% indefinitely;
- The taxable income for a Kenya business setup is calculated on the audited accounting profit, as adjusted for tax purposes, for the accounting year ending in the preceding calendar year;
- Kenya signed a mere 7 double taxation treaties which fail to materially reduce the tax burden of foreign entrepreneurs interested in Kenya company formation;
- Under corporate tax law, Kenya company formation is liable to pay withholding tax on the following types of payment made to a non-resident: interest, royalties, contract and other service fees, lease rentals (for movable property) and technical fees. The rates of withholding are 10%, 15% or 20% of the gross payment;
- Kenya business incorporation allows tax exemptions if setup within an EPZ. If in an EPZ, the Kenya business setup is tax exempt for the first 10 years, while paying a reduced corporate tax rate of 25% for every year after;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
- According to the Companies Act, to register a company in Kenya, you must have at least one director above 18 years of age;
- To form a Kenyan company you must have at least one shareholder who must be above 18 years and according to the revised companies act of 2017, the Kenyan company no longer requires to appoint at least one Kenyan (citizen by birth) to hold at least 30% stake for the company to be incorporated or registered;
- Shareholders who wish to travel to Kenya to do business will be required to prove that US$100,000 in capital has been set aside for the Kenya business setup, as a requirement of a successful entrepreneur work permit application. This does not apply to shareholders who do not plan on travelling to Kenya;
- Each company must have a registered office in Kenya. Healy Consultants can provide this for monthly fee of US$1,450;
- Each time a change occurs in the particulars of the Kenya business or to its officers, the change must be lodged with the Kenyan Companies Registry;
- A Kenyan company must file Annual Return with Company Registrar and Annual Tax Return with Revenue Authority to meet the legal requirements of the Kenya Companies Act;
- Foreign ownership is restricted in the aviation, insurance, telecommunications and agricultural industries, with listed companies also facing restrictions;
- The process of de-registering a company is dictated by the Government. This process will take a minimum of 6 months. Healy Consultants fee to project manage company de-registration is US$1450. During this 6 month period it is mandatory to maintain a resident company secretary and a legal registered office in Kenya.
Recruitment in Kenya
- Recruitment of foreign labour requires the employer to justify the hiring of the foreign worker in place of a Kenyan. The foreign employee is expected, but not required, to have professional and educational qualifications relevant to the position;
- Citizens of the East African Community (Uganda, Rwanda, Burundi, Tanzania) can be hired more easily than employees from other countries, with a simplified application process for a special Class B work permit following Kenya company registration;
- When employing local or foreign workers, employers must make sure to stay compliant with the 2007 Employment Act and the 2007 Labour Relations act, which are the two main laws governing labour in Kenya. The new labour laws most resemble the English system of labour laws, in terms of employer responsibilities.
Licensing in Kenya
- To complete Kenya company formation, firms will be required to apply for a license for Kenya business setup. Read more about Kenya business setup licenses;
- Any Kenya business setup registered within an EPZ is exempt from all licensing requirements, with only a single EPZ business license required to conduct business.