The Income Tax (Advance Pricing Agreement) Regulations, 2025

The Kenya Revenue Authority (KRA) has released the Draft Income Tax (Advance Pricing Agreement) Regulations, 2025, marking a significant milestone in the country’s efforts to strengthen its transfer pricing framework and enhance tax certainty for cross-border transactions.

Our latest Tax Alert provides an overview of the proposed regulations and KPMG’s insights on their potential impact on taxpayers operating in Kenya.

The public consultation period runs until 2 December 2025, providing an opportunity for stakeholders to share feedback that will inform the final regulations.

Key highlights

The draft regulations introduce an Advance Pricing Agreement (APA) framework that enables taxpayers and the Commissioner to agree in advance on an appropriate transfer pricing methodology for specified controlled transactions. This development offers several positive outcomes, including:

• Greater certainty over tax outcomes across multiple years;
• A more collaborative mechanism for managing and resolving potential transfer pricing disputes;
• The opportunity to align transfer pricing positions with treaty partners through bilateral or multilateral APAs; and
• The introduction of rollback provisions allowing agreed methodologies to be applied to prior, non–time-barred years where appropriate.

Considerations for businesses

While the proposed APA regime represents a welcome step toward enhanced predictability, taxpayers should carefully consider the practical implications of the draft regulations.

Key areas include:

• Extensive documentation and pre-filing requirements: The process demands detailed information on covered transactions, functional analyses, and supporting financial data.
• Application and renewal fees: The draft regulations propose non-refundable fees of KES 5 million for new applications and KES 2.5 million for renewals, which may influence the accessibility of the programme for smaller entities.
• Ongoing compliance obligations: Taxpayers will be required to submit an annual compliance report within six months of each year-end, supported by robust documentation to monitor adherence to agreed methodologies.

Next steps

Taxpayers considering an APA should assess the suitability of the mechanism in the context of their transfer pricing profile, governance, and risk exposure.

KPMG is available to assist organisations in evaluating the potential benefits of an APA, preparing for the pre-filing process, and developing submissions for the consultation.