Kenya: Declaration of related-party or controlled transactions on income tax company returns

Changes to income tax corporation tax (IT2C) return

Changes to income tax corporation tax (IT2C) return

The Kenya Revenue Authority has made changes to the income tax corporation tax (IT2C) return to include a form for the declaration of related-party transactions.

When filing income tax returns, all taxpayers with related-party transactions are required to answer “Yes” to the question, under the basic information sheet of the IT2C return, asking whether they have related parties outside Kenya or controlled transactions.


Taxpayers with related parties outside Kenya and/or any controlled transactions will be required to disclose their transactions annually in the IT2C return.

The requirement will apply in relation to related persons when:

  • Either person participates directly or indirectly in the management, control, or capital of the business of the other
  • A third person participates directly or indirectly in the management, control, or capital of the business
  • An individual, who participates in the management, control, or capital of the business of one, is associated by marriage, consanguinity, or affinity to an individual who participates in the management, control, or capital of the business of the other

The rules will also apply to resident entities that carry on business with related and unrelated persons operating in a preferential tax regime.

According to section 18A(2) of the income tax law, preferential tax regimes include:

  • Any Kenyan legislation, regulation, or administrative practice that provides a preferential rate of tax to such income or profit, including reductions in the tax rate or the tax base
  • A foreign jurisdiction that: 
    • Does not tax income
    • Taxes income at a rate that is less than 20%
    • Does not have a framework for the exchange of information
    • Does not allow access to banking information
    • Lacks transparency on corporate structure, ownership of legal entities located therein, beneficial owners of income or capital, financial disclosure, or regulatory supervision


The declaration needs to contain the following information:

  • Details of related-party transactions—including names of related persons, jurisdiction of incorporation, nature of relationship, description of transactions, mode of consideration, and aggregate value of the transaction
  • Comparative financial performance of the local entity/branch and the ultimate parent entity/head office
  • Category of related-party transactions, description of the same, transaction values for the categorised transactions, transfer pricing adjustments if any, and transfer pricing methods
  • A separate disclosure for related-party transactions of a capital nature indicating similar disclosures to the bullet above
  • A section showing the amounts due to or due from related parties from borrowings or current account balances at year end

Read a June 2023 report [PDF 166 KB] prepared by the KPMG member firm in Kenya



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