Kenya: Public consultation on draft transfer pricing rules
Substantially modelled on the approaches to transfer pricing legislation suggested by the OECD and ATAF
Substantially modelled on the approaches suggested by the OECD and ATAF
The Cabinet Secretary, National Treasury and Economic Planning, on 4 September 2023 published for public input and comments draft transfer pricing rules that would replace the currently effective rules from 2006.
The draft rules complement the changes introduced through the Finance Act, 2022 on country-by-country (CbC) reporting and transfer pricing documentation requirements for multinational entities (MNEs) in Kenya.
The draft rules are substantially modelled on the approaches to transfer pricing legislation suggested by the Organization for Economic Cooperation and Development (OECD) and Africa Tax Administration Forum (ATAF).
Scope of draft rules
The draft rules would apply to:
- Nonresident persons carrying on business in Kenya with a related resident person or permanent establishment (PE)
- Resident persons carrying on business with a related person operating in a preferential tax regime
- Resident persons carrying on business with a nonresident person located in a preferential tax regime
- Resident persons carrying on business with an associated enterprise of a nonresident person located in a preferential tax regime
- Resident persons carrying on business with a PE a nonresident person operating in Kenya where the non-resident person is located in a preferential tax regime
Transactions subject to the draft rules
The draft rules would expand the scope of transactions subject to the adjustment of prices. In addition to the transfer of goods or services, loans and any other transaction that may affect the profit or loss of an entity, the rules would apply to:
- Financing transactions, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business
- Insurance and reinsurance transactions
- Transactions of business restructuring or reorganization entered into by a person with an associated person, irrespective of the fact that it has bearing on the profit, income, losses or assets of such persons at the time of the transaction or at any future date
- Cost contribution arrangements
- Transactions involving derivatives
Read a September 2023 report [PDF 336 KB] prepared by the KPMG member firm in Kenya
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