In Kenya, entities that are part of multinational enterprise (MNE) groups and engage in transactions with related non-resident parties are required to comply with the transfer pricing provisions of the Income Tax Act (Section 18), the Income Tax (Transfer Pricing) Rules, 2006, and the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
Transfer pricing regulations require that transactions between related parties; referred to as controlled transactions be conducted on an arm’s length basis, meaning the pricing and terms should mirror those agreed between independent parties under similar circumstances. This principle ensures that profits are fairly allocated across jurisdictions and helps prevent base erosion and profit shifting. As a result, Kenyan entities with intercompany transactions must establish appropriate transfer pricing policies and maintain robust supporting documentation to demonstrate compliance.
We assist local entities that are part of MNCs by developing robust arm’s length transfer pricing policies and documentation, structuring related-party arrangements to enhance their tax efficiency, conducting compliance reviews, and providing end-to-end support during transfer pricing audits and engagements with the Kenya Revenue Authority.
