In Kenya, entities that are part of multinational enterprise or Corporations (MNCs) 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. They are required to formulate robust arm’s length transfer pricing policies and support documentation.
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 involved in inter-company transactions must establish appropriate transfer pricing policies and maintain robust supporting documentation to demonstrate compliance with the law.
We assist local entities that are part of multinational groups by developing for them robust arm’s length transfer pricing policies and documentation in Kenya, structuring their related-party arrangements to enhance tax efficiency, conducting compliance reviews, and providing them with end-to-end support during transfer pricing audits and engagements with the Kenya Revenue Authority.
