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Kenya levies withholding taxes on Kenyan-sourced income of non-residents, including dividends, interest, royalties, service fees, capital gains, and other income categories. Effective 1 January 2024, a 15% tax rate applies to the repatriation of income by a non-resident carrying on business in Kenya through a permanent establishment (see Sec. 4.3.).

The Finance Act 2014 introduced a general Limitation on Benefits (LoB) rule in Kenyan legislation whereby any exemption or relief from Kenyan tax that is otherwise available under an applicable treaty, will not be granted if the person claiming the exemption or relief, while a resident of the other Contracting State, is controlled for 50% or more by a person or persons who is (are) not resident of that Contracting State. The limitation does not apply, and treaty benefits are still available, where the person claiming the treaty benefit is a company listed on a stock exchange of that Contracting State.

The withholding tax rates for different streams of income prescribed under domestic law are provided below.

Dividend

Tax is to be withheld at the rate of 15% (previously 10%) on dividends paid to non-residents.

Special Withholding Tax Rates

The following special withholding tax rates apply to dividends paid to non-residents:

Particulars	Withholding Tax Rate
Dividends paid to non-residents operating in the oil and gas sector	10%
Dividends paid to citizens of the East African Community Partner States	5%

Exemptions

The following dividend payments are exempt from withholding tax:

Effective 1 July 2022, dividends paid by Special Economic Zone enterprises, developers, or operators; and
Dividends paid to the East African Development Bank and corporations established under the Treaty for East African Co-operation, including dividends paid to wholly-owned subsidiaries thereof.

Interest

Tax is withheld at the rate of 15% on interest paid to non-residents (including on interest payments by petroleum contractor companies and mining licensee companies to non-residents). Interest includes deemed interest, which is defined under domestic law as an amount of interest deemed to be payable by a resident on any interest-free loan provided or secured by a non-resident, where the loan is provided free of interest, and the resident person is controlled by a non-resident person alone or together with not more than four other persons. The deemed interest rate is linked to the 91-day treasury bill rate and is set at 16% from April to December 2024 (15% for January, February, and March 2024).

Special Withholding Tax Rates

The following special withholding tax rates apply on interest paid to non-residents:

Particulars	Withholding Tax Rate
Interest on non-government bearer instruments or bonds of at least 2 years duration	25%
Interest on government bearer bonds issued outside Kenya of at least 2 years duration	7.5%
Interest paid by Special Economic Zone enterprises, developers, or operators	5%

Exemptions

The following interest payments are exempt from withholding tax:

Interest paid by the Kenyan Government and Central Bank of Kenya;
Interest paid under an agreement of public interest to which the Government is a party either as principal or guarantor;
Interest paid to the East African Development Bank and corporations established under the Treaty for East African Co-operation, including interest paid to wholly-owned subsidiaries thereof;
Interest on savings account held with the Kenya Post Office Savings Bank;
Interest paid by the Export-Import Bank of the United States;
Interest on listed bonds, notes, or other similar securities used to raise funds for infrastructure projects and assets defined under Green Bonds Standards and Guidelines, and other social services, provided such instruments have a maturity of at least 3 years;
Interest income on bonds issued by the East African Development Bank;
Interest on any loan charged on the consolidated fund or the revenues of any local authority; and
Interest paid by a special economic zone developer, operator, or enterprise to a non-resident person in the first 10 years of its establishment (effective from 1 July 2023).

Royalty Copyright

Tax is withheld at the rate of 20% on copyright royalties paid to non-residents (including royalties paid by petroleum contractor companies and mining licensee companies to non-residents).

On 10 December 2021, the High Court, relying on Article 12 of the OECD Model Tax Convention, held that if a payment does not result in acquiring the right to commercially exploit the copyright in the software, including the exclusive right to reproduce the software in any material form and the exclusive right to translate or adapt the software, then such payment will not be considered as royalty payment for Kenyan withholding tax purposes. The High Court also distinguished between copyright and copyrighted material and held that payments made for copyrighted material are not subject to withholding tax.

Special Withholding Tax Rates

Tax is withheld at a reduced rate of 5% on copyright royalties paid by Special Economic Zone enterprises, developers, or operators.

Exemptions

The following copyright royalty payments are exempt from withholding tax:

Royalties paid under an agreement of public interest to which the Government is a party either as principal or guarantor; and
Royalties paid by a special economic zone developer, operator, or enterprise to a non-resident person in the first 10 years of its establishment (effective from 1 July 2023).

Royalty Patent

Tax is withheld at the rate of 20% on patent royalties paid to non-residents (including royalties paid by petroleum contractor companies and mining licensee companies to non-residents).

Special Withholding Tax Rates

Tax is withheld at a reduced rate of 5% on patent royalties paid by Special Economic Zone enterprises, developers, or operators.

Exemptions

The following patent royalty payments are exempt from withholding tax:

Royalties paid under an agreement of public interest to which the Government is a party either as principal or guarantor; and
Royalties paid by a special economic zone developer, operator, or enterprise to a non-resident person in the first 10 years of its establishment (effective from 1 July 2023).

Royalty Trademark

Tax is withheld at the rate of 20% on trademark royalties paid to non-residents (including royalties paid by petroleum contractor companies and mining licensee companies to non-residents).

Special Withholding Tax Rates

Tax is withheld at a reduced rate of 5% on trademark royalties paid by Special Economic Zone enterprises, developers, or operators.

Exemptions

The following trademark royalty payments are exempt from withholding tax:

Royalties paid under an agreement of public interest to which the Government is a party either as principal or guarantor; and
Royalties paid by a special economic zone developer, operator, or enterprise to a non-resident person in the first 10 years of its establishment (effective from 1 July 2023).

Natural Resource Income

Tax is withheld at the rate of 20% on payments by Kenyan residents (including petroleum contractor companies and mining licensee companies) to non-residents towards ‘natural resources income.’ If such payments are made to a Kenyan resident, a 5% withholding tax applies.

Natural resources income includes any premium or other amount paid as consideration for the right to take natural resources from land or sea; or an amount calculated in whole or in part by reference to the quantity or value of natural resources taken from land or sea. Natural resources include minerals, sand, quarries, fish, timber, etc.

Service Management

Tax is withheld at the rate of 20% on payments made by a Kenyan resident for management services performed in Kenya by a non-resident without a Kenyan permanent establishment.

Special Withholding Tax Rates

The following special withholding tax rates apply on service fees paid to non-residents:

Particulars	Withholding Tax Rate
Consultancy fees paid to citizens of the East African Community Partner States	15%
Service fees paid by petroleum contractor companies to non-resident sub-contractors	10%
Service fees paid by petroleum license holders to non-resident sub-contractors	10%
Management, professional or training fees paid by contractors to non-resident sub-contractors in the petroleum industry or the oil and gas sector	10%
Management, professional or training fees paid by Special Economic Zone enterprises, developers, or operators	5%

Exemptions

The following service fee payments are exempt from withholding tax:

Management or professional fees under an agreement of public interest to which the Government is a party either as principal or guarantor;
Audit fees for analysis of maximum residue limits paid to a non-resident laboratory or auditor;
Commission paid by a resident air transport operator to a non-resident agent to secure tickets for international travel;
Commission paid to a non-resident agent in respect of flowers, fruits, or vegetables exported from Kenya and auctioned in any market outside Kenya; and
Management or professional fees paid by a special economic zone developer, operator, or enterprise to a non-resident person in the first 10 years of its establishment (effective from 1 July 2023).

Service Technical

Tax is withheld at the rate of 20% on payments made by a Kenyan resident for technical services performed in Kenya by a non-resident without a Kenyan permanent establishment.

Special Withholding Tax Rates

The following special withholding tax rates apply on service fees paid to non-residents:

Particulars	Withholding Tax Rate
Consultancy fees paid to citizens of the East African Community Partner States	15%
Service fees paid by petroleum contractor companies to non-resident sub-contractors	10%
Service fees paid by petroleum license holders to non-resident sub-contractors	10%
Management, professional or training fees paid by contractors to non-resident sub-contractors in the petroleum industry or the oil and gas sector	10%
Management, professional, or training fees paid by Special Economic Zone enterprises, developers, or operators	5%

Exemptions

The following service fee payments are exempt from withholding tax:

Management or professional fees under an agreement of public interest to which the Government is a party either as principal or guarantor;
Audit fees for analysis of maximum residue limits paid to a non-resident laboratory or auditor;
Commission paid by a resident air transport operator to a non-resident agent to secure tickets for international travel;
Commission paid to a non-resident agent in respect of flowers, fruits, or vegetables exported from Kenya and auctioned in any market outside Kenya; and
Management fees paid by a special economic zone developer, operator, or enterprise to a non-resident person in the first 10 years of its establishment (effective from 1 July 2023).

Capital Gains

Generally, tax is not required to be withheld on capital gains accruing to non-resident corporate recipients in Kenya. Effective 1 January 2023, Kenya introduced Income Tax (Financial Derivatives) Regulations 2023 whereby gains accruing to a non-resident from a financial derivatives contract entered into with a resident are subject to tax at the rate of 15%, except for gains derived by financial derivatives traded at the Nairobi Securities Exchange.

On 11 October 2024, the Kenyan High Court in its judgement held that the Income Tax (Financial Derivatives) Regulations 2023 are unconstitutional. The High Court, in its order, quashed the regulations and prohibited the Kenya Revenue Authority (KRA) from imposing or collecting any tax from the members of the Applicant (Kenyan Bankers Association) who had challenged the implementation of the regulations.

Non-residents are subject to taxation on net capital gains arising from the disposal of immovable property or shares in oil, mining, or mineral prospecting companies in Kenya unless an exemption applies under domestic law or the applicable tax treaty attributes the taxing right to the other country.

The tax is levied on the net gain derived on the disposal of an interest in a person, if the interest derives 20% or more of its value, directly or indirectly, from immovable property in Kenya.

In case a company owns the immovable property, the company should notify the revenue authorities in writing if there is a 10% or more change in its ownership. In case the seller is a non-resident, the resident entity which owns the immovable property, is liable, as an agent of the non-resident person, for any tax payable by the non-resident person in respect of the disposal.

Effective from 1 July 2023, gains derived on the transfer of property by a special economic zone enterprise, developer, and operator are exempt.

Other Income

The following withholding tax rates apply to different payments made to non-residents:

Income Stream	Withholding Tax Rate	Remarks
Rent, premium, or similar consideration for the use or occupation of immovable property	30%	-
Rent, premium, or similar consideration for the use or occupation of movable property	15%	Excludes aircraft or aircraft engines, locomotives or rolling stock.
Any payment in respect of any appearance at, or performance in, any place (whether public or private) for entertaining, instructing, taking part in any sporting event or otherwise diverting an audience and any payment in respect of activity by way of supporting, assisting or arranging an appearance or performance	20%	Payments made by filming agents and filming producers approved by the Kenya Film Commission to approved actors and crew members are exempt from withholding tax.
Winnings of any kind, including from betting, gaming, and lottery	20%	-
Payment in respect of gains or profits from the business of transmitting messages by cable or radio communication, optical fiber, television broadcasting, Very Small Aperture Terminal (VSAT), internet and satellite, or any other similar method of communication	5%	Gains or profits are the gross amounts received for telecommunication service or message transmission.
Insurance or re-insurance premium	5%	Insurance or reinsurance premiums paid for aviation that cover aircraft, cargo, and passengers are exempt.
International transportation income	Exempt	Non-residents engaged in the air transport business in Kenya and who are residents of countries that offer tax exemptions to Kenyan residents in the same business are exempt from withholding tax on their earnings in Kenya.
Payments to Special Economic Zone enterprises, developers, or operators other than dividends	10%	-
Payments for sales promotion, marketing, and advertising services	20%	-
Payments for goods transportation	20%	Excludes air and shipping transport services and transport services to citizens of the East African Community Partner States.
Digital Content Monetization	20%	Effective 1 July 2023, a 20% withholding tax applies on payments to non-resident persons without a permanent establishment in Kenya made in relation to digital content monetization. For this purpose, digital content monetization means offering for entertainment, social, literal, artistic, educational, or any other material electronically through any medium or channel, in any of the following forms: Advertisement on websites, social media platforms or similar networks by partnering with brands including endorsements from sellers of such brands; Sponsorship where a brand owner pays a content creator for content creation and promotion; Affiliate marketing, where the content creator earns a commission whenever the audience of the content creator clicks on the product displayed; Subscription services where the audience pays a periodic fee to access the content and support the content creator; Offering for use a logo, brand or catchphrase associated with the content creator merchandise sales eBooks, course or software; Membership programs for exclusive content including early access; Licensing the content including photographs, music or other businesses or individuals for use in the user's own projects; or A content creator earns a commission or fees from crowdfunding.

Below is a discussion of domestic withholding tax rules for most of the common cross-border payments.

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