Kenya- Economy and Opportunity

Kenya Showcase

Next global destination for your business

Kenya has a market-based economy and is generally considered the economic, commercial, financial and logistics hub of East Africa. Kenya has aboilshed price & exchange controls alongwith government initiatives for macro economic sustainability.

Kenya Economy

Kenya’s economic performance softened in 2022 though country’s long-term growth rate has increased over the time. Real GDP expanded by 4.8 percent in 2022, The GDP of Kenya stood at 113.42 billion USD in 2022 and is expected to reach 119.66 billion USD by the end of 2023.

Foreign Direct Investments

Kenya’s total stock of FDI stood at $10.4bn, with major investors including the UK, Mauritius, the US, South Africa and France. FDI stock is predominantly concentrated in finance and insurance (around 33%), information and communication (16.1%), wholesale and retail (15.4%) and manufacturing activities (14.8%).

Opportunity Mapping

Kenya has witnessed growth in entrepreneurship and innovation which has resulted in the rise of small businesses in the country. The government is encouraging and supporting the growth of small and medium-sized enterprises (SMEs) with key sectors being agriculture, manufacturing, real estate, services & energy sector.

India in Kenya

India and Kenya are maritime neighbours with robust and multi-faceted partnership, marked by regular high-level visits, increasing trade and investment and extensive people to people contacts. In 2021, India export accounted $2.55B to Kenya. The main products that India exported to Kenya are Refined Petroleum ($504M), Packaged Medicaments ($253M), and Semi-Finished Iron ($149M). Indian companies have a significant presence in Kenya like the Tata Group, Essar, Reliance Industries and Bharti Airtel.

Kenya is one of Africa's top investment destinations and, as a centre for commerce, finance, and logistics, it provides a variety of corporate structures to potential investors.

Limited Liability Partnership

Partners within a LLP are classified into 2 classes. One is general partners who engage in full management and control of the business and accept full personal responsibility for the liabilities and other is limited partners who have no personal liability beyond their investment.

Private Limited Company

They are separate and distinct entities from their owners and are registered for tax as a separate entity. It has its own rights, obligations and a life separate from its owners. It requires a minimum of at least one director and a maximum of 50 members.

Public Limited Company

The public can buy and sell shares in the company. The company shares can be traded at the Over The Counter (OTC) market and the Nairobi Securities Stock Exchange. It requires a minimum of 7 shareholders and 2 directors and has no maximum limit.

Foreign Entities in Kenya

A Kenya private limited company requires minimum of 1 director & 1 shareholder of any nationality who can be
living outside of Kenya. However, foreigners wishing to relocate to Kenya by obtaining an entrepreneur visa are
required to show that they have (or will) invest at least US$100,000 in the company. After business setup in Kenya, all companies are required to first register for tax with the Kenya Revenue Authority and then prepare financial statements, which must always be audited.

The Kenya Revenue Authority (KRA) is the agency in charge of the collection and receipt of all revenue on behalf of the Kenyan government making the process straightforward and adaptable for its users.

Corporate Tax

Resident companies are taxable in Kenya on income accrued or derived from Kenya. They are also charged for business activities outside Kenya. The rate of CIT for resident companies, including subsidiary companies of foreign parent companies, is 30%.

Dividend Tax

Dividends received by a resident company from a company where it holds directly or indirectly more than 12.5% of the shares is exempt from tax. This means that dividend received by a resident company from its local or foreign subsidiary is tax exempt. The tax rate for dividends paid to Kenya residents is 5%.

VAT

The value added tax is a tax that is applicable to the sale or import of taxable goods and services, and is administered by the Kenya Revenue Authority. If the taxable supplies worth 5,000,000 KES or more within a year, then one have to register for VAT. The rate vary from 0% to 16%.

Taxation of Non Resident entities

Non-resident companies are subject to Kenya Corporate Income Tax (CIT) only on the trading profits attributable to a Kenyan PE. Where a non-resident person carries on business in Kenya through a permanent establishment, the income attributable to the PE will be considered income accrued in or derived from Kenya and it will be subject to tax at the non-resident CIT rate of 37.5%. Lower rates may apply to non-residents where there is a DTT in force which can vary from 5% to 20%.

The government has initiated various reforms to hasten, streamline and simplify procedures which directly affect businesses with reference to the Doing Business Indicators by the World Bank.

Branch Office

Branch Registration is a requirement for all companies incorporated outside Kenya that intend to operate in Kenya. Branches must have a local representative resident in Kenya, who may be a citizen or a non- citizen. It is taxed at 37.5%.

Subsidiary Company

A subsidiary is considered a local company with compliance requirements similar to those of local companies. It is taxed as resident entity, at the rate of 30% with the local tax benefit available to it.

Joint Venture

For JV in Kenya, the partners must first register the venture with the Registrar of Companies. The registration process involves submitting the company’s memorandum and articles of association, details of the partners.

Kenya Business

Kenya posted tremendous growth in the services sector, contributed mainly by tourism, real estate and financial
sectors, and which now contributes more than 50% of GDP. India is one of the largest exporters of goods to Kenya, especially in sectors like refined petroleum and pharmaceuticals. The Foreign Investment Protection Act (FIPA) of Kenya guarantees capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including uncapitalized retained profits.