Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

September 12, 2023

Kenya revamps Transfer Pricing rules

  • New draft Transfer Pricing rules introduced in Kenya reflect recent changes in the income tax law and will eventually replace rules introduced in 2006.
  • The new rules are generally modeled after international transfer pricing guidelines, published by the Organisation for Economic Co-operation and Development.
  • Although the new rules will increase compliance obligations for multinational enterprises, they also provide needed clarity.


Kenya's Cabinet Secretary for National Treasury, on 4 September 2023, issued Draft Income Tax (Transfer Pricing) Rules, 2023, for public comment. These new rules are intended to align with the Finance Act, 2022, which made a myriad of changes to the Income Tax Act section on related-party transactions, including introducing Country-by-Country Reporting (CbCR) requirements for multinational entities with operations in Kenya. (Refer to our previous Global Tax Alert on this: Kenya introduces Country-by-Country reporting requirements, 26 July 2022.) The Draft TP Rules are largely modeled on the Organisation for Economic Co-operation and Development (OECD) Guidelines. Upon enactment, they will replace the existing Transfer Pricing Rules, which were introduced in 2006.

Detailed analysis

Some of the key proposals contained under the new Transfer Pricing (TP) Rules include:

1. Expanding the scope of transactions subject to a TP review — currently, transactions listed as subject to these TP rules include:

  • The sale, purchase or lease of tangible assets
  • The transfer, purchase or use of intangible assets
  • The provision of services
  • The lending or borrowing of money
  • Any other transaction that may affect the profit or loss of an enterprise

The Draft TP rules propose to expand the scope of transactions that are subject to TP to also include:

  • Insurance and reinsurance transactions
  • Transactions involving derivatives
  • Cost-contribution arrangements
  • Business restructuring or reorganization, irrespective of whether it has any bearing on the financial position of the entity involved
  • Financial transactions including guarantees, the purchase or sale of marketable securities, any type of advances and deferred payments or receivables.

The main aim is to align the TP rules with the Income Tax Act changes and clarify the transactions that qualify as related-party transactions to curb tax avoidance through repatriation of profits.

2. Enhancing the information in the local files to add a detailed description of the controlled transaction, including: the parties involved, transaction values, settlement currency contractual terms and trading models, the amounts of the intragroup payments or receipts for each related party transaction, and the jurisdiction of the parties involved

3. Specifying commodity transactions that are in-scope for TP, including agricultural products, solid or gas materials, hydrocarbons, derivatives and natural mineral or any other good for which a publicly quoted price is available

For the export or import of these commodities, the publicly quoted price on the date of shipping the goods will be considered the arm's-length price. However, evidence can be provided to show any appropriate adjustments to that quoted price consistent with the arm's length principle.

4. Empowering the Commissioner to request additional information to support transfer prices, such as financial statements for parties to the transactions, segmented reports, details and rationale for the selection of the allocation keys, allocation schedules showing how the financial data used in the local file ties with the annual financial statements, and summary schedules of relevant financial data for comparables used in the analysis and sources from which this data was obtained

Outlook and implications

This revision of TP Rules in Kenya is expected to result in additional compliance requirements for multinational enterprises (MNEs). But, it also brings increases clarity on TP applicability in Kenya and aligns with the OECD Guidelines as the global best practice.

As MNEs anticipate the final rules, it would be prudent to proactively review their global operations and tax reporting to align with their economic value chain. This will also call for enhanced consistency and transparency in the reporting and documentation of MNEs' economic activities globally.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

Ernst & Young Société d'Avocats, Pan African Tax — Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more