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04 March 2025 Kenya enacts domestic minimum top-up tax
Kenya has, through the Tax Laws (Amendment) Act, 2024 (the Act), introduced a domestic minimum top-up tax to align with the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Pillar Two. The law was assented to on 11 December 2024 and took effect from 27 December 2024. As part of the OECD's Two-Pillar Solution, Pillar Two aims at addressing tax challenges arising from the digital economy and base erosion by multinational enterprises (MNEs). It introduces a global minimum tax of 15% for qualified MNEs. The key components include:
Kenya's introduction of a domestic minimum top-up tax falls under the QDMTT. This ensures that in-scope MNEs with operations in Kenya pay at least 15% corporate income tax. The domestic minimum top-up tax applies to MNEs that report annual consolidated revenues of at least €750m, which is roughly equivalent to 95 billion Kenyan shillings (KES95b), in at least two of the previous four accounting periods. The primary objective of this tax is to ensure that these MNEs maintain a minimum effective tax rate (ETR) of 15% on income generated in Kenya. A significant difference in Kenya's QDMTT is that the ETR is calculated at the entity level, rather than at the jurisdiction level as outlined in the OECD Guidance on Pillar Two Rules.
Kenya is expected to issue further regulations and guidelines on the implementation of the domestic minimum top-up tax. Future Global Tax Alerts will provide updates as and when the regulations are published.
Document ID: 2025-0599 | ||||||