Corporate Residence - Quartet Consulting

CORPORATE RESIDENCE IN KENYA:

Last reviewed – 26 February 2025

1. Definition of Tax Residency

A company is considered a Kenyan tax resident if it meets any of the following criteria:

Incorporation: It is registered under Kenyan law.
Management & Control: Its decision-making authority (e.g., board of directors, executives) operates from Kenya in a given tax year.
Legal Declaration: The Cabinet Secretary for the National Treasury declares it a resident through a legal notice.

N/B: A Kenyan tax-resident company is taxed on global income, while non-residents are taxed only on Kenyan-source income.

2. Permanent Establishment (PE)

A non-resident is considered to have a PE in Kenya if it operates through:

Type of PE	Definition
Fixed Place of Business PE	A physical location such as an office, branch, factory, or warehouse used for business activities.
Construction PE	A building site, construction, or assembly project that lasts 6+ months.
Agency PE	A dependent agent who habitually concludes contracts or plays a crucial role in finalizing contracts on behalf of a foreign company.
Service PE (New in Finance Act 2023)	A non-resident company providing services (e.g., consulting, technical services) in Kenya for an extended period.

Finance Act 2023 Key Updates:

Expanded PE definition to include the Service PE concept.
Excluded preparatory and auxiliary activities from constituting a PE.
Removed the duration threshold for a fixed-place PE, meaning a foreign business could create a PE immediately upon commencing activities in Kenya.