Group Taxation - Quartet Consulting

GROUP TAXATION:

Last reviewed – 26 February 2025

Tax Treatment of Group Companies

In Kenya, each company within a group is taxed as a separate entity.
There is no provision for group taxation or tax consolidation.

Transfer Pricing

Companies engaging in related-party transactions must ensure pricing is at arm’s length.
The Kenya Revenue Authority (KRA) requires companies to prepare and submit transfer pricing documentation upon request.
The Commissioner has authority to adjust prices if they deviate from arm’s-length principles.

Country-by-Country (CbC) Reporting

The Finance Act, 2022 introduced new rules requiring multinational enterprise (MNE) groups operating in Kenya to prepare and file CbC reports, Master Files, and Local Files. These rules are designed to enhance tax transparency and align Kenya’s regulations with OECD’s Base Erosion and Profit Shifting (BEPS) Action 13.

Who Must Comply?

CbC reporting applies to MNE groups with a gross turnover exceeding KES 95 billion (approximately EUR 750 million).

What Needs to Be Filed?

Document	Purpose	Who Must File?	Filing Deadline
CbC Report	Provides an overview of an MNE group’s global income allocation, taxes paid, and economic activity by jurisdiction.	Ultimate parent entity of an MNE group meeting the KES 95B threshold	Last day of group’s financial year
Master File	Contains standardized information about an MNE group’s operations, transfer pricing policies, and global business structure.	Kenyan subsidiaries of an MNE group meeting the KES 95B threshold	Within 6 months of the group’s year-end
Local File	Provides detailed information on specific intercompany transactions involving the Kenyan entity.	Kenyan subsidiaries of an MNE group meeting the KES 95B threshold	Within 6 months of the group’s year-end
CbC Notification	Notifies KRA about which entity in the MNE group will file the CbC report	Kenyan subsidiaries of MNE groups meeting the KES 95B threshold	By the last day of the group’s year-end

Automatic Exchange of CbC Reports

Kenya signed the Multilateral Competent Authority Agreement (CbCR MCAA) in September 2022.
This agreement allows for the automatic exchange of CbC reports between Kenya and other participating jurisdictions.
There are currently 69 active bilateral exchange relationships, meaning if an MNE’s parent company (or a designated entity) files the CbC report in one of these countries, its Kenyan subsidiary is exempt from local CbC filing.

Key Takeaways:

CbC Reporting is mandatory for MNE groups with turnover above KES 95 billion.
If the parent company files a CbC report in a participating jurisdiction, the Kenyan entity is exempt from local filing.
Kenyan subsidiaries must still file a Master File, Local File, and CbC Notification annually.

GROUP TAXATION:

Country-by-Country (CbC) Reporting

What Needs to Be Filed?

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