In the dynamic business landscape of Kenya, navigating corporate income tax (CIT) is essential for both local and international companies. This guide explores the key aspects of taxes on corporate income in Kenya, including rates for resident and non-resident entities, special incentives, and exemptions. Whether you’re a startup or an established enterprise, understanding CIT can help you make informed decisions.
Last reviewed on August 2, 2025, this information reflects key updates, including changes from the Finance Act, 2025.
Resident vs. Non-Resident Companies: Taxation Basis
Corporate income tax in Kenya applies differently based on a company’s residency status.
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- Resident Companies: These are taxed on income accrued or derived from Kenya. If a resident company conducts business activities outside Kenya, it is also liable for tax on that foreign-derived income. This includes subsidiaries of foreign parent companies operating in Kenya.
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- Non-Resident Companies: Taxation is limited to trading profits attributable to a Kenyan Permanent Establishment (PE). A PE typically includes a fixed place of business, such as a branch or office, through which the company carries out its activities.
This distinction ensures that Kenya’s tax system aligns with international standards while protecting local revenue.
Standard Corporate Income Tax Rates
The standard CIT rate in Kenya is straightforward and competitive:
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- Resident Companies (including subsidiaries of foreign companies): 30%
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- Non-Resident Companies (including branches and PEs): 30%
However, the Finance Act, 2025, introduces a reduced rate for certified start-ups to foster innovation and growth. Start-ups certified by the Nairobi International Financial Centre Authority (NIFCA) enjoy:
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- 15% for the first three years
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- 20% for the following four years
This incentive aims to support emerging businesses in key sectors, making Kenya an attractive hub for entrepreneurs.
Special CIT Rates and Incentives
Kenya offers various special rates and exemptions to encourage investment in specific industries and zones. These incentives are designed to boost economic development, exports, and innovation. Below is a summary of key special rates:
| Entity | CIT Rate (%) |
|---|---|
| Export Processing Zone (EPZ) Enterprises | 0% (first 10 years) 25% (next 10 years) 30% (thereafter) |
| Registered Unit Trusts/Collective Investment Schemes | Exempt (subject to conditions) |
| Special Economic Zone (SEZ) Enterprises, Developers, and Operators | 10% (first 10 years) 15% (succeeding 10 years) |
| Local Motor Vehicle Assembly Companies | 15% (first 5 years) 15% (succeeding 5 years, subject to conditions) |
| Company Operating a Carbon Market Exchange or Emission Trading System (certified by NIFCA) | 15% (first 10 years from commencement) |
| Company Operating Shipping Businesses | 15% (first 10 years from commencement) |
These reduced rates apply to qualifying resident and non-resident companies, providing significant savings for eligible operations.
Rates on Gross Income for Non-Residents
Non-resident companies deriving specific types of income from Kenya are subject to withholding taxes on gross income, rather than net profits. These rates are lower and apply to:
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- Transmission of messages: 5%
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- Ownership or operation of ships and aircraft: 2.5%
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- Demurrage charges: 2.5%
These provisions ensure that non-residents contribute to Kenya’s tax base without the need for full CIT compliance on all activities.
How FNJ Can Help
Staying compliant with corporate income tax in Kenya not only avoids penalties but also unlocks opportunities for tax efficiency through available incentives. With ongoing legislative changes, such as those in the Finance Act, 2025, professional guidance is crucial.
At FNJ & Associates, our team of tax experts specializes in Kenyan corporate taxation. Contact us today for a consultation to ensure your business thrives in Kenya’s evolving tax environment.
For more insights on tax strategies or personalized advice, reach out to FNJ & Associates via our website or email us at info@fnjassociates.co.ke. Let’s optimize your corporate tax obligations together!