The government has released draft tax regulations that will require multinational companies operating in Kenya to pay a minimum corporate tax of 15 per cent, in a move aimed at curbing profit shifting and ensuring that global companies contribute their fair share to the country's revenue.
Treasury Cabinet Secretary John Mbadi has invited the public to submit their views on the draft Income Tax (Minimum Top-Up Tax) Regulations, 2025, by December 3 under the regulations, which are meant to operationalise Section 12G of the Income Tax Act and align Kenya with the OECD’s global minimum tax framework.
According to Mbadi, the proposed rules will apply to multinational groups with an annual consolidated turnover of at least €750 million, equivalent to about Ksh96.92 billion at the current exchange rates.
Under the draft framework, multinational firms will be required to calculate their effective tax rate (the average rate of tax an individual or corporation pays on their total income) in Kenya. If the rate falls below 15 per cent, they will pay a top-up tax to bring it up to the minimum threshold.
“The purpose of the top-up tax is to ensure that the total tax payable on the profits of a constituent entity in Kenya is not less than the minimum rate,” the regulations read in part.
What it Means
For instance, if a multinational company operating in Kenya pays only 10 per cent corporate tax after claiming incentives or deductions, the new regulations would require it to pay an additional 5 per cent as a top-up tax, bringing its total effective rate to 15 per cent.
This ensures that all large companies, regardless of where they are based or how they structure their finances, contribute a fair minimum share of tax to Kenya’s economy.
At the same time, Treasury explained that the regulations are designed to address tax avoidance by large corporations that exploit international loopholes and tax incentives to reduce their effective tax rate.
Additionally, the new measures will aim to increase transparency and prevent aggressive tax planning by large companies, especially those in key sectors such as technology, energy, logistics, and manufacturing.
Tax Dates and Exemptions
Further, to simplify compliance, companies will be required to file a Global Anti-Base Erosion (GloBE) Information Return and a Top-Up Tax Return within six months after the end of their financial year.
The tax will be payable within four months after the close of the year of income, with companies that fail to comply facing penalties under the Tax Procedures Act.
However, under the proposals, public entities, pension funds, sovereign wealth funds, and real estate investment vehicles will be exempted.
At the same time, companies will be exempted from paying international shipping income, as long as the company can show that the strategic and commercial management of all relevant ships is effectively carried out from within Kenya.
