Transfer pricing in Kenya at a glance
|Regulation Type||National regulations|
|Are there specific transfer pricing regulations?||Yes|
|Submission deadline upon request||Directly|
|Annual update required||No|
|Official language requirements||English|
|Potential impact of penalties||N/A|
Kenyan tax law
Rules for transfer pricing in Kenya are based upon:
- Income Tax (transfer Pricing) Rules 2006
- Income Tax Act Section 18(3)
Rules for transfer pricing in Kenya are as such not based on the OECD Transfer Pricing Guidelines. Only for the use of the transfer methods the OECD methods are applicable.
Accepted methods are:
- the comparable uncontrolled price method
- the resale price method
- the cost plus method
- the profit split method (contribution analysis or residual analysis)
- the transactional net margin method
Priority of methods
Rules for transfer pricing in Kenya prescribe that the most appropriate method should be used. If none of the above mentioned methods would result in an arm’s length price, others methods may be used.
Information that should be included in the documentation:
- The selection of the transfer pricing method and the reasons for the selection
- The application of the method, including the calculations made and price adjustment factors considered
- The global organization structure of the enterprise
- The details of the transaction under consideration
- The assumptions, strategies and policies applied in selecting the method
- Other background information regarding the transaction
Rules for transfer pricing in Kenya prescribe that all documentation should be submitted in English.
Requirements to prepare documentation annually
In Kenya there are no requirements to update the documentation annually. Only if significant changes in a year occur, it is common practice that the documentation is updated to reflect the updates.
Submission deadline upon request by tax authorities
Upon request of the tax authorities a taxpayer should submit its documentation directly.
Advance Pricing Agreements
In Kenya it is not possible to obtain an Advance Pricing Agreement.
In Kenya there are no specific transfer pricing penalty regulations in place. This means that ordinary penalties apply.