Taxing a foreign company's Kenyan branch
The corporation tax rate Kenya's Income Tax Act sets for a non-resident company's branch, why older pages differ, and how to scope the work.
By Achekam · · 4 min read · For Accountants & audit firms in Kenya
A foreign engineering group wins a contract in Kenya and sets up a branch rather than a subsidiary. Its finance team asks the Kenyan firm it has engaged a simple question: what rate of corporation tax will the branch pay? Search online, and the answer seems to depend on which page you land on.
That inconsistency has a cause. The rate for branches of non-resident companies changed, and not every page caught up. This article sets out the rate in the Income Tax Act as published on Kenya Law, compares it with the resident rate, explains when withholding tax is the final word instead, and covers the scoping questions a firm should settle before it takes on the branch's compliance.
The rate from the 2024 year of income
The Income Tax Act, as published on Kenya Law, sets the rate for a non-resident company with a permanent establishment in Kenya at Sh. 6.00 in each twenty shillings, which is 30%, for the year of income 2024 and each subsequent year. The provision is in the Third Schedule, Head B, paragraph 2(b).
For the branch in the opening example, then, the answer for current years is 30% of its taxable income, at the time of writing. The full text, including the other rates in the Third Schedule, is on Kenya Law's page for the Income Tax Act, the law behind corporation tax, withholding tax and instalment tax.
Older pages with the earlier rate
Some KRA pages still show the earlier non-resident rate of 37.5%. That figure belongs to years before 2024. A firm preparing a return for 2024 or later should work from the Act, and if a client or colleague quotes 37.5%, ask which year they are looking at and where the figure came from.
The same care applies to any summary table the firm keeps internally. A rate table copied from an old KRA page into a template will produce the wrong answer for every branch return prepared from it.
Comparing with a resident company
For a resident company, the Income Tax Act sets the corporate rate at the same Sh. 6.00 in each twenty shillings, 30%, for the year of income 2021 and each subsequent year. That provision is paragraph 2(a) of the same Head, in the consolidated version dated 1 July 2026.
| Company | Rate in the Act | From |
|---|---|---|
| Resident company | 30% | Year of income 2021 |
| Non-resident company with a Kenyan permanent establishment | 30% | Year of income 2024 |
So for years of income from 2024, the headline rate no longer depends on whether a foreign group operates through a branch or a subsidiary. Special lower rates apply to listed categories, such as special economic zone enterprises, and special regimes exist for export processing zones and NIFC companies. Check whether any of those applies before using the headline rate. The structuring choice itself involves more than the rate; a foreign company's branch in Kenya covers the registration side.
Where there is no permanent establishment
Not every foreign company earning Kenyan income has a branch. KRA says withholding tax is a final tax for payments to non-residents with no permanent establishment in Kenya. For most payments to residents, by contrast, withholding is not final: the payee declares the income and the withholding certificates in its annual return and pays any balance.
That distinction shapes the engagement. A foreign company with a permanent establishment files a return and pays corporation tax on the branch's profits. One without a permanent establishment may simply suffer withholding at source on each payment, with no Kenyan return for that income. Whether the client has a permanent establishment is therefore the first question, not a detail. Payments by Kenyan businesses to foreign suppliers are covered in withholding tax on foreign suppliers.
Setting up the branch client in Achekam
Achekam can carry the Kenyan tax side of a branch engagement, with conditions worth understanding first.
Calculations. Once its rules are approved, Achekam computes Kenyan corporation tax, instalment tax, VAT, withholding tax, turnover tax, capital gains tax and stamp duty. Extractive, petroleum and non-resident digital profiles are refused as "assessment required", so a branch in one of those sectors needs its computation done outside the standard calculators.
Where the client is taxed. Achekam taxes a client where the client is, meaning its country of incorporation or tax residence, not where the firm is. It creates no Nigerian or Kenyan tax profile for a client in a country without a pack. A branch belongs to a company incorporated elsewhere, so when setting up the client, check that the record leads to a Kenyan tax profile before relying on Achekam's Kenyan computations for it. If it does not, the branch's Kenyan tax work needs another route.
Whether and when the branch pays instalment tax is a separate question to settle at planning; the general dates are in corporation tax instalment dates in Kenya.
Scoping the engagement
Before signing the engagement letter, settle these questions with the client:
- Does the foreign company have a permanent establishment in Kenya, and since when?
- Which years of income are in scope, and do any fall before 2024?
- Does the branch fall within any special regime, such as a special economic zone?
- Is the branch in a sector Achekam treats as "assessment required"?
- Who prepares the branch accounts on which taxable income is based?
- Which payments to the head office or to other non-residents carry withholding obligations?
- Who files and pays, and who approves the return on the client's side?
Before quoting a rate
Check the year of income first. For 2024 onward, the Act sets 30% for a branch; for earlier years, confirm the rate that applied then, and never rely on a single web page without checking its date.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
