Kenya's Finance Bill 2026 introduces technical amendments to Country-by-Country reporting requirements, clarifying definitions and filing obligations for multinational enterprise groups, with changes set to take effect from 1 July 2027.
Kenya’s Finance Bill, 2026, introduces significant updates to Country-by-Country (CbC) reporting through amendments to the Income Tax Act. These changes focus on refining definitions and aligning statutory references to ensure clarity and compliance within multinational enterprise (MNE) groups.
Technical amendments to definitions
The Bill proposes technical adjustments to the definitions governing CbC reporting to provide better legal clarity:
- Country-by-Country report: The definition is amended to align with sections 18D(1) and (1A) of the Income Tax Act.
- Excluded multinational enterprise group: The definition is updated to specifically refer to the criteria specified in section 18D(1B).
New definition of “Ultimate Parent Entity” (UPE)
To provide greater certainty in identifying the entity responsible for filing the CbC report, the Bill proposes a more detailed three-part definition for an ultimate parent entity. A constituent entity of an MNE group is considered a UPE if:
- It holds a sufficient interest, directly or indirectly, in one or more other constituent entities within the MNE group.
- It is required to prepare consolidated financial statements under the accounting principles of its tax residence jurisdiction (or would be required to do so if its equity interests were traded on a public securities exchange in that jurisdiction).
- There is no other constituent entity in the MNE group that owns a sufficient interest in it, either directly or indirectly.
Filing obligations and alignment
The proposed amendments aim to better align statutory references for reporting. By updating the references in Section 18F to include sections 18D(1), (1A), and (1B), the Bill clarifies the legal framework for Master file, Local file, and CbC reporting obligations. These changes reinforce that filing obligations can apply to constituent entities within the group, rather than being exclusively tied to the UPE.
The changes are proposed to take effect starting 1 July 2027.
Earlier, Kenya’s government released the Finance Bill, 2026, proposing amendments across key tax laws, including the Income Tax Act (Cap. 470), VAT Act (Cap. 476), Excise Duty Act (Cap. 472), Stamp Duty Act (Cap. 480), Tax Procedures Act (Cap. 469B), and the Miscellaneous Fees and Levies Act (Cap. 469C).
