Kenya has introduced Minimum Top-Up Tax Regulations 2026, aligning with OECD Pillar Two rules and imposing a 15% minimum effective tax rate on qualifying multinational groups with annual consolidated revenue of at least EUR 750 million, effective for income years beginning on or after 1 January 2025.
The National Treasury of Kenya has published the Income Tax (Minimum Top Up Tax) Regulations, 2026 (Legal Notice No. 189), establishing a comprehensive legal framework to enforce a 15% minimum effective tax rate on large multinational corporations operating within the country.
Issued by the National Treasury Cabinet Secretary on 12 August 2026 and gazetted on 18 September 2026, the regulations align Kenya’s tax regime with the OECD Pillar Two Global Anti-Base Erosion (GloBE) Model Rules. The rules apply to income years beginning on or after 1 January 2025.
The new top-up tax applies to Multinational Enterprise (MNE) groups that generate a consolidated annual turnover of EUR 750 million or more (or local currency equivalent) in at least two of the four preceding income years. Where an MNE group’s financial reporting period differs from 12 months, the threshold is adjusted proportionally based on the number of days in the income year. The regulations also lay out specific consolidation rules for corporate restructurings, including group mergers and demergers.
How the tax is calculated
The top-up tax payable is determined on a group basis by calculating the difference between 15% and the group’s combined Effective Tax Rate (ETR) in Kenya, multiplied by its excess profit:
- Combined effective tax rate: Calculated by dividing total adjusted covered taxes by total net accounting income across covered entities in Kenya.
- Substance-based income exclusion (SBIE): To protect genuine economic activity, excess profit is reduced by a substance exclusion covering eligible payroll and tangible asset costs.
- Transitional SBIE relief: A special transitional scale applies from 2025 through 2033, starting at an exclusion rate of 9.6% for employee costs and 7.6% for tangible assets in 2025, gradually stepping down to 5.0% for both by 2033.
Compliance requirements and impending deadlines
The regulations impose strict administrative and notification obligations on all covered entities:
- Immediate notification (17 November 2026): Covered entities must notify the Commissioner in writing within 60 days of gazettement—setting the initial deadline to 17 November 2026. Entities becoming covered later must notify before the end of their income year.
- Minimum top-up tax return: Must be filed no later than 6 months following the end of the reporting fiscal year.
- GloBE information return: Due within 18 months after the end of the initial covered year, and within 15 months for subsequent years.
- Payment currency: Top-up tax payments must be remitted in Kenya Shillings (KSH) converted from the consolidated financial presentation currency using average annual exchange rates.
Safe harbours and exclusions
To facilitate compliance during the initial implementation phase, eligible entities may elect to apply the Transitional Country-by-Country Reporting (CbCR) Safe Harbour for fiscal years beginning before 1 July 2029.
The rules also provide exemptions and adjustments for qualifying international shipping income managed from Kenya, companies undergoing eligible debt restructuring, and net loss deferred tax assets. Non-compliance may result in penalties under the Tax Procedures Act.
