On 12 April 2022, the Finance Bill 2022 was presented in the National Assembly of Kenya, which provides following tax measures related to transfer pricing.

The Bill aims to amend Section 18(A) of the ITA to include transactions between residents and certain persons who are in a preferential tax regime within the scope of transfer pricing (TP). Prior to the proposed change, the (TP) requirement only applied to transactions between residents operating in a preferential tax regime and related residents operating outside of a preferential tax regime. The proposal therefore aims to broaden the scope of transactions falling within the scope of transfer pricing by including non-resident persons operating under the preferential tax regime.

The Bill proposes to introduce CbC documentation requirement for MNEs resident in Kenya in line with OECD BEPS Action 13. The Bill prescribes the turnover threshold requirement of KES 95 billion including extraordinary or capital gains. The CbC report should be submitted within 12 months of the last day of the MNE group’s reporting financial year.

The bill proposes to introduce an obligation for multinational enterprise groups (MNE) or constituent entities based in Kenya to notify the commissioner aimed at assisting commissioner in identifying the party within the multinational group responsible for the submission of the CbC report.

The Finance bill also proposes to require submit local file and master file for MNE’s resident in Kenya no later than six months after the last day of the multinational’s reporting financial year. A person who fails to comply with the reporting requirements will be subject to the penalties prescribed in the Tax Procedures Act.

The Bill proposes to increase the digital service tax rate from 1.5% to 3% of the gross transaction value.

The proposals would come into effect on 1 July 2022.