Kenya

Inventory valuation

Inventory is stated at the lower of cost or net realisable value, with the exception of biological assets, whose value is prescribed by the Commissioner.

Capital gains

See Capital gains tax (CGT) in the Other taxes section for more information.

Dividend income

Kenya-source dividends paid to a Kenyan resident are taxable in Kenya at the rate of 5% unless the recipient is a Kenya resident company holding 12.5% or more of voting power of the company paying the dividend. 

The WHT paid is a final tax. Dividends paid to non-residents and any overseas holding company attract 15% WHT. 

The Income Tax (Amendment) Act, 2026 amended Section 7 of the ITA to provide that a transfer of property by a company to its shareholders under the internal reorganization provision in paragraph 6(2)(i) of the Eighth Schedule is not deemed to be a distribution for the purposes of the ITA. 

Interest income

Interest income is generally included in the determination of taxable income unless expressly exempted for income tax. 

The Finance Act, 2026 amended the Fourth Schedule to formally include financial institutions licensed under the Microfinance Act. As a result, interest earned by such institutions is exempt from income tax in the hands of the payer (i.e. not subject to withholding tax). 

Royalty income

Royalty income is generally included in the determination of taxable income and is subject to CIT at 30%. Where royalties paid to a Kenyan taxpayer attract Kenyan WHT, the WHT credit can be used to offset against the tax liability arising from the royalty income. 

Foreign income

In Kenya, companies are taxed on income accrued or derived from Kenya. Certain income such as royalty, interest, and management and professional fees, paid to non-residents are deemed to have accrued or derived from Kenya.