Transfer pricing is one of the most complex areas of tax compliance, yet it affects a wide range of businesses in Kenya — including family groups, companies with overseas affiliates, and businesses that share common ownership.
What is Transfer Pricing?
Transfer pricing refers to the prices set for transactions between related parties — such as a parent company selling goods to a subsidiary, or a director lending money to their company. KRA requires these transactions to be priced at "arm's length" — i.e., as if the parties were independent.
Kenya's Rules
The Income Tax Act and KRA guidelines require:
- Documentation of all related-party transactions
- Evidence that prices reflect arm's length values
- Master file and local file documentation for businesses above KSh 500 million annual turnover
- Country-by-country reporting for multinationals above EUR 750 million global turnover
Common Related-Party Transactions
- Management fees between parent and subsidiary
- Interest on inter-company loans
- Royalties for use of intellectual property
- Shared service costs
Our tax advisors help businesses document related-party transactions correctly, prepare transfer pricing policies, and ensure full compliance with KRA guidelines — avoiding costly adjustments and penalties.
