Emerging Markets Rates and Currencies Handbook

Additional Comments NDFs, Options and Cross Currency Swaps are permitted but have little activity in country and are mostly illiquid. Citibank N.A. Upperhill Road, Citibank House BOX 30711-00100 Nairobi, Kenya FX Sales Contact: +2542 0275 4088 Tax Summary – Kenya Kenya W/H Tax • 15% WHT • Not applicable if the payment is to a financial institution listed under the 4th Schedule of the income tax Act • 15% applicable for gains on financial derivatives traded by a non-resident • Non-resident 15% WHT on dividends • Resident WHT on dividends: WHT exempt if >12.5% voting power, 10% otherwise • Under DTAs may be reduced Deductibility of interests • For a permanent establishment in Kenya, the gains or profits shall be ascertained without any deduction in respect of interest paid or purported to be paid by the PE to the non-resident person and by disregarding any foreign exchange loss or gain with respect to net assets or liabilities purportedly established between the PE in Kenya and resident person. • Thin capitalization rules are applicable where gross interest paid or payable to related persons and third parties in excess • Generally deductible, if incurred to generate taxable income. • Thin capitalization rules are applicable where gross interest paid or payable to related persons and third parties in excess 30% of EBITDA of the borrower in any financial year • Not applicable to banks and other financial institutions licensed under Banking Act • Transfer pricing applicable in cases where the offshore bank is located in a preferential tax regime • TP legislation • Generally deductible, if incurred to generate taxable income. • Thin capitalization rules are applicable where gross interest paid or payable to related persons and third parties in excess 30% of earnings before interest, taxes, depreciation, and amortization of the borrower in any financial year: • Not applicable to banks, financial institutions and microfinance institutions Licensed by CBK • Income to a local entity: Income taxed as a separate source income and a loss carried forward • N/A Country Tax Deductibility and Considerations Inter-Co Debt Offshore Derivatives Equities Bank Loans Offshore Local Borrowing