Emerging Markets Rates and Currencies Handbook

162 Citi | Emerging Markets Currencies Handbook 2021 Kenya Item Inter-Co Debt Offshore Bank Loans Offshore Local Borrowing Derivatives Equity W/H Tax 15% WHT • Under certain tax treaties can be reduced to 0% Oil & Gas 15% WHT 15% WHT Oil & Gas 15% WHT N/A Non-resident 15% WHT on Dividends • Oil & Gas WHT dividends: 10% • Under certain tax treaties can be reduced to 0% Resident WHT on dividends: WHT exempt if >12.5% voting power, 5% otherwise Deductibility of interests Generally deductible if incurred to generate taxable income Thin cap rules if all conditions apply: 1) non- resident person controls a company alone or with up to four others, 2) company is not a bank or FI, 3) D/E > 3x (2x for extractive sector). In this case, the excess of interest expense over D/E ratio is not deductible • Thin cap rules do not apply to companies with affordable housing projects Transfer pricing rules apply (i.e. arms length rule) Generally deductible if incurred to generate taxable income Thin cap rules if all conditions apply: 1) non-resident person controls a company alone or with up to four others, 2) company is not a bank or FI, 3) D/E > 3x (2x for extractive sector). In this case, the excess of interest expense over D/E ratio is not deductible • Thin cap rules do not apply to companies with affordable housing projects Transfer pricing rules do not apply N/A N/A Deductibility of FX losses Realised FX losses are tax deductible expenses FX losses realised on any loans from shareholders in the period when company was thinly capitalised will be deferred until the state of thin capitalisation ceases to exit. This does not apply to Banks. Realised FX losses are tax deductible expenses N/A Other taxes, duties N/A N/A N/A N/A N/A Comments N/A N/A N/A N/A N/A Note: Citigroup Inc. and any of its affiliates do not provide accounting, tax, or legal advice. Please seek advice from a relevant licensed advisor. Source: Relevant legislation, publicly available sources. Subsidiary Funding — Tax Consideration Tax Summary — Kenya