Kenya's new transfer-pricing rules let KRA check at least 25 items on related-party deals

Kenya's new transfer-pricing rules let the Kenya Revenue Authority (KRA) check at least 25 items on transactions between related divisions, subsidiaries or affiliates of the same multinational company, against about 10 areas covered before, the Business Daily reported on 6 October. The paper said the regulations were published by Treasury Cabinet Secretary John Mbadi.

An EY tax alert dated 6 October said the Income Tax (Transfer Pricing) Rules, 2026 took effect on 12 August 2026, revoking and replacing the Income Tax (Transfer Pricing) Rules, 2006.

Transfer pricing is an accounting practice used to determine the prices charged for transactions between related divisions, subsidiaries or affiliates of the same company, the Business Daily explained. "The object and purpose of these rules are to provide guidelines for determining arm's length prices for transactions between related persons," the paper quoted Mbadi as saying.

According to the Business Daily, the newly covered areas include long- and short-term borrowing and lending, guarantees, marketable securities, advances, receivables and other debts, as well as insurance and reinsurance, business restructurings, cost distribution arrangements and derivatives. EY's alert mentions financing transactions, insurance and reinsurance, business restructuring with a related person, cost distribution arrangements and derivatives.

For each category of controlled transaction, firms must give KRA information including the parties involved, the transaction value, the settlement currency, the contractual terms and the trading model, according to the Business Daily. EY's alert says the Commissioner may also ask for a comparability analysis (including the search process, data sources, details of the comparables selected and the reasons for rejecting others), audited financial statements for each accounting year, and segmented reports with allocation keys and rationale.

The rules add a pricing provision for related-party commodity imports and exports. Where a reliable price is available from a recognised commodity exchange, a price-reporting or statistical agency, a government price-setting body or another index used by independent parties, EY said, the publicly quoted price on the date the goods are shipped is used as the sale price for computing taxable income, regardless of the price agreed between the related parties. The benchmark is the average quoted price for the 15 days before and after the shipping date, supported by shipping documents. The price may be adjusted if the taxpayer provides sufficient evidence that it is appropriate and consistent with the arm's-length principle.

The Business Daily said tax due and unpaid in a transfer-pricing arrangement will be treated as additional tax under the Tax Procedures Act. The paper quoted the new rules: "The provisions of the Tax Procedures Act relating to fraud, failure to furnish returns and underpayment of tax shall apply to transfer pricing."

Experts at the law firm Bowmans Kenya said in a commentary, as quoted by the Business Daily, that "the level of detail prescribed for transfer pricing information and supporting documentation signals the KRA's continued, and intensifying, focus on transfer pricing as an audit and revenue mobilisation priority".

EY's alert tells businesses to review their related-party arrangements, update supporting documentation and check whether their transfer-pricing approaches fit the new rules.