Kenya Revenue Authority: Advance Pricing Agreement Regulations 2025 Now Operational

• Kenya Revenue Authority publishes draft regulations for Advance Pricing Agreement (APA) and Minimum Top Up Tax (MTT).
• Draft APA regulations provide framework for multinational corporations to negotiate advance pricing agreements with Kenyan tax authority.
• New MTT regulations simplify calculation of minimum top-up tax liabilities for multinational corporations.
• Companies must review transfer pricing arrangements to comply with new requirements.
• Lawyers should advise clients on compliance with draft regulations and help navigate changes.

The draft regulations are built upon Kenya's existing tax laws, including the Income Tax Act, 1976 and the Value Added Tax Act, 2013.

The Kenya Revenue Authority has published two draft regulations aimed at streamlining tax compliance for multinational corporations. The Draft Income Tax (Advance Pricing Agreement) Regulations, 2025 and the Draft Income Tax (Minimum Top Up Tax) Regulations, 2025 were open for public comment until late 2025 and early 2026, respectively. The Advance Pricing Agreement framework became effective on January 1, 2026, and the Minimum Top-Up Tax became effective on January 1, 2025, with the regulations operationalizing these frameworks. These regulations are part of a broader effort to modernize Kenya's tax laws and ensure compliance with international standards.

The Advance Pricing Agreement (APA) regulations aim to provide a framework for multinational corporations to negotiate advance pricing agreements with the Kenyan tax authority. This will enable companies to avoid double taxation and ensure that their transfer pricing arrangements are in line with Kenyan law. The APA regulations also introduce new requirements for companies to disclose information about their related-party transactions.

The Minimum Top Up Tax (MTT) regulations, on the other hand, aim to simplify the process of calculating minimum top-up tax liabilities for multinational corporations. Under the new regulations, companies will be required to calculate their MTT liability based on a percentage of their gross turnover.

The draft regulations are built upon Kenya's existing tax laws, including the Income Tax Act, 1976 and the Value Added Tax Act, 2013. The regulations also take into account international standards for transfer pricing, as outlined in the Organisation for Economic Co-operation and Development (OECD) Guidelines on Transfer Pricing for Multinational Enterprises and Tax Administrations. Kenya has committed to implementing these guidelines as part of its efforts to combat base erosion and profit shifting.

The draft regulations are also consistent with the recommendations of the African Union's Committee of Experts on Tax Matters, which have emphasized the need for African countries to strengthen their tax laws and improve transparency in transfer pricing arrangements.

The draft regulations have significant implications for multinational corporations operating in Kenya. Companies will need to review their transfer pricing arrangements and ensure that they comply with the new requirements. Failure to do so may result in double taxation, penalties, or even reputational damage.

Lawyers advising clients on transfer pricing arrangements should be aware of the potential impact of these draft regulations on their clients' businesses. They should also be prepared to advise on compliance with the new rules and help companies navigate any changes that may be required. By staying ahead of the curve, lawyers can help their clients avoid costly mistakes and ensure a smooth transition to the new regulatory framework.

Lawyers should watch for the potential impact of these draft regulations on their clients' transfer pricing arrangements, and be prepared to advise on compliance with the new rules.

Source: Original reporting via Public Notices