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Employing in Kenya

At a glance

Employment in Kenya

Kenya has a relatively mobile, well-educated workforce labour force that is growing rapidly in line with the country’s population and economic growth. A large segment of the country’s labour force operates in the informal economy, which is often not covered by statutory provisions.

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Payroll & Tax in Kenya

Foreign companies operating in Kenya may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Kenya are: Individual income tax (IIT) for employees in Kenya, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.

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Immigration / Work Permits in Kenya

Foreign nationals wishing to work in Kenya are required to obtain a work permit. However, work permits are generally only granted in instances where the employer can prove that doing so would be beneficial to Kenya and the position cannot be filled by any suitable Kenyan applicants.

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Incorporation

There are three types of business forms available to foreign companies in Kenya. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Kenya and the planned business activity.

When setting up a company in Kenya, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Kenya for business purposes. In particular, it looks at common pathways to establishing a business presence in Kenya, generally through a corporation, branch office or liaison office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Kenyan economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, November 2015 or closest available dates.

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GEO Solutions or DIY Employment in Kenya?

GEO Solutions or DIY Employment

Companies entering Kenya must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Kenya Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Kenyan entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Kenya

Payroll Kenya
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
0 - KES 121, 968 10
KES 121,969 - 236,880 15
KES 236,881 - 351,792 20
KES 351,793 - 466,704 25
Above 466,704 30
Tax Returns Supplied

Yes

Corporate Tax Requirements

Generally, the tax year follows the company’s fiscal accounting year.

A company is required to make payment equal to 25% of its estimated tax for the year, by the 20th day of the 4th, 6th, 9th and 12th months of its financial accounting year. The estimated tax must equal either 110% of the previous year’s tax or 100% of the tax estimated to be due for the current year.

A company must file a self-assessment return within six months after the end of its financial year. It must also file financial statements within six months after the end of its financial year.

Employers Social Security and statutory contributions

The employer is required to contribute 6% of an employee’s monthly wages to the National Social Security Fund. For more details, please refer to the section on Employment.

Employees Social Security and statutory contributions

The employee is required to make contributions to the National Social Security Fund (NSFF) as well as the National Hospital Insurance Fund (NHIF).

The contribution rates are as follows:

NSFF: 6% of monthly wages

NHIF: Ranging from KES30 up to KES320

For more details, please refer to the section on Employment.

Corporate Income Tax Rate

The current corporate income tax rate is 30% for resident companies, and 37.5% for non-resident companies.

Payroll Tax

No

Sales Tax

VAT is imposed on the supply of taxable goods and services in Kenya. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods  which they receive (input tax).

The current standard rate of VAT imposed on taxable goods and services is 16%, with reduced rates of 12% (industrial fuel and electricity) and 0% (exports).  Some goods and services such as unprocessed agricultural products and financial services are exempt.

 

Withholding Tax

Kenya imposes withholding tax (WHT) on certain classes of income earned by non-residents:-

  • Dividends: 10%
  • Management and professional fees, training fees, royalties and performance fees: 20%
  • Interest: 15%
  • Use of immoveable property (real estate): 30%
  • Use of other property (equipment): 15%
  • Pensions and retirement annuities: 5%
  • Telecommunication service fees: 5%
  • Sales of property or shares in oil-mining or mineral-prospecting companies: 20%
 A reduced rate may be available under an applicable Double Tax Treaty.
Other Tax
  • Turnover tax: Imposed at a rate of 3% of annual gross turnover for companies earning in excess of KES 5m.
  • Fringe and Employment Benefits Tax: Generally, non-cash benefits are taxable on the higher of the cost incurred by the employer or the fair market value. The taxable value is added to the emoluments for tax purposes. Exempt if aggregate total does not exceed KES 36,000 per annum.
  • Capital gains tax: Imposed on gains realised by companies and individuals on the transfer of property located in Kenya at a rate of 5%.
  • Railway Development Levy: Imposed on the import value of all imported goods at a rate of 1.5%. Import value is taken as the aggregate of the cost, insurance and freight value.
Work Permits
Business Visas
Others
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5 Changes in Immigration Policies for Workers on Assignment
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