A Kenya LLC requires a minimum of 1 director and 1 shareholder

Society Constitution
offshore in Kenya

Country analysis: legal structures

Everything you need to know to set up an operating company with a bank account.

1. Exchange of banking information

β€’ There are prison terms for sharing customer bank details with any third party (and possibly fines).

β€’ Banks are not subject at all to strict customer due diligence regulations (old FATF recommendation 5 / new FATF recommendation 10).

β€’ Banks are partially obliged to maintain sufficient records of customer and transaction data for law enforcement (old FATF recommendation 10 / new FATF recommendation 11).

β€’ Banks and / or other covered entities are required to report large transactions in currency or other monetary instruments to designated authorities.

β€’ The national administration is powerful enough to obtain and provide bank information on request, but with some problems.

β€’ There are undue notification and appeal rights against the exchange of banking information on demand without qualification

2. Legal forms

Kenya Limited Liability Company

The Kenyan private limited company (also known as a limited liability company) is the type of business entity most used by local and foreign entrepreneurs.

A Kenya LLC requires a minimum of 1 director and 1 shareholder of any nationality who can live outside of Kenya.

According to the Kenyan Company Law, there is no minimum share capital requirement when setting up a business in Kenya. However, foreigners wishing to relocate to Kenya by obtaining an entrepreneur visa must demonstrate that they have invested (or will invest) at least US $ 100.000 in the company.

After commercial set-up in Kenya, all businesses must i) register for tax with the Kenya Revenue Authority and ii) prepare financial statements, which should always be audited.

The Kenya Limited Liability Company:

Since 2012, it is also possible to register a limited liability company (LLP) in Kenya with only i) two corporate or individual partners ii) US $ 2 as the minimum capital contribution and iii) a manager, who must be an authorized person to work in Kenya (Kenyan citizen or foreigner with work permit).

Unlike many other countries, all partners in a Kenya LLP can be limited partners and have limited liability against losses to the partnership.

The main advantage of the limited liability company is that it is a transparent tax entity, not subject to corporate income tax: all income channeled through the company is taxed directly at the partner level and must be included in their income. personal / corporate tax returns.

It is also easy to convert an existing Kenyan company into a limited partnership by submitting an application to the Kenyan Business Registry along with the company's certificate of incorporation, an up-to-date list of its shareholders and their identification documents. The conversion is generally approved in two weeks.

Kenya Stock Company

Setting up a limited company in Kenya requires a minimum of seven shareholders and two directors. The company will also need to file its (audited) financial statements with the Kenyan Business Register.

A Kenyan public company is preferred by entrepreneurs or investors looking to list their company on the Nairobi Stock Exchange.

Kenya Branch

Branches can bill local customers, sign local sales contracts, and receive income from customers. However, the branch will need to obtain the necessary licenses for its business industry.

The foreign company must also designate a representative resident in Kenya

Kenya EPZ (Export Processing Zone) Company:

Local and foreign companies wishing to establish a manufacturing company or an agriculture oriented company in Kenya for export purposes may choose to establish a limited liability company in an Export Processing Zone (EPZ).

All limited liability companies wishing to obtain EPZ status must register and obtain approval from the Export Processing Zone Authority.

Remember

Un resident director is NOT mandatory for any type of entity. A Resident Representative - Required for Branch Offices. A building manager is required for limited liability companies.

OFFICES

Foster Swiss helps our Clients secure offices or we provide an office address. Most emerging markets require our Clients to have a 12-month office lease before company registration is approved.

We help our Clients overcome this challenge in the following ways:

Virtual office service

DDepending on the country and city, the rates range from US $ 900 to US $ 2000 and the annual active virtual office services range from US $ 1500 to US $ 4000).

Shared office space

LThe one-time fee is US $ 850. Thereafter, our Client pays the monthly rent directly to the owner).

Permanent office space

D Depending on the country and the city, the rates range from US $ 5.000 to US $ 8.000).

LEGAL ACCOUNTING AND TAXES

Tax rates

Kenyan resident and non-resident businesses are subject to a standard business income tax of 25% on taxable income generated in Kenya or sourced from Kenya. Taxable income for a Kenyan business is calculated on audited accounting profit, adjusted for tax purposes, for the accounting year ending in the previous calendar year.

Branches of foreign companies registered in Kenya are subject to a 37,5% corporate tax on taxable income. While a subsidiary would normally be subject to thin capitalization restrictions, a branch is not. Also, a Kenyan branch is not subject to remittance tax.

Capital gains in Kenya are considered ordinary corporate income and are taxed at a standard final rate of 5%.

Income from companies registered in an Export Processing Zone (EPZ) in Kenya is exempt from tax for the first 10 years. Companies in EPZs are subject to a reduced rate of 25% after 10 years.

Dividends paid by a company in the Special Economic Zone (SEZ) to a non-resident are free from withholding tax.

A 5% withholding is applied to dividends paid to non-resident entities. A business is considered non-resident in Kenya if it is not incorporated under Kenyan law, or if its management and control is outside of Kenya. However, a non-resident entity is exempt from withholding tax if the recipient company resident in Kenya owns more than 12,5% ​​interest in the paying entity.

A withholding tax of 5% to 25% is applied on interest paid to resident and non-resident entities. The amount varies depending on the business activity and whether the company is established in mainland Kenya or in an EPZ.

There is a 5% withholding tax on technical service fees and royalties paid to companies based in a Kenya Special Economic Zone. A 20% rate is applied for non-resident entities.

Dividends paid by a foreign company are not taxable in Kenya. Kenyan resident employees pay taxes on both local and international income, either from their employer or from independent services provided locally or internationally.

Employers are required to withhold 5% tax on employee gross compensation (Pay As You Earn (PAYE)) and send it to the National Social Security Fund (NSFF).

The personal income tax is applied at 10% (on the first US $ 1.500), 15% (on the next US $ 1.400), 20% (on the next US $ 1.400), 25% (on the next US $ 1.400), following US $ 30) and 1.400 (on the following US $ 5.650). the next US $ XNUMX).

Value Added Tax (VAT)

De according to Chapter 470 of the Kenya Tax Law, each entity must register for VAT with the Kenya Revenue Authority. VAT is applied at 14% on goods and services subject to tax. An EPZ entity is exempt from VAT.

Kenya Tax Relief and Business Grants Programs

UA newly listed company in Kenya enjoys a reduced corporate tax rate of 25% (compared to the usual 27,5%) for up to five years from listing. Entities established in Kenya's Export Processing Zones benefit from a 10-year tax holiday.

An entity established in a Kenya Special Economic Zone (EEZ) pays a corporate tax of 10% for the first 10 years and 15% for the next 10 years. Kenya has a limited network of double tax treaties with countries such as Denmark, Germany, Canada, India, Norway, the United Kingdom, and South Africa. These treaties provide for a reduction or exemption of taxes on certain types of income for a Kenyan company.

LEGAL AND COMPLIANCE

DAccording to the Companies Act, to register a company in Kenya, you must have at least one director over the age of 18.

To form a Kenyan business, you must have at least one shareholder who must be over 18 years of age, and according to the revised business law of 2017, the Kenyan business is no longer required to appoint at least one Kenyan (citizen by birth) to have at least 30% participation in the company to be incorporated or registered.

Shareholders wishing to travel to Kenya for business will need to demonstrate that US $ 100.000 in capital has been set aside for the Kenyan business facility as a requirement for a successful entrepreneurial work permit application. This does not apply to shareholders who do not plan to travel to Kenya. Each company must have a registered office in Kenya. Foster Swiss can offer this service for a
monthly fee of US $ 1.450.

Whenever there is a change in the Kenyan business details or its officers, the change must be filed with the Kenyan Business Register.

A Kenyan business must file the Annual Return with the Company Registrar and the Annual Tax Return with the Revenue Authority to comply with the legal requirements of the Kenyan Company Law.

Foreign ownership is restricted in the aviation, insurance, telecommunications and agriculture industries, and publicly traded companies also face restrictions. The process of canceling a company is dictated by the Government. This process will take a minimum of 6 months.

COUNTRY PROBLEMS

FOutside of the free zones, Kenyan businesses suffer high taxes. The withholding tax burden on Kenyan businesses has increased as Kenya has signed only seven double tax treaties with other countries.

Foreign ownership of Kenyan companies is restricted in aviation, insurance, telecommunications and agriculture. National resident shareholders are required. Challenges in daily dealing with inefficient government departments. Examples of government inefficiency include i) taking an average of three months to obtain a work visa for a foreign employee ii) taking four months to receive VAT refunds and tax withholdings and iii) one month to obtain customs clearance.

Corruption.

Judicial system Foreign investors receive little support in resolving disputes. Kenya has a high crime rate. In addition to looking after their personal safety, investors often have to spend money insuring property, offices, land, and their employees. Commercial insurance premiums are high.

While the infrastructure in Kenya is better than in most East African countries, it is nevertheless in poor condition and hinders the movement of people and goods.

Obtaining a work permit for a qualified expat is difficult. Typically, a Kenyan company will need to deposit at least US $ 100.000 into a Kenyan bank account, or have an audit report confirming that at least US $ 100.000 was previously invested, before the authorities will grant the visa. This unwanted consideration of cash flow affects small businesses in particular.

While it is theoretically possible to freely repatriate money outside of Kenya, in practice any transaction exceeding US $ 10,000 must be supported by documentary proof of the reason for the transfer.

It is very difficult for a foreigner to acquire land in Kenya for a project. Land regulations are opaque and the Ministry of Lands has cumbersome regulations

MORE CONFIGURATION SERVICES SOLUTIONS

  • Shareholders and Agents
  • Office permits
  • Protection of trademarks and copyrights. - Market study.
  • Legal support
  • Proportion of details of temporary unions or associations
  • Fusions and acquisitions.
  • Internal control.
  • Group restructuring.
  • Financial management consulting.
  • Buy a business.
  • Valuation of companies.
  • Credit recovery
  • Job solutions
  • Due diligence search on existing companies and individuals

3. Commercial register

The national company registry comprises the identity information of the legal owner, all companies require the registration of all legal owners.

All names plus countries of residence plus addresses or NITs or dates of birth, passport or personal identifications, or incorporation numbers are always registered.

Information on legal owners is not always available online (up to 10 EUR / GBP / USD).

4. Transparency of society

The national limited partnership registry includes information on the legal ownership of all partners.

Updating of legal property information is mandatory for all partners.

Only names are always recorded.

5. Shareholders publications

All companies require registration of all beneficial owners at a threshold of more than any stake / influence, up to 10%.

Updating the information on the identity of the final beneficiaries is not mandatory because bearer shares are available / circulating / not registered with a public authority.

All names plus countries of residence plus addresses or NITs or dates of birth, passport or personal identifications are always recorded.

Real property is not always available online (up to 10 EUR / GBP / USD).

6. Publication of the company account

β€’ There is no obligation to maintain accounting data.

7. Country-by-country financial reports

No country-by-country public reporting at all.

8. Corporate tax return

There is NO requirement for local submission of a country-by-country global reporting file (in accordance with OECD BEPS Action 13) by large corporate groups (with a worldwide turnover of more than 750 million euros) and local subsidiaries of foreign groups.

Unilateral cross-border tax rulings (eg advance tax rulings, advance tax rulings) are available in laws or regulations, or administrative practice.

All unilateral cross-border tax rulings are posted online for free, but without the name of the taxpayer in question

9. Identifier of legal entities

β€’ The use of an annually updated Legal Entity Identifier (LEI), developed under the guidance of the Financial Stability Board, FSB, is not mandatory.

β€’ The use of an annually updated Legal Entity Identifier (LEI), developed under the guidance of the Financial Stability Board, FSB, is not mandatory for some financial market operators.

β€’ The use of an annually updated LEI for the identification of reporting financial institutions (in accordance with the Common Reporting Standard (CRS) is not mandatory.

10. Measures to avoid tax evasion

<br>β€’There is no unilateral relief for double taxation through a tax credit system.

11. Tax matters judicial secrecy

None or restricted access to BOTH criminal and civil tax processes.

None or restricted access to BOTH criminal and civil tax judgments / verdicts

12. Opaque structures

β€’ The jurisdiction does NOT issue or accept the circulation of large notes / cash notes of its own currency (of a value greater than 200 EUR / GBP / USD).

β€’ Unregistered bearer shares are available / outstanding or registered by a private custodian.

β€’ Series LLC / Shielded Cell Companies are not available.

β€’ Trusts with escape clauses are not prohibited.

13. Anti-money laundering legislation

Kenya is not currently on the FATF list of countries that have been identified with strategic AML deficiencies.

The FATF welcomes Kenya's significant progress in improving its AML / CFT regime and notes that Kenya has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2010. Therefore, Kenya is no longer subject to the FATF monitoring process under its ongoing global AML / CFT compliance process. Kenya will work with ESAAMLG as it continues to address the full range of AML / CFT issues identified in its mutual evaluation report.

The last Follow-up Mutual Evaluation Report related to the implementation of the anti-money laundering and terrorist financing regulations in Kenya was conducted by the Financial Action Task Force (FATF) in 2017. Based on that Evaluation, Kenya was considered complies with 1 and largely complies with 24 of the FATF 40 + 9 Recommendations.

Overall Non-Compliance Score of FATF Standards in Percentage: 86,4%. (100% = all indicators rated as not met / low level of effectiveness; 0% = all indicators rated as completed or highly effective).

14. Automatic exchange of information

The automatic exchange of information is extremely secret in Kenya.

Kenya is not a signatory to the Multilateral Competent Authority Agreement (MCAA), which provides the multilateral legal framework to engage in Automatic Exchange of Information (AEOI) in accordance with the OECD Common Information Standard (CRS).

What type of private banking exists in Kenya?

International Banking
Local banking

Central bank security ⭐⭐⭐

The international and digital banks They're available.

CRS: NO.

Real bank operations: 90%.

Type of visa: KESh, US $, €.

Joint accounts: SI.

Remote management account: To consult.

Asset management Depending on the rating of the company.

Rates: It depends on the type of account.

Credit / debit cards in local currency.

Crypto friendly banks: It depends on the correspondent bank.

Portfolio availability: It does not depend on the correspondent bank.

Ability to issue letters of credit: SI.

Why with Foster Swiss?

Foster Swiss is an international company registered in Switzerland aimed at providing financial and compliance advice on a variety of topics related to company formation
and commercial banking internationally. We are specialized in the implementation of businesses in different jurisdictions, which means that we offer value-added services helping our clients in their expansion abroad.

Some of these services include:
Advice and consultancy,
visas, offices, nominated director / shareholder / secretary,
accommodation if necessary… to name a few.
Check with your assigned consultant for more information.

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