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An emerging trend in recent tax disputes in Kenya suggests that the Kenya Revenue Authority (KRA) is adopting an increasingly expansive approach to Permanent Establishment (PE) and profit issues. In several ongoing appeals, KRA has sought to assert PE based on minimal or indirect local activity, and to apply the Profit Split Method (PSM) to allocate a portion of global profits to Kenya—often with limited regard for the actual scale or nature of the local contribution.
23 July 25
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This approach appears to be driven by post-BEPS confidence, particularly following Action 7 and Actions 8–10, which emphasise economic substance and value creation over legal form. In many cases, KRA has argued that support functions such as liaison, business development, facilitation, or infrastructure access create a sufficient nexus to justify profit reallocation—even where these functions are routine or outsourced.
The reality is that the international tax system has undergone a major recalibration over the past decade. At the heart of this transformation lies the concept of PE—once a narrowly defined threshold based on physical presence, now evolving to accommodate the complexities of e-commerce, digital services, and cross-border business fragmentation.
In this article, we analyse what these recent developments mean for international businesses operating in or engaging with Kenya—and the steps needed to stay compliant and competitive.
Click here to download and read the full article.
Should you have any questions regarding this legal alert, please do not hesitate to contact Daniel Ngumy, Kenneth Njuguna or James Karanja.