On 3 November 2025, the Kenya Revenue Authority published the Draft Income Tax (Advance Pricing Agreement) Regulations 2025, inviting comment from taxpayers and professionals before finalisation. The draft regulations set out a structured administrative process for the APA framework introduced under Section 18G of the Income Tax Act by the Finance Act 2025, which took effect on 1 January 2026.
What the Draft Regulations Cover
The regulations map the full APA lifecycle from start to finish:
- Pre-filing consultation: Taxpayers can approach KRA informally before submitting a formal application, allowing both parties to align on key issues early and gauge viability before committing resources.
- Formal application: The taxpayer submits detailed information about the controlled transaction, including the relationship between the related entities, the transaction’s supply chain, and the proposed transfer pricing methodology.
- Review and negotiation: KRA reviews the application, may suggest modifications, and issues a binding agreement once terms are settled.
- Renewal, revision, and cancellation: The regulations address what happens when circumstances change, including KRA’s right to cancel an APA where the taxpayer has misrepresented material facts — consistent with Section 18G(4) of the Income Tax Act.
Unilateral and Bilateral APAs
A unilateral APA involves only the taxpayer and KRA and is the faster, simpler route. A bilateral APA involves KRA and the competent authority of a treaty partner country. It takes more time and resources but provides coordinated protection in both jurisdictions simultaneously, which is valuable for transactions with significant cross-border tax exposure in both Kenya and a treaty partner state.
Gaps Worth Watching
Two gaps in the draft have attracted comment from practitioners. First, there are no statutory timelines for KRA’s review of applications, which creates a risk of open-ended delays and uncertainty for applicants. Second, there is no rollback mechanism allowing an agreed methodology to apply to prior open years. Kenya’s peers, including India and Nigeria, have used rollback provisions to incentivise APA uptake. These gaps may be addressed before the final regulations are gazetted.
Stakeholders submitted comments before the December 2025 deadline. The final regulations are expected before 30 June 2026, which is the six-month window prescribed by Section 18G(5) of the Income Tax Act.
What to Do Now
- Identify related-party transactions most at risk of KRA scrutiny and assess whether an APA would provide meaningful protection over the five-year agreement period.
- Compile the documentation a formal APA application will require, including Master File, Local File, and detailed functional analyses for the relevant transactions.
- Engage a transfer pricing adviser to prepare for the pre-filing consultation process, which is the practical starting point for any APA application.
Intelpoint Consulting is monitoring the finalisation of the APA regulations closely and advising clients on preparation strategies. Contact us to discuss whether an APA is right for your business.
Contact Intelpoint Consulting: www.intelpointconsulting.com and at info@intelpointconsulting.com