For years, transfer pricing disputes in Kenya followed a familiar pattern. The KRA raises an assessment. The taxpayer objects. The matter moves to the Tax Appeals Tribunal. Years pass, costs accumulate, and the outcome stays uncertain. A landmark change introduced through the Finance Act 2025 is set to break that cycle: Kenya now has a formal Advance Pricing Agreement framework, effective 1 January 2026.
What Is an Advance Pricing Agreement?
An APA is a voluntary arrangement between a taxpayer and the revenue authority that pre-determines the transfer pricing methodology for specific related-party transactions before those transactions are carried out. Rather than waiting for a KRA audit to challenge how you priced an intragroup service or an intercompany loan, an APA locks in the agreed method for up to five years.
Kenya’s APA framework sits under Section 18G of the Income Tax Act, introduced by the Finance Act 2025 (Act No. 9 of 2025). It covers controlled transactions under Sections 18(3) and 18A of the Act — cross-border transactions between resident and non-resident related parties, and dealings with entities in low-tax or preferential tax regimes.
Why This Change Matters
Kenya is a hub for multinationals across East and Central Africa. Intragroup transactions covering management fees, technical services, brand royalties, intercompany financing, and commodity sales have historically been flashpoints for KRA audits. Disputes about benchmarking methodology, the selection of comparables, and functional analysis have led to costly and prolonged litigation.
APAs shift the dynamic from confrontation to cooperation. A taxpayer that proactively agrees a pricing method with KRA removes the audit risk on that transaction for the agreement period. That certainty has tangible value: for financial planning, for investor disclosures, and for building a constructive working relationship with the revenue authority.
Two Types of APAs
Businesses can apply for a unilateral APA (involving the taxpayer and KRA only) or a bilateral APA (involving KRA and the competent authority of a treaty partner jurisdiction). A unilateral APA is faster and less resource-intensive. A bilateral APA takes longer but provides protection in both Kenya and the counterparty jurisdiction simultaneously, which is valuable where the same transaction faces scrutiny on both sides of the border.
Under Section 18G(4), KRA may void an APA if it later determines that the taxpayer entered into it through misrepresentation of facts. Accurate and transparent disclosure at the application stage is therefore essential.
The Regulatory Framework
The Cabinet Secretary has six months from 1 January 2026 to issue regulations governing the APA process, putting the deadline at 30 June 2026. KRA published draft regulations in November 2025 setting out the full APA lifecycle: pre-filing consultation, formal application, negotiation, execution, renewal, and cancellation. The final regulations are expected before 30 June 2026.
Steps to Take Now
- Map your controlled transactions and identify those with the highest transfer pricing risk. Intragroup services, royalties, financing, and commodity trades typically attract the most KRA scrutiny.
- Review whether your existing transfer pricing documentation — Master File, Local File, and Country-by-Country Report — is current, accurate, and defensible.
- Monitor the finalisation of the APA regulations. Once gazetted, the pre-filing consultation process is the practical starting point for any APA application.
- Engage a transfer pricing specialist early. The APA process involves a pre-filing meeting, formal application, negotiation, and execution. Early preparation gives you the strongest position.
Intelpoint Consulting works with multinationals and local groups on transfer pricing strategy, documentation, APA applications, and dispute resolution. If you are managing related-party transactions in Kenya, now is the right time to start the conversation.
Contact Intelpoint Consulting: www.intelpointconsulting.com and at info@intelpointconsulting.com