How to register, operate a company in Kenya as a Foreigner
Kenya presents a compelling business landscape with a youthful and digitally connected population. This dynamic demographic positions Kenya as the best country to invest in Africa.
Notably, emerging sectors like digital services, finance, construction, education, and franchising are fuelling Kenya’s economic diversification and propelling its growth trajectory.
Kenya is at the heart of Africa’s transformative regional integration. It is a good place to launch your business strategy for the African continent.
Entering the exciting Kenyan market as a foreign investor or conglomerate requires navigating the intricacies of company registration. While the process may seem daunting, fret not! This guide provides a practical roadmap, steering you through the necessary steps and requirements.
Choosing the right company type and structure
Regardless of your business type or industry, every journey begins with the Company Registry. This pivotal organization acts as your gateway to the Kenyan market, guiding you through the registration process and issuing essential investment certificates and permits.
Regulatory compliance for Kenyan companies
After the registration process, some companies encounter non-compliance problems because they are unaware of the need to adhere to regulatory compliance in Kenya. Here is a checklist of compliance obligations to comply with as a Kenyan business.
1. Annual returns filing
For Kenyan businesses, this regulatory compliance is essential as it serves as a way for companies to inform the appropriate regulators of their present condition. Since it also denotes a renewal of registration, it is consequently regarded as necessary. It has to be submitted annually. The Office of the Registrar of Companies is the main agency that is in charge of this compliance, and it requires every company, both indigenous and foreign, to file its annual returns once every year. Other agencies like the Kenya Revenue Authority require companies to file annual returns to update the status of the number of foreign workers at the company and for tax-related information, respectively.
The Companies Act provides that “where a company defaults in complying with the filing of Annual Returns and Financial Statements, the company and every officer of the company that is in default are liable to pay to the Registrar, an administrative penalty for each day during which the default continues.”
2. The company’s income tax return
This is a direct tax that all registered entities that engage in taxable activity and generate money are required to pay. Every company must register with KRA as a taxpayer and submit this filing; this is done upon the incorporation of the company.
The standard rate of corporate income tax is 30%. However, current rates vary according to the type of business a company conducts, where it is located, and the industry in which it works. All taxpayers are obligated to submit their year-end tax returns and pay any unpaid taxes; the final return and tax are due four months after the end of the fiscal year. Every three months, every business must present an anticipated self-assessment. A provisional self-assessment that can be amended upwards or downwards until the last day of the company’s base period must be included with the yearly returns. Four quarterly instalments of the self-assessment payment should be made on the last day of each quarter.
If tax is not paid by the deadline, a penalty equal to the statutory rate is applied to the amount owing at the beginning of the term. The penalty is compounded each month.
3. Value Added Tax (VAT)
VAT is applied to all goods and services rendered in Kenya and imported into the country, except for some goods and services that are exempted. The standard rate for VAT is 16%.
The payment is made to KRA, and any default in payment leads to a fine being levied on the company. Avoid this by registering your company with Afrilink Consultants, we expedite the tax filing process and ensure that your company complies.
4. National Social Security Fund (NSSF)
This payment compensates for a portion of the income lost by workers in Kenya due to incapacity, ageing, or the death of a family member, where dependents receive a lump-sum payout. In addition to paying pensions and other benefits, it is also used to award emigration benefits to non-Kenyan members who are permanently relocating elsewhere.
Registration and payment monthly for NSSF is mandatory for all companies, both local and foreign, for or on behalf of their Kenyan employees.
5. Pay as you earn
In Kenya, employers are required to deduct tax from an employee’s salary and other bonuses every month. The highest rate is 30% for tax-resident employees. Non-resident employees’ salaries and other remuneration are subject to a flat rate of 35%. By the fifteenth day of the following month, employers are required to pay the KRA the deducted taxes.
Overall, startups should seek professional advice and other expert guidance from company registration companies to make sure they are adhering to all legal and regulatory standards in order to follow the compliance checklist for Kenyan firms.
At Afrilink Consultants, we are happy to assist companies in navigating their compliance requirements. Reach out today at +254707280366 or email us at clientservice@afrilinkconsultants.com for unmatched services.
