The government is seeking to boost foreign investor confidence and enhance cross-border tax compliance through the proposed reintroduction of Advance Pricing Agreements (APAs) in the Finance Bill 2025/2026.
According to the draft bill, APAs—formal arrangements between multinational enterprises and the Kenya Revenue Authority (KRA)—would be reinstated to provide clarity on the transfer pricing of cross-border transactions.
Under the proposed framework, an APA will remain valid for up to five consecutive years, offering much-needed predictability and stability in Kenya’s tax environment.
Advance Pricing Agreements are designed to eliminate uncertainty and prevent tax disputes by enabling taxpayers and tax authorities to agree in advance on appropriate transfer pricing methods.
These agreements are particularly crucial for multinational companies, which often grapple with complex tax obligations across various jurisdictions.The reintroduction of APAs is expected to minimize the risk of retroactive tax assessments or penalties, which have historically posed challenges to businesses operating across borders.
By offering greater certainty on tax outcomes, the government aims to foster voluntary compliance and improve Kenya’s appeal as a destination for foreign direct investment.
Analysts and tax experts have lauded the move, viewing it as a progressive step toward aligning Kenya with global best practices in international taxation. The policy shift is expected to enhance transparency and trust between tax authorities and multinational corporations.
If passed into law, the APA framework will mark a significant milestone in Kenya’s ongoing efforts to create a stable, investor-friendly tax regime, signaling the government’s commitment to improving the ease of doing business in the country.
The Finance Bill 2025/2026 is currently under public scrutiny and will undergo parliamentary debate before being enacted.
Stakeholders in the business community are closely monitoring the development, hopeful that the measure will usher in a new era of tax certainty and cross-border investment growth.
