For Kenya’s affluent class, protecting legacy wealth increasingly means looking beyond the country’s borders, often to offshore jurisdictions.
For decades, the ultra-wealthy have relied on foreign destinations to safeguard their fortunes through various structures, including trust funds. Jersey, the Isle of Man, and the British Virgin Islands once dominated this map of financial secrecy.
And even though Kenya overhauled its trust laws in December 2021, in reforms praised by experts as “leveling the playing field,” the tide has barely shifted. The wealthy continue to look outward, drawn to the same offshore havens that have long catered to global wealth.
Mauritius and Switzerland continue to be the top tier of preferred jurisdictions, despite the drastic efforts by the government to level the playing field.
“In Kenya, we usually look at three or four jurisdictions besides home where your holding company can sit. We often see businesses set up in Mauritius, Dubai, or similar favourable destinations. When comparing jurisdictions, the question becomes, ‘What benefits does my business get?” James Muriithi, an estate planning lawyer says.
Mauritius, a tax haven, does not charge withholding tax on dividends earned by companies registered there, with the government charging 10 percent on earnings and 15 percent on royalties.
Firms registered on the Indian Ocean Islands also do not pay stamp duty, while Kenya’s corporate tax is pegged at 30 percent.
The numbers tell a compelling story. With Kenya’s corporate tax pegged at around 30 percent for resident companies and Mauritius offering a base corporate tax of 15 percent, which can fall to as low as 3 percent depending on incentives, the choice becomes obvious.
“If I can legally pay less tax and retain more profit, why not explore those options?” Poses Mr Muriithi.
And there is more. Mauritius offers additional advantages, most notably the free and fluid movement of capital due to the absence of exchange controls.
“There’s also no capital gains tax in Mauritius when you compare that to Kenya whose current tax rate is a flat 15 percent of the net gain. And so, this has become ideal for most Kenyan elites when setting up a trust in Mauritius or planning succession because there’s no estate tax.”
Beyond tax efficiency, business security also plays a major role.
“Most clients want to expand mobility into new territories. We often recommend mergers and acquisitions or project financing over setting up from scratch. Acquiring an existing business familiar with the local landscape minimises risk.”
Kenya’s 2021 trust law modernisation introduced family trusts to make local wealth management more efficient and transparent.
But even then, that hasn’t been enough to convince most elite Kenyans to set up trusts in the country, given the potent mix of tax advantages in Mauritius, confidentiality, legal predictability, and the desire to avoid messy family disputes.
Besides the tax incentives, confidentiality greatly serves as a very powerful motivator.
“Many wealthy Kenyans build their wealth quietly. They don’t want the public or even the extended family to know what they own. Offshore trusts offer much more privacy,” says Mr Muriithi.
Nevertheless, he notes that one of the major incentives of setting up a trust in Kenya is the tax exemptions, especially on property transfers.
“There are many benefits to setting up a trust in Kenya, but Mauritius still holds an edge in the incentives it offers compared to Kenya. Neither Kenya nor Mauritius currently imposes an estate duty or inheritance tax. However, in Kenya, unlike Mauritius costs still arise when transferring assets in the form of capital gain tax. This means wealth can be transferred to heirs without incurring an additional tax burden upon death,” adds Mr Muriithi.
According to Patrick Juma, a wealth advisor at Britam, the preference for offshore trusts is also rooted in history.
“For years, there were few institutions in Kenya handling trust funds, coupled with the lack of information to the public about trusts. It's this limited capacity that pushed many wealthy Kenyans abroad to Switzerland and Mauritius, and that has become, sort of, a culture to this date,” he says.
Patrick Juma, a Financial & Wealth Advisor at Britam
Photo credit: Pool
Mr Juma maintains that, despite several Kenyan companies rushing to set up the trust funds in recent years, many wealthy Kenyans are yet to have full trust in these fresh institutions.
“Many wealthy Kenyans worry these new local trust institutions lack the experience and stability of their offshore counterparts. They fear collapse or mismanagement. Offshore jurisdictions, meanwhile, have long-established trust industries,” he explains.
Another driver, Mr Juma notes, is taxation implications in most African countries.
“Most African countries have complex and heavier tax implications on financial structures,” says Mr Juma.
But even with Kenya’s improved laws, he points out that legal disputes remain another major reason wealthy families choose offshore trusts.
“Kenyans are very strategic and very litigious. We’ve seen families fight for years over wealth. Offshore trusts protect heirs from forced heirship claims and reduce litigation risk.” he adds.
Kenya’s courts have seen some of the longest-running succession battles in Africa. Two notable cases involve the estates of influential politicians Mbiu Koinange and JM Kariuki. The Koinange estate case has dragged on for more than four decades, while the dispute over JM Kariuki’s estate lasted 38 years.
According to the Insurance Regulatory Authority and Kenya Revenue Authority, it is estimated that 20–30 percent of estate value is often lost during succession due to legal costs, disputes, probate delays, and poor planning.
A family trust can bypass Kenya’s long, complex, and often expensive probate process. Trust assets remain outside probate, enabling faster and smoother transfer to beneficiaries, but even then, Mr Juma notes that the probate delays always become a hindrance.
