New rules to boost transfer pricing, tax transparency

By ALICE MURIITHI

Effective July 1, 2022, entities in Kenya that are members of a multinational enterprise group (MNE) whose annual turnover is at least Sh95 billion will be required to submit transfer pricing documentation in three tiers to the Kenya Revenue Authority.

This three-tiered documentation consists of a country-by-country report (CbCR), master file and local file. How do you know if you are a member of an MNE under the new rules?

However, for this mechanism to work, countries in which the MNE group has a presence in should have signed up to a framework for automatic exchange of CbCR reports so that they are able to, both receive reports filed in other countries and also exchange reports filed in their country. This framework is known as the Competent Authority Agreement framework or the Multilateral Competent Authority framework on exchange of CbC reports (CbCR MCAA). Although over 90 countries have signed up to this multilateral framework, Kenya is yet to do so. This means that although CbCR reports may have been filed in the parent entity jurisdiction, the local entity based in Kenya that is a member of an MNE group with annual consolidated turnover of at least KES 95 billion, will still be required to make the local filing.

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New rules to boost transfer pricing, tax transparency

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