NAIROBI, Kenya- Companies and businesses across Kenya have received a major tax reprieve after President William Ruto assented to the Income Tax (Amendment) Bill, introducing fresh changes aimed at easing the cost of doing business.
The new law is part of broader economic reforms by the government targeting investment growth, business expansion and improved corporate operations.
The legislation was among three bills signed into law by the president as the administration pushes to strengthen Kenya’s economic environment.
New law changes how company restructuring is taxed
The bill, sponsored by Kuria Kimani, focuses on easing how firms reorganise ownership structures and transfer assets within corporate groups.
Previously, when companies transferred value or assets to shareholders during restructuring, the Kenya Revenue Authority treated the transaction as a taxable dividend.
That automatically triggered withholding tax obligations for affected firms.
Under the newly signed law, transfers of property by a company to shareholders during internal restructuring will no longer be classified as taxable distributions.
The changes are expected to reduce tax exposure for firms carrying out mergers, reorganisations and internal restructuring exercises.
Conditions firms must meet to qualify for exemption
The tax exemption will only apply under specific conditions outlined in the law.
According to the amendment, the asset transfers must be distributed proportionately based on existing shareholding structures.
In addition, any share transfers involved must relate to subsidiaries operating within the same corporate group.
The changes are expected to particularly benefit large firms with multiple subsidiaries and businesses undergoing ownership restructuring.
Push to improve Kenya’s investment climate
The latest amendment comes as the government seeks to improve Kenya’s attractiveness to investors amid pressure from businesses over taxation and operational costs.
Officials say simplifying corporate restructuring rules could encourage expansion, reduce compliance disputes and improve ease of doing business.
The reforms also come at a time when companies have increasingly raised concerns about tax-related barriers affecting investment decisions and long-term growth plans.