Kenya has introduced new transfer pricing rules requiring businesses to provide more detailed documentation for transactions with related parties, strengthening the Kenya Revenue Authority’s ability to scrutinise corporate tax arrangements. The Income Tax (Transfer Pricing) Rules, 2026, published under Legal Notice No. 186, replace the previous regulations introduced in 2006 and broaden the transactions subject to review.
Transfer pricing refers to the prices charged for goods, services, loans and other transactions between companies or entities that are related. Tax authorities examine these arrangements to determine whether prices reflect the arm’s-length principle—the standard that related parties should transact on terms comparable to those that independent parties would agree to under similar circumstances.
The updated rules expand scrutiny to areas including financing arrangements, insurance, business restructuring and commodity transactions. These categories can involve complex valuations and cross-border dealings, making supporting records important when companies explain how they arrived at the prices used in related-party transactions.
According to PwC Kenya, businesses will need stronger evidence to justify their pricing methods and demonstrate that transactions comply with the applicable requirements. Companies with cross-border operations and multinational group structures may need to review their internal policies, agreements and supporting calculations to ensure their documentation is consistent and readily available.
The changes are significant for companies that conduct business with foreign affiliates, including arrangements involving management services, intellectual property, financing and the movement of goods across borders. Where the Kenya Revenue Authority considers that prices do not reflect arm’s-length conditions, transfer pricing rules can allow adjustments to taxable profits.
For businesses, the new framework increases the importance of maintaining clear records showing how prices were determined, which methods were applied and what evidence supports the commercial terms. Firms may also need closer coordination between finance, tax, legal and operational teams to ensure transactions are documented consistently.
The changes come as tax authorities globally focus on whether multinational businesses allocate income and expenses appropriately across jurisdictions. Transfer pricing enforcement is one tool used to reduce the risk of profits being shifted to lower-tax locations through arrangements that do not reflect the economic substance of a transaction.
Businesses operating in Kenya will need to assess the rules against their existing compliance processes and seek professional guidance where necessary. The quality of their documentation may become increasingly important during tax reviews, audits and disputes with the revenue authority.
