Disclosure of Beneficial Ownership of Companies in Kenya

Posted on November 2nd, 2020


Under recommendation of the Financial Action Task Force on International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation, members are urged to maintain adequate and timely information on the beneficial ownership and control of legal persons.

Following this recommendation, Kenya introduced section 93A of the Companies Act of 2015 in July 2019, through the Statute Law (Miscellaneous Amendments) Act. It provides that companies incorporated or registered in Kenya should keep a register of beneficial owners with the relevant information relating to such owners. Further, through a Legal Notice dated 18th February 2020, the Attorney-General published the Companies (Beneficial Ownership Information) Regulations, 2020 (the Regulations) which give effect to section 93A of the Companies Act.

The latest development in this area of the law is a public notice issued by the Registrar of Companies advising that the beneficial ownership e-register is operational as from 13th October 2020.

Definition of Beneficial Owner

The Companies Act defines a beneficial owner as “the natural person who ultimately owns or controls a legal person or arrangements or a natural person on whose behalf transactions are conducted, and include persons who exercise ultimate effective control over a legal person or arrangement.”

Under the Regulations, a beneficial owner is a natural person who directly or indirectly:

  • holds at least ten percent (10%) of the issued shares of the company;
  • exercises at least ten percent (10%) of the voting rights in the company;
  • holds the right to appoint or remove a director of a company; or
  • exercises significant influence or control over a company.

Significant influence or control under the regulations means participation in the finances or financial policies of the company.

Salient Features of the Regulations

Particulars of Information of Beneficial Owner

A company is required to enter the following particulars of the beneficial owner in the register – the full name; the birth certificate number; the national identity number and the passport number; the nationality; the date of birth; the postal address; the business address; the residential address; telephone number; the email address; the occupation or profession; the nature of ownership or control; the date the person became the beneficial owner; the date the person ceases to be a beneficial owner and any other information that may be required by the registrar from time to time.

Obligations of the Company

Duty to Investigate the Beneficial Owner

The Regulations provide that a company has a duty to investigate and obtain the particulars of a beneficial owner. The first step in the investigation is issuance of a notice to the person they believe to be the beneficial owner of the company. A person issued with this notice by the company is required to comply with the notice within twenty-one (21) days from the date that the notice was issued. In case a person fails to comply with the notice within time, the company shall issue them with a warning notice of fourteen (14) days.

Restriction of Persons Who Fail To Comply With the Warning Notice

If a person fails to comply with the warning notice within fourteen (14) days from the date of issuance, the company shall restrict the relevant interest of the person. Thereafter, the company files with the registrar a copy of the restriction issued fourteen (14) days after issuance of the restriction.

The effect of the restriction is that:

  • any transfer of interest by the person shall be void;
  • the person shall not exercise his rights in respect to the interest;
  • no shares shall be issued to the person in an allotment; and
  • no payment shall be made to the person in respect of the interest he holds in the company.

Restrictions on Sharing Beneficial Ownership Information

In an effort to ensure that the officers of the company comply with the provisions of the Data Protection Act, 2019, the regulations provide that the company should not disclose the information of the beneficial owner to the public, unless the beneficial owner has consented to the disclosure.

The beneficial owner information can only be disclosed for purposes of complying with the Regulations, for purposes of communicating with the beneficial owners or in compliance with a Court Order.

A person who discloses beneficial ownership information to the public risks a fine not exceeding Kenya Shillings Twenty Thousand (KES 20,000) or imprisonment for a term not exceeding six (6) months or to both.

Penalty In Case of Non-Disclosure by the Company

Under section 93A of the Companies Act, failure by a company to comply with the disclosure requirements is an offence which on conviction attracts a fine not exceeding Kenya Shillings Five Hundred Thousand (KES 500,000) payable by the company and each officer of the company in default. Further, if the non-compliance continues, the company and the officers shall be liable an additional fine not exceeding Kenya Shillings Fifty Thousand (KES 50,000) per day.

Operationalisation of Disclosure of Beneficial Ownership Information

The Registrar of Companies announced through a Public Notice that with effect from 13th October, 2020 the beneficial ownership e-register is operational. As such, companies are required to update their beneficial ownership e-register by 31st January 2021. Therefore, company officers are required to take attendant steps to ensure compliance with the provisions of the Act and the regulations. In summary some of the steps that company officers could take include:

  • Issuance of notices to the persons that can be termed as beneficial owners as per the definition in the Act and the regulations;
  • Adherence to timelines outlined in the regulations for example, timelines on issuance of notices;
  • Updating the e-register in case of any new information of beneficial owners;
  • Updating the registrar of companies in case of any restriction measures placed on beneficial owners; and
  • Ensuring that the information of the beneficial owners is not disclosed to the public without their consent, contrary to the provisions of the Data Protection Act.

Nullification of the Statute Law (Miscellaneous Amendments) Act of 2019

On 29th October, 2020 the High Court of Kenya in Constitutional Petition Number 284 of 2019 (as consolidated with Petition No. 353 of 2019) declared amongst other laws that the Statute Law (Miscellaneous Amendments) Act of 2019 is unconstitutional thus null and void for failure to involve the Senate in their passage. As stated above, this particular Act introduced section 93A of the Companies Act; the main provision on disclosure of beneficial ownership information by companies in Kenya.

However, the Court in its Judgment suspended the nullification of the impugned Acts for a period of nine (9) months to enable the Respondents to comply with Article 110 of the Constitution and regularize the Acts. The suspension of the nullification of the affected statues means that companies still have an obligation to comply with the laws and the regulations on beneficial ownership information.


In absence of the above-mentioned laws and regulations, many individuals who are beneficial owners of companies remain legally anonymous. As such, money launderers and those involved in covert criminal activities and terrorism would invariable take advantage of hitherto opaque corporate structures to conceal their true ownership of assets and properties. Therefore, the disclosure of beneficial ownership information is expected to promote greater transparency within corporates in Kenya, by shedding light on true ownership structures within companies.

This alert is for informational purposes only. If you have any queries or need clarifications, please do not hesitate to contact Pamella Ager (pamella@oraro.co.ke) (Partner), or your usual contact at our firm, for advice relating to the Regulations and how the same might affect you.

The VAT (Electronic Tax Invoices) Regulations, 2020 & The VAT (Digital Market Place Supply) Regulations, 2020 in a Nutshell

Posted on October 13th, 2020


On 25th September, 2020, the Cabinet Secretary of National Treasury and Planning Ukur Yattani (“the CS Treasury”) gazetted two regulations under the Value Added Tax Act being the Value Added Tax (Electronic Tax Invoices) Regulations, 2020 and the Value Added Tax (Digital Market Supply) Regulations, 2020. These Regulations come at a time when there is pressure on Kenya Revenue Authority (“KRA”) to collect more taxes and the need to optimize the taxation of the ever-growing digital economy. In this legal alert, we give an overview of these two regulations.

Value Added Tax (Electronic Tax Invoices) Regulations, 2020

These Value Added Tax (Electronic Tax Invoices) Regulations, 2020 have been enacted to ensure that daily supply of goods and services is monitored for purposes of taxation. As such, these Regulations require every VAT registered person under section 34 of the Value Added Tax Act (“VAT Act”) to have a register.

A register is defined under these Regulations as “an electronic tax invoicing or receipting system that is maintained and used in accordance with these Regulations.”

The objective of these Regulations is to ensure that: the KRA’s system will be integrated with other entities’ such as National Transport Safety Authority, Kenya Power, National Construction Authority and other agencies;  and that there is efficient transmission of data from the Register into KRA’s system thus improving the efficiency of collecting taxes.

Use of the Register

The register is used to ensure that each sale is recorded at the point of sale. An invoice is recorded with respect to each sale and thereafter the invoice generated is transmitted to the purchaser and the invoice details transmitted to KRA on a daily basis.

Accordingly, these Regulations places the following obligations on the part of a VAT registered taxpayer: ensure that the register is available at the point of sale; facilitate the inspection of the register by the registered person; ensure that the register is properly maintained through regular servicing; keep and maintain a register every time a register is serviced including record of persons who serviced; and comply with any other requirements as directed by the Commissioner.

The Taxpayer is also required to ensure continuity of operations of the register if there is an interruption of power supply.

Further, if at any given time the user is unable to use the register, such a user should notify the Commissioner within 24 hours and user will be given directions on an alternative mode of keeping the record. Once the user is able to use the register, such a user is expected to register the sales which were recorded in the alternative manner into the electronic register. Additionally, if the user intends to stop using the register either because of closure of business, cessation of supply of Vatable supplies or any other reason, the user should notify the Commissioner of the intended discontinuation 30 days prior to the discontinuation.

Requirements in A Tax Invoice

The Taxpayer shall ensure that that the PIN of the registered user, time and date of the invoice, buyers PIN, total gross amount ,total amount, item code of supplies for exempt, zero-rated supplies as provided by the Commissioner is entered, brief description of goods and services, quantity of supply, unit measure, tax charged, unique register identifier, unique invoice identifier , quick response (QR) code and any other requirement as may be specified by the Commissioner.

Specifications of the Register

In order for the register to be effective it should: be capable of being connected with information technology networks; have sufficient storage to maintain records; display clear messages in the official languages; be secure and tamperproof; be capable of being integrated with the Authority’s system; be capable of transmitting data to the systems; allow for updating of changes tax laws; and be capable of capturing information required by the regulations.

Impact of the Regulations

The regulations will enable efficient tax collection by KRA as it provides the Authority with necessary information on transactions involving the persons registered for VAT. It is therefore a mandatory requirement that every VAT registered taxpayer must have. The Electronic Tax Registered will also alert KRA of Taxpayers who are charging VAT and have not registered obligation thereby widening the tax base as the taxpayer will be required to activate VAT obligation.

The Register shall be capable of transmitting the KRA’s system the tax invoice data and the end of day summary of the respective day’s data in the manner specified by the Commissioner. The import of this is, KRA shall have real time information and this will also eradicate the VAT inconsistencies which have caused problems as Output and Input declared sometimes results in mismatched data.

The Regulations requires that all VAT registered persons should have a Register in place on or before 25th September 2021. Provided that a VAT registered taxpayer can on application to the Commissioner, at least 30 days before the 25th of September, 2021, seek for an extension of compliance which extension shall not exceed six months.


Failing to comply with the Regulations will result in a conviction and one shall be liable to pay a fine not exceeding one million shillings, or to imprisonment for term of not exceeding 3 years, or both.

The Value Added Tax (Digital Market Supply) Regulations, 2020

The Finance Act of 2019 introduced the taxation of services offered at the digital marketplace, hence, these Regulations have been enacted to offer further guidelines on the Value Added Tax to be charged on supplies made in the digital market place.

Scope of Taxable Supplies

The Regulations define the following supplies as taxable supplies at the digital market place:

  • Downloadable digital content including mobile applications, e-books and films;
  • Subscription based media including news, magazine and journals;
  • Over the top services including streaming television shows, films, music, podcast and any other digital content;
  • Software programmes which include software, drivers, website, filters and firewalls;
  • Electronic data management including website hosting, online data warehousing, file sharing and cloud storage services;
  • Music and games;
  • Search engine and automated help desk services including customizable search engine services;
  • Tickets for live events, theatres and restaurants;
  • Distance teaching through pre-recorded media or e-learning including online courses and training;
  • Digital content for listening, viewing or playing on audio, visual or digital media;
  • Services that link the supplier to the recipient including transport hailing services;
  • Electronic services under section 8(3) of the Act; and
  • Any other service that is provided through a digital market place and is not exempt under the Act.


The Regulations regards a person as a supplier of digital services and as eligible for VAT registration in the following instance. Firstly, where the supplies are made by a person in an export country to a recipient in Kenya in a business to consumer transaction(B2C).

Secondly, where the person is conducting business in Kenya as provided under section 8(2) of the VAT Act and either: the recipient of the supply is in Kenya; the payment of the services is made to a supplier in the export country from a bank registered under the Banking Act; or the payment of the services that is made to the supplier in the export country is authorized in Kenya.

If the export country (non-residents) who make business to consumer (B2C) supplies chooses not to register under the simplified framework, they have the option of appointing a tax representative to account for the VAT on their behalf in accordance with Section 15A of the Tax Procedures Act, 2015.

The regulations also provide for a simplified VAT registration framework which applies to export country (non-residents) who makes supplies on in the digital marketplace. The registration will be done online using a format to be prescribed by the Commissioner after which the applicant will be issued with a PIN for purposes of filing returns and payment of taxes.

Further, the Regulations also requires that a B2C supplier who has registered under these Regulations is exempted from issuing the electronic tax invoice. However, notwithstanding the exemption, they will still be required to issue a receipt showing the value of supply and tax deducted thereon. The Regulations also provide the option for deregistration, upon application to the Commissioner, for a non-resident who is no longer making supplies in the digital marketplace as provided in Section 36 of the VAT Act.

Place and Time of Supply 

Given that the time and place of supply is crucial in determining when VAT is due, these Regulations provide that a digital supply is deemed to have been made where: the recipient of the supply is in Kenya; the payment proxy including credit card information and bank account details of the recipient is in Kenya; or where the residence proxy of the recipient is in Kenya.

As to the time of supply, it shall be earlier of the date on which the supply is received in part or in whole; or the date on which the invoice or receipt for the supply is issued. It is important have the correct declaration made as this will determine whether additional assessments may be raised in future should KRA find that wrong information was provided while declaring VAT.

Claim for Input Tax

Crucially, a deduction for VAT input by a supplier shall not be allowed for B2C transactions for supplies in the digital marketplace. This is a departure from the provision of Section 17 of the VAT Act.

Impact of the Regulations  

These regulations will widen the tax base and enhance tax collection by the Authority.  However, it is a case of “wait and see” for us to assess the efficiency of collecting VAT on a digital economy given the transnational nature of the digital economy. Further, KRA may have some challenges when it comes to enforcing these Regulations against international digital market players.

All digital suppliers are required to comply with these regulations not later than 25th February 2021. Additionally, the Regulations are categorical that a person who fails to comply with these regulations shall be liable for penalties under the VAT Act or the Tax Procedures Act.

This alert is for informational purposes only. If you have any queries or need clarifications, please do not hesitate to contact Lilian Renee Omondi (renee@oraro.co.ke) Partner, Wanjala Opwora (wanjala@oraro.co.ke) Associate or your usual contact at our firm, for advice relating to the new VAT Regulations on Electronic Tax Invoices and Digital Market Supply.

New Changes Introduced by the Tax Laws (Amendment) Act, 2020

Posted on April 27th, 2020


Kenya’s economy is currently sailing through uncharted waters, forcing the government to come up with tax amendments aimed at alleviating the tax burden on Kenyans and boosting liquidity amidst the coronavirus pandemic. Parliament has passed the Tax Laws (Amendment) Act, 2020 (the “Act”) which was assented to by the President on 25th April 2020.



The Act has made several amendments to tax laws and tax related laws. We highlight the same hereunder.

The Income Tax Act

Qualifying Interest

The definition of ‘Qualifying Interest’ under section 2 of the Income Tax Act has been amended by removing the restriction to interest from financial institutions, banking institutions, building societies or the Central Bank. This effectively means that interest earned in other commercial investments amounts to qualifying interest and withholding tax on the same will be Final tax.

Withholding Taxes 

Sections 10(1) and 35(1)(o) of the Income Tax Act have been amended to the effect that payments made to non-residents for sales promotion, marketing, advertising services, and transportation of goods (excluding air and shipping transport services) will now be subject to withholding taxes at the rate of 20% of the gross amount.

Paragraph 3(d) of the Third Schedule of the Income Tax Act has been amended by increasing the non-resident tax rate from 10% to 15% with respect to a dividend. Paragraph 3(p) too has been amended to include reinsurance and by further adding to the list sales promotion, marketing, advertising services, and transportation of goods (excluding air and shipping transport) services at 20% of the gross amount.

The rates of the resident withholding tax rates (Paragraph 5(d)) have been amended by increasing the amounts of money applicable with respect to pensions funds and pensions income. This means that those earning pensions below Kshs. 288,000 will not have the withholding rates applicable to them.  Finally, paragraph 9 of the Third Schedule has been amended reducing the presumptive tax rate from 3% to 1% in line with the presidential directive on tax reliefs

Turnover Tax

Turnover tax was previously applicable at the rate of 3% on businesses earning a maximum income of Kshs. 5 Million. Subject to an amendment of section 12C (1) of the Income Tax Act, companies as well as businesses (including partnerships and sole proprietors) with an income of between Kshs. 1 Million and Kshs. 50 Million can opt to be subjected to turnover tax at the rate of 1% of the gross receipts.

Presumptive Tax

By deleting section 12C (5) of the Income Tax Act, presumptive tax at the rate of 15% of the single business permit at the time of renewal has been removed. It will consequently be payable by monthly filings to Kenya Revenue Authority.

Allowable Expenses

Section 15 (2) (ab) of Income Tax Act that provided for a 30% rebate on electricity costs incurred by manufacturers has been deleted. This means that the same will no longer be deducted in the ascertainment of the total taxable income.

Incomes Exempt from Taxes

The First Schedule of the Income Tax Act that sets out incomes expressly exempt from income tax has been amended by deleting a number of paragraphs. This means that the following incomes will now be subject to Income Taxes.

  1. Income from certain state boards and authorities including Pyrethrum Board of Kenya, Sisal Board of Kenya, Kenya Dairy Board, Canning Crops Board, Central Agricultural Board, Pig Industry Board, Pineapple Development Authority, Horticultural Crop Development Authority,  National Irrigation Board, Mombasa Pipeline Board, Settlement Fund Trustees, Kenya Post Office Savings Bank; and  Cotton Board of Kenya.
  2. Profits made by the Agricultural Society of Kenya from an exhibition held for purposes of the society.
  3. Interest on tax reserve certificates which may be issued by authority of Government.
  4. Gains on transfer of shares of a local authority.
  5. Gains on transfer of land adjudicated under Land Consolidation Act and Land Adjudication Act when the title has been registered under the Registered Land Act and transferred for the first time.
  6. Interest earned on contributions paid into the Deposit Protection Fund.
  7. Interest earned on loans granted by the Local Government Loans Authority established under the Local Government Loans Act.
  8. Dividends received by a registered venture capital company.
  9. Gains from the trade in shares of a venture company earned by a registered venture company within the first ten years from the date on first investment in that venture company by the venture capital company.
  10. Interest income generated from cash flows passed to the investor in the form of asset backed securities.
  11. Dividends paid by a registered special economic zone enterprise, developer and operator to non-resident persons.


Capital Deductions

The rate of Investment allowances for certain Capital Expenditures have been amended as follows:

Particulars Rate
Hotel buildings, buildings in use for manufacture, hospital buildings, petroleum or gas storage facilities, 50% in the year of first use and 25% per year on reducing balance.
Educational and commercial buildings 10% per year on reducing balance
Machinery used for manufacture, hospital equipment, ships or aircrafts 50% in the year of first use and 25% per year on reducing balance.
Motor vehicle and heavy earth moving equipment, computer and peripheral computer hardware and software 25% per year on reducing balance.
Furniture and fittings, telecommunications equipment, 10% per year on reducing balance
Filming equipment by local producer 25% per year on reducing balance.
Machinery used to undertake exploration or operations on prospective rights or mining right 50% in year of first use and 25% on a reducing balance basis thereafter



The amount of personal relief has been increased from Kshs.16,896 p.a to Kshs. 28,800 p.a.

The rate of tax in the highest income tax bracket has been reduced from 30% to 25% and the income subject to tax in the highest bracket has been increased from Kshs. 47,059 to Kshs. 57,333.

Withdrawals from a registered pension or provident scheme or the National Social Security Fund (NSSF) before the expiry of 15 years from the date of joining the scheme has been aligned to the individual tax rates. On the other hand, any withdrawal from a registered pension or provident scheme or NSSF after the expiry of 15 years from the date of joining the scheme for amounts exceeding Kshs 1.2 million, has been reduced from 30% to 25%.


The Value Added Tax Act (VAT Act)

Standard Rate

The standard VAT rate had been revised from the standard rate of 16% to 14% by way of Gazette Notice.

Credit Notes

Subject to the VAT Act, Credit Notes can be issued after 6 months from the invoice date. In the case where there is a commercial dispute in relation to the price payable, a credit note can be issued within 30 days after determination of the matter.

Refunds of Tax on Bad Debts

Section 31 of the VAT Act has been amended by reducing the period within which a taxpayer may apply for a refund from 5 years to 4 years from the date of the supply.

Record Keeping

The Act has also amended section 43(1) of the VAT Act  by deleting the word “every registered” and inserting the article “A” this means that every person whether  registered or not, is required to keep records of all their business transactions for at least 5 years.

Exempt Items

Personal protective gear including masks that were subject to VAT at the standard rate of 14% are now exempt. Further, vaccines for use in human and veterinary medicine, infusion solutions and medicaments cease are now exempt.

The following items that have been exempt will now be subject to VAT at the standard rate of 14%.

  1. Plant and machinery used for manufacture of goods.
  2. Taxable supplies imported or locally purchased for use in construction of power generating plants.
  3. Plastic biogas digesters.
  4. Biogas and Leasing of biogas production digesters.
  5. Parts imported or purchased locally for information technology purposes (subject to approval of the Cabinet Secretary).
  6. Goods imported or purchased for use in construction and development of industrial parks of 100 acres.
  7. Exhibits, specimens, equipment, chemical reagents, films, film strips, visual aid equipment for public museums.
  8. Asset transfer and other transactions related to the transfer of assets into a Real Estate Investment Trusts (REIT) and other asset-based securities.


The Excise Duty Act, 2015

The definition of “other fees’ as set out in the First Schedule Part III of the Excise Duty Act has been amended by deleting the words “licensed financial institutions” and substituting it with the words “licensed activities.” This effectively means that excise duty is only applicable on licensed activities of a financial institution.


Tax Procedures Act, 2015

Private Ruling

Sections 65(3) of Tax Procedures Act has been amended by extending the period within which the Commissioner should determine a private ruling from 45 days to 60 days. Further, section 69 requiring publication of Private Ruling has been repealed.


Penalty for Late Filling of Turnover Tax Returns

Subject to the amended section 83(1)(b) of the Tax Procedures Act, the penalty for the late filing of Turnover tax returns has been reduced from Kshs. 5,000 to Kshs. 1,000.


The Kenya Revenue Authority Act, 1995

The KRA Act has been amended by inserting a new section 15A that empowers the Commissioner to appoint a bank to act as an agent for revenue banking services .The said agent is required to transfer the funds to the designated Central Bank of Kenya accounts within a maximum of 2 days following the date of collection. Failure to comply with this provision imposes a tax debt on the appointed agent.

This alert is for informational purposes only and should not be taken as or construed to be legal advice. If you have any queries or need clarifications, please do not hesitate to contact Partner, Lena Onchwari (lena@oraro.co.ke), and Associate, Wanjala Opwora (wanjala@oraro.co.ke) or your usual contact at our firm, for legal advice relating to the COVID-19 pandemic and how the same might affect you.

Whether a Chargee is Obligated to Pay Capital Gains Tax Upon the Exercise of Statutory Power of Sale and Suspension of “Twin Payment” of Capital Gains Tax and Stamp Duty

Posted on April 9th, 2020

Capital Gains Tax (CGT) is a tax payable under the Income Tax Act by a proprietor of land upon transfer of such land and/or buildings. In Kenya, CGT was re-introduced on 1st January 2015 after being suspended in 1985.

Kenya Revenue Authority (KRA) issued a public notice on 4th October 2016 requiring that CGT and Stamp Duty be paid through the KRA i-Tax online platform. This effectively meant that CGT and Stamp Duty would be paid simultaneously before any transfer of property could be completed. Prior to payment of Stamp Duty, a purchaser was required to present an approved CGT slip as proof of payment of CGT by the vendor or exemption therefrom as the case may be.

In September 2019, KRA introduced an additional layer to the transfer process by requiring approval and verification of all transactions declared as exempt from CGT.

Kenya Bankers Association (KBA) on behalf of licensed banks who were aggrieved by the mandatory requirement of presentation of an approved CGT slip prior to the payment of Stamp Duty by a purchaser, moved to Court (Kenya Revenue Authority v Kenya Bankers Associations [2020] eKLR) to challenge this requirement by the KRA . KBA argued that the requirement would place the burden of paying CGT that is ordinarily payable by a property owner on either a bank exercising its statutory power of sale to recover a debt or a purchaser in the circumstances.

The Court of Appeal considered the following issues among others:

  1. Whether when exercising the power of sale by, a chargee does so as a proprietor of the charge or of the land?
  2. Whether a chargee in exercise of the statutory power of sale is obligated to pay CGT?
  3. Whether CGT is a tax payable on the charged land or on the income of the proprietor of the land?

The Court of Appeal upheld the decision of the High Court that held as follows:

  1. that a chargee is a proprietor of the charge and not of the charged land.
  2. That a chargee in executing a transfer by charge does so as a nominee of the chargor by virtue of the charge and not as the proprietor of the land.
  3. CGT is a tax payable on the income of the proprietor of the land and is not a tax payable on the charged land.

The Court of Appeal concluded that requiring a chargee exercising its statutory power of sale or purchaser to pay CGT without first ascertaining whether there is in fact capital gain is unreasonable and unfair. KRA was directed to allow for payment of Stamp Duty on an instrument of transfer following the sale of land by a bank pursuant to a bank’s statutory power of sale, without requiring prior payment of CGT. (To view the decision click here)

Subsequent to the above decision, KRA published a notice on 23rd March 2020 dispensing with the conditional presentation of a CGT Acknowledgement Slip before Stamp Duty payment is processed. (To view notice click here).

Effectively, as soon as the necessary adjustments are in place, it will no longer be mandatory to present proof of payment of CGT prior to payment of Stamp Duty and registration of a disposition in land.

Landowners are however still liable to pay CGT only that the same can now be paid after completion of the transfer process. KRA has indeed emphasized that transfer of property will still attract CGT to be paid by the transferor on or before the 20th day of the following month in which the transfer of property is effected.

We are of the view that these changes will go a long way in expediting the transfer process.  This will complement the government’s recent efforts of improving the ease of doing business in Kenya by creating efficiency in the transfer process and promoting investments in the real estate sector.

The content of this alert is intended to be of general information only and should not be relied upon without seeking specific legal advice on any matter.

Should you have any queries or questions on the legal alert, please do not hesitate to contact Nelly Gitau (nelly@oraro.co.ke) or Tesrah Wamache (tesrah@oraro.co.ke).

Salient Changes Under the Business Laws (Amendment) Act, 2020

Posted on March 30th, 2020

On 18th March, 2020 the President assented to the Business Laws (Amendment) Act, 2020 (the Act). The Act, which came into force on its date of assent, seeks to facilitate the ease of doing business in Kenya by amending various statutes. Below is a summary of the salient changes brought about by the Act, that affect specific sectors:

Electronic Execution of Documents
The Act recognises the use of advanced electronic signatures and electronic signatures as a valid mode of execution of documents in Kenya. The recognition of electronic signatures is poised to improve the ease at which land transactions are carried out, especially in transactions where the parties are not in Kenya at the time of execution.

The Stamp Duty Act has equally been amended to provide that documents can be electronically stamped, extending the scope of the initial provision which only recognized stamping by a franking machine or an adhesive stamp.

Electronic Registries
The Registration of Documents Act (the RDA) has been amended to recognise electronic filing of documents. The Registrar of Documents is empowered to establish both the Principal Registry in Nairobi and the Coast Registry in electronic form. This is intended to ease the process of applying for registration of documents under the RDA, as one may not require to physically present a document for registration at either of the two Registries.

Abolishment of Land Rate and Land Rent Clearance Certificates
Previously, a person seeking to register an interest in land was required to provide proof of payment of land rates and land rent before registration is effected. An application for registration therefore had to be accompanied with Rates and Rent Clearance Certificates where rent and rates were payable.

The Act has deleted these provisions in entirety implying that it shall no longer be mandatory to produce Land Rent and Rates Clearance Certificates when applying for registration of an interest in land. Transferees therefore have to individually carry out their own due diligence and satisfy themselves that rent and rates have been paid in order to avoid assuming these liabilities.

It is however important to note that although Section 38 and 39 have been deleted from the Land Registration Act, Sections 55 (b) and 56 (4) which require production of a Rent Clearance Certificate and Consent to Lease or Charge prior to registration remain in force. It will, therefore, be necessary to address this disparity going forward, in order to clarify the applicable completion documents in property dealings.

Waiver of Registration of Workplaces for new businesses
New businesses with less than one hundred (100) employees can now operate without registration of a workplace for a period of one year from the date of registration of the business. This provision is set to provide small and medium sized enterprises with more time to register their workplaces.

Increased threshold for enforcing Squeeze-Out rights in mergers and takeovers
The stake that an acquiring party should purchase before enforcing a squeeze-out has been restored to ninety per cent (90%) from the current stake of fifty per cent (50%). The increase in the squeeze-out threshold seeks to restore the protection of the rights of minority shareholders, especially in listed companies.

Abolishment of the use of common seals in execution
The use of common seals in executing contracts by companies has been abolished. The adoption of this amendment broadens the scope for holding a company accountable for contracts as such contracts may be executed by any person acting under its authority, express or implied authority.

Treatment of bearer shares
Bearers of share warrants can now convert their warrants into registered shares. This provision is poised to recognize and protect the rights of bearers acquired before the coming into force of the Companies Act, 2015.

Additional factors to consider when lifting a moratorium in insolvency matters
The Act has included additional factors to consider when the courts seek to lift a moratorium in insolvency. These include, whether the value of the secured creditor’s claim exceeds the value of the encumbered asset, whether the secured creditor is not receiving protection for the diminution in the value of the encumbered asset, whether the encumbered asset is not needed for the reorganisation or sale of the company as a going concern and whether relief is required to protect or preserve the value of the assets such as perishable goods.. The inclusion of these factors is to take into account the different business exigencies of companies under administration.

Information requests by creditors
The Act gives creditors the right to request for information from the insolvency practitioner in respect of the insolvency process. The information rights will provide more transparency in relation to the insolvency process in Kenya.

Enforcement of the Building Code
The National Construction Authority (NCA) has been authorised to promulgate and enforce the Building Code in the construction industry. Consequently, any matters concerning compliance with the Building Code shall be under the purview of the NCA. The NCA will also have power to promulgate regulations relating to and to conduct mandatory inspections of the construction sites with a view to verify and confirm whether contractors are complying with the construction regulations.

Investment deductions, exemption of supplies for bulk storage of Standard Gauge Railway raw materials and market protectionism
Companies that incur a capital expenditure of at least Kenya Shillings Five Billion (KES 5,000,000,000) on construction of bulk storage and handling facilities with a minimum capacity of one hundred thousand metric tonnes in relation to the Standard Gauge Railway (SGR), will be entitled to investment deductions equal to one hundred and fifty per cent (150%) of the capital expenditure incurred from the year of first use of the facility.
Additionally, taxable supplies procured locally or imported for the construction of bulk storage in support of the SGR operations are exempted from paying import declaration fees.

Further, a twenty five per cent (25%) tax has been imposed on imported glass bottles under the Excise Duty Act.

The adoption of these amendments is intended to boost businesses for local manufacturers and ultimately grow Kenyan brands.

This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact Pamella Ager (pamella@oraro.co.ke), Nelly Gitau (nelly@oraro.co.ke), Jacob Ochieng (jacob@oraro.co.ke), Lena Onchwari (lena@oraro.co.ke), Naeem Hirani (naeem@oraro.co.ke) or your usual contact at our firm, for legal advice relating to the Business Laws (Amendment) Act, 2020 and how the same might affect your business.

Obligations of a Company in Relation to Disclosure of Company Beneficial Ownership Information

Posted on March 4th, 2020

Prior to the coming into force of the Companies Act No.17 of 2015 (the ”Companies Act”), Kenyan Companies were not required to disclose the details of their beneficial ownership of shares. However, pursuant to the Companies (Amendment) Act, 2017 and subsequently the Statute Law (Miscellaneous Amendments) Act, No. 12 of 2019 which introduced section 93A of the Companies Act, companies incorporated or registered in Kenya are required to keep a register of beneficial owners with the relevant information relating to the said beneficial owners as prescribed by the regulations made under the Companies Act.

The Attorney General has published the Companies (Beneficial Ownership Information) Regulations, 2020 (the “Regulations”) which set out in greater detail how these disclosures are to be made and the obligations of a company in relation to these disclosures.

The Regulations define a beneficial owner as the natural person who ultimately owns or controls (emphasis is added) a legal person or arrangements or the natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement (emphasis is added).

The Regulations apply to a beneficial owner who:

  1. holds at least 10% of the issued shares in the company either directly or indirectly;
  2. exercises at least 10% of the voting rights in the company;
  3. holds a right to directly or indirectly appoint or remove a director of the company; or
  4. exercises significant influence or control over the company (emphasis is added).

The term “exercises significant influence or control over the companyhas been defined to mean participation in the finances and financial policies of a company without necessarily having full control over them. This definition is quite wide and may have the effect of covering management and financial advisory companies.

The Regulations also require a company to take reasonable steps to identify its beneficial owners and enter their details in its register of members. The particulars to be included in the register include; the full name, birth certificate number, national identity number, national identity card number or passport, personal identification number, nationality, date of birth, postal address, business address, residential address, telephone number, email address, occupation or profession, nature of ownership or control and the date on which any person ceased to be a beneficial owner.

The Regulations require a company to lodge with the Registrar of Companies (the “Registrar”) in the prescribed form, a copy of its register of beneficial owners within 30 days after its preparation. A company is also required to lodge with the Registrar in the prescribed form any changes in the particulars of the beneficial owner of a company and where the beneficial owner ceases to be a beneficial owner of a company.

The Regulations also impose a duty on a company to investigate and obtain beneficial owner particulars where it has reasonable cause to believe that a person is a beneficial owner of a company by giving the owner notice to provide the same. The person is then required to respond to the notice within 21 days. Where the person fails to respond to the notice, the company is required to keep a copy of the warning notice in its register of beneficial owners, to restrict the relevant interest of a person where the failure to respond is within 14 days from the date of the warning notice, to note the restriction in the register and to file the same with the Registrar.

The effect of a restriction with respect to a relevant interest is that any transfer of the interest is void, no rights are exercisable in respect of the interest, no shares may be issued in right of the interest or in pursuance of an offer made to the interest holder and no payment may be made of sums due from the company in respect of the interest.

A company is also prohibited from disclosing beneficial ownership information except where it is for communication purposes, for compliance with the Regulations, in compliance with a court order or if it has a written consent of the beneficial owner. The Registrar may also use the information for communication purposes with the beneficial owner. However, the beneficial ownership information is prohibited from being made available to the public.

The impact of these Regulations is that companies with shareholders who have nominee shareholding will need to disclose details of the ultimate shareholders and investigate nominee structures that not only depict ownership arrangements but also control arrangements.

This alert is for informational purposes only. If you have any queries or need clarifications, please do not hesitate to contact Jacob Ochieng (Partner), Milly Mbedi (Senior Associate) or your usual contact at our firm for advice.

What the Data Protection Act, 2019 Means for You

Posted on November 13th, 2019

8th November, 2019 marked a great milestone in the history of Kenyan legislation with the enactment of the long-awaited Data Protection Act, 2019 (the Act). The purpose of the Act is to inter alia regulate the collection and processing of data in Kenya. The Act has introduced elaborate obligations to persons who collect and process data whose infringement would lead to stiff penalties of an administrative fine of up to KES 5 million or in case of an undertaking, up to 1% of its annual turnover of the preceding year, whichever is lower.

The Act establishes the office of the Data Protection Commissioner which is to be headed by a Data Commissioner. The role of the office of the Data Protection Commissioner includes overseeing the implementation of the Act, establishing and maintaining a register of data controllers and data processors, exercising oversight on data processing operations, receiving and investigating any complaint by any person on infringement of the rights under the Act.

The Act has extraterritorial application as it applies to data controllers and processors established or resident in or outside Kenya in so far as they process personal data while in Kenya or of data subjects located in Kenya.

All data controllers and data processors who meet the thresholds to be prescribed will now be required to be registered with the Data Commissioner. Failure to register is an offence, whose fine on conviction is KES 3 million or an imprisonment term not exceeding ten (10) years or both.

The Data Commissioner may carry out periodical audits of the processes and systems of the data controllers or data processors to ensure compliance with the Act.

Section 24 of the Act allows data controllers and data processors to appoint a data protection officer who may be a staff member whose role includes advising on compliance with the Act. A group of entities is allowed to appoint a single data protection officer provided that the officer is accessible by each entity.

The Act outlines the principles of data protection which are modelled on the principles set out in the EU General Data Protection Regulation. It further stipulates the rights of persons whose data is collected, including the right to: be informed of the use to which their personal data is to be put; access their personal data in custody of a data controller or data processor; to correction of false or misleading data; and to deletion of false or misleading data about them.

Processing of data is prohibited unless certain conditions set out under the Act, including the obtainment of the consent of the person whose data is processed are fulfilled. In addition, the processing of sensitive personal data is prohibited except for the stipulated permitted grounds. Further, personal data relating to the health of a person may only be processed by or under the responsibility of a health care provider; or by a person subject to the obligation of professional secrecy under any law.

The Act also stipulates that a person shall not use, for commercial purposes, personal data unless inter-alia the person obtains consent from the person whose data is to be used.

The Act outlines the conditions for the transfer of personal data outside of Kenya and the safeguards that must be considered. For instance, where the transfer is necessary for the performance of a contract between a person whose data is collected and the data controller or data processor or implementation of pre-contractual measures taken at the person’s request.

The impact of this Act is that persons who collect, control, manage and store data will need to review their terms and conditions and operations to avoid the risks of non-compliance.

This alert is for informational purposes only. If you have any queries or need clarifications, please do not hesitate to contact Jacob Ochieng, Partner, Milly Mbedi, Senior Associate or your usual contact at our firm, for advice relating to the Data Protection Act, 2019 and how the same will affect you

Amendments to the Companies Act No. 17 of 2015: Registration of Beneficial Owners and Takeover Transactions in Kenya

Posted on September 13th, 2019

On 5th July 2019 the President of the Republic of Kenya assented to the Statute Law (Miscellaneous Amendments) Act, No. 12 of 2019 (the “Miscellaneous Amendments Act”) whose date of commencement was 23rd July 2019. Among the major amendments contained in the Miscellaneous Amendments Act are amendments to Sections 93 and 611 of the Companies Act, 2015 (No.17 of 2015) (the “Companies Act”).

Section 93(1) of the Companies Act has been amended by deletion of the expression “which shall include information relating to beneficial owners of the company, if any”. In addition the expression “including information relating to beneficial owners, if any” contained in section 93(8) of the Companies Act has been deleted. Section 93 A has been inserted immediately after section 93.

Section 93A makes it mandatory for companies to keep a register of beneficial owners with the relevant information relating to the said beneficial owners as will be prescribed by the Companies (Beneficial Ownership Information) Regulations, 2019 (the “Regulations”) that are yet to be gazetted. Further, companies are now required to lodge a copy of the register with the Registrar within 30 days after the preparation of the same. Any amendments to the register shall be lodged with the Registrar within fourteen (14) days save for public listed companies. If a company fails to comply with this requirement, the company, and each officer of the company who is in default, commit an offence and on conviction each liable to a fine not exceeding Kenya Shillings five hundred thousand (KES 500,000/-). If following conviction the company continues to fail to comply, the company and each of its officers in default commits a further offence on each day of which the failure continues and on conviction are liable to a fine not exceeding Kenya Shillings fifty thousand (KES 50,000/-) for each such offence. The rationale of this amendment is to strengthen the government’s resolve in combating money laundering by requiring companies to reveal personal details of individuals holding at least ten percent (10%) stake or voting rights in the company. On the other hand, this amendment has the potential of undermining confidentiality in the business sphere and discouraging foreign investors who value their privacy from investing in local companies.

The amendments to Sections 611(2), 611(4), 615 (3), (4) and (5) of the Companies Act have fundamentally changed the statutory threshold for takeover bids under the Companies Act.  the amendments have deleted the ninety percent (90%) threshold and replaced it with fifty percent (50%) threshold. Hence, in case of a takeover offer, the statutory right will now accrue in cases where (a) the offeror has already acquired (or has unconditionally contracted to acquire) not less than fifty percent (50%) in the value of share to which the offer relates; and (b) if the shares to which the offer relates are voting shares, the offeror has acquired (or has unconditionally contracted to acquire) not less than fifty percent (50%) of the voting rights conferred by those shares. Once the offeror gives a notice pursuant to section 611, the offeror is bound to acquire the shares to which the notice relates on the terms specified in the offer. These amendments will significantly diluted the rights of minority shareholders. On the contrary, it provides ease of doing business in Kenya as it allows any shareholder holding at least fifty percent (50%) to buy out the other shareholders.

This alert is for informational purposes only. If you have any queries or need clarifications, please do not hesitate to contact Jacob Ochieng (Partner), Sheila Nyakundi (Associate) or your usual contact at our firm, for advice relating to the amendments and how the same will affect you.

Housing Fund Levy Set to Take Effect Next Month

Posted on April 16th, 2019

The Principal Secretary in the Ministry of Housing and Urban Development has today announced the coming to effect of the Housing Fund Levy (the levy) introduced, under the Finance Act, 2018.

The employer and the employee shall each be required to contribute 1.5% of the employee's monthly basic salary to a maximum of Kenya Shillings Five Thousand (KES 5000). Voluntary contributions will also be accepted to the scheme at a minimum of Kenya Shillings Two Hundred (KES 200) per month.

According to the notice, the levy shall fall within other payroll statutory deductions such as PAYE, NSSF and NHIF that are deducted by an employer every month. The first contribution shall be due by May 9th 2019.

The purpose of the levy is to finance the Affordable Housing Scheme under the Big 4 Agenda which will enable employees to purchase a home under the scheme, transfer the contributions to a pension scheme, transfer the contributions to another person under the scheme or, as cash to self, spouse, or a dependent child.

We shall update you as this matter unfolds.

Should you require further information on this subject please contact Geoffrey Muchiri (Partner) or Georgina Ogalo-Omondi(Partner): 

Kenya-Mauritius Double Tax Avoidance Treaty

Posted on March 19th, 2019

By Walter Amoko | Lena Onchwari


Kenya, as is the case with other countries, has entered into a number of Double Tax Avoidance Treaties (DTAs) with an aim of avoiding or mitigating double taxation of persons (both legal and natural) residing in the contracting states but more importantly as a way of encouraging Foreign Direct Investments.

Kenya signed a DTA with Mauritius (a country that has a vast treaty network and favorable tax framework) which was subsequently gazetted by the Cabinet Secretary of Finance via Legal Notice Number 59 of 2014 issued under the Income Tax Act. The Tax Justice Network Africa challenged both the constitutionality of the DTA and Legal Notice before the High Court on multiple grounds including opacity of the process, the need for public participation in the exercise, that it was not for the benefit of Kenya and lack of Parliamentary scrutiny.

The High Court has now given its Judgment. The constitutional challenge to the DTA failed. The High Court found that the DTA had some form of ratification as required since both states agreed to be bound by it and that the process of its formulation was open and transparent. Further the court found there was no basis for faulting want of public participation. However, the Legal Notice that was intended to domesticate it was void because it was not tabled before Parliament within the time required by the Statutory Instruments Act.


The High court’s decision did not invalidate the Double Tax Avoidance Treaty by declaring it unconstitutional nor did it affect the propriety of anything done under it prior to the invalidation of the Legal Notice. It merely declared the Legal Notice as void for lack of parliamentary scrutiny. The impact of this is that though the DTA is still valid, it does not have legal effect in Kenya.

It is open to the Cabinet Secretary to issue a new Legal Notice in respect of this (and any other similar Legal Notices on any DTAs entered after 2013) and ensure full compliance with the Statutory Instruments Act including presenting it ; with all the required information, on time to Parliament.

Should you require further information on the DTA, please contact Walter Amoko (Partner) or Lena Onchwari (Partner):

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Oraro & Company Advocates is a full-service market-leading African law firm established in 1977 with a strong focus on dispute resolution and corporate & commercial law. With a dedicated team of 12 partners, 16 associates and 40 support staff, the firm has been consistently ranked by leading legal directories such as Chambers Global, IFLR 1000 and Legal 500 as a top-tier firm in Kenya.

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