Kenya is moving to tighten its grip on offshore deal-making involving local companies, proposing a 15% capital gains tax on foreign exits that have traditionally slipped outside its tax net.
Under the Finance Bill 2026 currently before Parliament, non-resident investors could be required to pay tax in Kenya when selling shares in companies whose value is derived from Kenyan assets or operations even if those transactions are executed entirely offshore.
At the centre of the proposal is an amendment to the Income Tax Act that would make gains from “the alienation of shares by a non-resident person where the shares derive their value from Kenya” taxable locally. In practical terms, this targets deals structured through holding companies in jurisdictions such as Mauritius, Delaware, London, and the Cayman Islands, a common setup for private equity and venture capital exits in Kenya.
The Kenya Revenue Authority (KRA) would also gain broader powers to tax transactions that trigger changes in ownership of Kenyan companies or assets, including restructurings at group level. The move is aimed at closing long-standing loopholes that have made it difficult to enforce capital gains tax on offshore transactions tied to Kenyan value.
For foreign venture capital and private equity investors, the proposal could reshape exit strategies in Kenya’s startup ecosystem, where many companies are incorporated offshore despite operating mainly in the country. These structures have been favoured for easier fundraising from global investors, stronger legal protections, and smoother mergers or acquisitions.
However, tax experts warn the wording could go beyond traditional exits. The Institute of Certified Public Accountants of Kenya (ICPAK) cautioned that it may unintentionally capture capital-raising rounds and internal reorganisations at holding-company level, not just asset sales.
The push reflects Kenya’s growing determination to tax value created within its borders, even when ownership structures are international.
Recent disputes highlight the stakes. In 2025, the Kenya Revenue Authority issued a KES 21 billion ($161.7 million) tax demand tied to the offshore sale of Tullow Kenya BV to Gulf Energy, arguing the underlying oil assets in Turkana gave the transaction a Kenyan tax footprint.
A similar precedent dates back to 2017, when the sale of Java House by Emerging Capital Partners to Dubai-based Abraaj Group triggered a prolonged dispute. Kenya’s Tax Appeals Tribunal eventually upheld a KES 773.8 million ($5.9 million) assessment, affirming the tax authority’s position on offshore transactions linked to local value.
With the new proposal, Kenya joins a growing list of countries, including Uganda, tightening rules around offshore deals to ensure that capital gains tied to domestic assets are taxed where the value is created. The move could have far-reaching implications for how global investors structure deals in Africa’s fast-growing tech, energy, and infrastructure sectors.