Tax Opinion / Advisory Memo template and sample (Kenya)

TAX OPINION To: Savannah Horticulture Exporters Limited From: Kamau & Wekesa Advocates LLP Date: 8 October 2026 Re: Payment of annual technical service fees to AgriTech BV and related Kenyan tax consequences 1. Question Whether withholding tax applies to the fees and at what rate, and whether transfer pricing documentation is required. 2. Brief Answer Withholding tax is likely to apply to the technical service fees paid to AgriTech BV. Where the fees are treated as management, professional or consultancy fees, or as fees for services of a technical nature, they fall within the class of payments on which withholding tax is imposed on non-resident persons, and the obligation to withhold and remit rests on Savannah Horticulture Exporters Limited as the payer. The rate of withholding tax is not given in the material available to us and must be confirmed against the Income Tax Act as amended by the current Finance Act; the question whether the fees are also subject to tax as business income attributable to a permanent establishment in Kenya is dealt with under that head below. Transfer pricing documentation is likely to be required. The parties are related through common shareholding and the transaction is a cross-border payment of USD 400,000, and our understanding is that the Income Tax (Transfer Pricing) Rules apply to cross-border transactions between related persons and require a transfer pricing policy or documentation demonstrating that the transaction is at arm's length. The current threshold and the form of documentation required must be confirmed against the Rules and the Income Tax Act as amended. 3. Facts Relied On Savannah Horticulture Exporters Limited makes a payment of annual technical service fees of USD 400,000 to AgriTech BV, a Netherlands-resident related company. AgriTech BV has no permanent establishment in Kenya; the services are performed partly in Kenya by visiting agronomists; the parties are related through common shareholding. The relevant facts are as follows: 1. The taxpayer is Savannah Horticulture Exporters Limited, a company resident in Kenya. 2. The counterparty is AgriTech BV, a company resident in the Netherlands. 3. The transaction is the payment of annual technical service fees of USD 400,000 by Savannah Horticulture Exporters Limited to AgriTech BV. 4. AgriTech BV has no permanent establishment in Kenya. 5. The services are performed partly in Kenya by visiting agronomists. 6. The parties are related through common shareholding. This opinion depends on the accuracy of the facts set out above, and it must be revisited if any of them is wrong or changes. 4. Analysis Withholding tax. Our understanding is that the Income Tax Act imposes withholding tax on payments made by a resident person to a non-resident person in respect of management, professional or consultancy fees, and fees for services of a technical nature, and that the payer is required to deduct the tax at source and account for it to the Kenya Revenue Authority. The USD 400,000 paid by Savannah Horticulture Exporters Limited to AgriTech BV is consideration for technical services, and the services are performed partly in Kenya by visiting agronomists. On those facts the fees are very likely to fall within the class of payments on which withholding tax on non-residents is imposed, and Savannah Horticulture Exporters Limited carries the obligation to deduct and remit. The rate at which withholding tax is charged is not given in the material available to us. Rates of this kind are fixed by the Income Tax Act and are amended from time to time by each Finance Act; the applicable rate must therefore be confirmed against the Income Tax Act as amended by the current Finance Act before any deduction is made. For the same reason we do not express a concluded view on the final tax character of the payment, and we note that the question whether the payment is chargeable as income attributable to a permanent establishment in Kenya, or is instead dealt with under the withholding tax machinery alone, depends on the application of the relevant provisions of the Income Tax Act to services performed partly in Kenya, and on the terms of the technical services arrangement, which we have not seen. Transfer pricing. Our understanding is that the Income Tax (Transfer Pricing) Rules apply to transactions between persons who are related, and that where such a transaction is cross-border the taxpayer must maintain documentation demonstrating that the terms of the transaction are consistent with the arm's length principle. AgriTech BV is a Netherlands-resident company and the parties are related through common shareholding; the payment of USD 400,000 in annual technical service fees is therefore a related-party cross-border transaction of a kind to which the Rules are directed. Transfer pricing documentation is accordingly likely to be required, and we regard the maintenance of an arm's length analysis, contemporaneous with the transaction, as prudent in any event.

Tax Opinion / Advisory Memo template (Kenya)

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