Kenya is preparing to increase its tax net to cover offshore sales of local companies, which could affect how foreign investors exit startups and other businesses tied to the country.
Under the Finance Bill 2026 before parliament, the government wants to introduce a 15% capital gains tax on gains made by non-resident investors selling shares abroad when those shares derive value from Kenyan assets or operations.
If passed, the amendment to Kenya’s Income Tax Act would allow the Kenya Revenue Authority (KRA) to tax transactions completed outside the country, even when the companies involved are registered in foreign jurisdictions such as Mauritius, Delaware, London or the Cayman Islands.
The proposal targets a long-standing structure used by venture capital and private equity firms investing in African startups. Many Kenyan startups operate locally but are incorporated abroad because foreign investors prefer offshore holding companies that simplify fundraising, offer stronger legal protection and make acquisitions easier.
Kenya now wants a share of the profits when those investors exit.
The bill states that gains arising from “the alienation of shares by a non-resident person where the shares derive their value from Kenya” would become taxable locally, regardless of where the transaction happens.
Treasury officials are also seeking powers to tax deals involving “a change of the group membership of a company resident in Kenya” as well as changes in ownership tied to Kenyan property.
The proposed law could impact investor exits in sectors including technology, energy and infrastructure, where offshore ownership structures are common.
For founders and investors in Kenya’s startup ecosystem, the changes may create fresh tax exposure during acquisitions, secondary sales and restructuring exercises carried out at the holding-company level.
The Institute of Certified Public Accountants of Kenya (ICPAK) warned lawmakers that the amendment may go beyond standard asset sales.
“As drafted, the provision may create Kenyan CGT exposure for offshore investor exits, capital raising transactions, group restructurings and internal reorganisations undertaken at holding company level,” the body said.
Kenya’s move follows a string of high-profile disputes over offshore transactions linked to local assets.
Last year, Tullow Oil agreed to sell its Kenyan subsidiary, Tullow Kenya BV, to Gulf Energy in a deal connected to the Lokichar oil project in Turkana. Although the transaction was structured offshore, the KRA issued a KES 21 billion ($161.7 million) tax demand, arguing that the transferred shares drew their value from Kenyan oil resources.
The tax authority took a similar position in the 2017 sale of Java House by Emerging Capital Partners to Dubai-based Abraaj Group. Kenya’s Tax Appeals Tribunal later upheld a KES 773.8 million ($5.9 million) tax assessment after rejecting arguments that the transaction fell outside Kenya’s jurisdiction.
The Finance Bill 2026 also includes other tax measures. Kenya plans to raise rental income tax from 7.5% to 10%, introduce a 20% tax on gambling winnings and impose a 1.5% withholding tax on scrap metal sales.
Most provisions in the bill are expected to take effect from July 1, 2026, if parliament approves them.
Kenya is not alone in strengthening tax rules around offshore deals. Uganda already taxes some offshore transactions linked to local assets, while governments across emerging markets are increasing pressure on multinational investors to pay taxes where economic value is created.
For foreign investors already dealing with a slow funding market across Africa, the proposed tax could complicate and increase the cost of Kenyan startup exits.
