How can a foreigner open a company in Kenya

Kenya attracts a lot of foreign investment due to numerous opportunities for companies, strategic location, stable political environment and ease of doing business.

Registering a business in Kenya offers a number of benefits to those looking to start or operate a business here, from tax benefits and legal protection to access to finance and global visibility, opening up new opportunities for entrepreneurs.

Foreigners are allowed to register a company in Kenya on their own, together with other foreigners or with citizens of the country. The registration process is managed by the Government of Kenya through the e-citizen platform.

Types of companies in Kenya

1.  Individual entrepreneurship

Sole proprietorship/company names are often registered by Kenyans wishing to run a small business using a name other than their own. There is no legal separation between the owner and the business, and therefore all responsibilities fall on the business owner. This creates a high risk for personal assets if something goes wrong.

2.  Partnership

Partnership involves two or more people pooling resources to run a business. Businesses registered as partnerships are similar to sole proprietorships in that all responsibilities fall on the individual partners.

3. Limited Liability Partnership

The new Companies Law contains a provision for the registration of limited liability partnerships. The structure is the same as that of a general partnership, the only difference being that liability to partners is limited and, therefore, reduces their risks.

4.  Limited Liability Company (LLC)

Limited Liability Companies (LLC) are the most common business entity in Kenya due to their ease of formation, compliance and protection of owners from personal liability. The new company law allows sole owners to create limited liability companies. The owners of an LLC can be natural or legal persons of Kenyan or foreign origin. The advantage of this option is that partners are only required to pay personal income tax and not the corporate tax levied on Kenyan businesses. All income received from the business is taxed at the partnership level.

5. Closed Joint Stock Company

Foreigners are allowed to register an organization as only 1 director and 1 shareholder. This means that to successfully register you do not need to find a local director to work in your company.

Foreigners can also manage this organization locally or from abroad. By using management consultants, your business can operate even in your absence as you receive assistance with employee benefits, tax filing, and other official requirements.

5. Company branch in Kenya

Foreigners wishing to do business in Kenya can do so by registering a branch of their foreign company in the country. The branch requires you to have a local representative. When a company is registered as a branch, it is considered a foreign organization and is subsequently required to pay a tax of 37.5%.

6. Subsidiary

A subsidiary is owned by a parent company. However, it has a different name and its obligations do not extend to the parent organization. The subsidiary is treated as an independent entity and only has to pay 30% tax to the Kenya Revenue Authority.

7. Public company

To register a public company in Kenya, a minimum of seven shareholders and two directors are required. The company has no restrictions on the maximum number of shareholders and can sell its shares to the public. The process of registering a public company in Kenya is the same for both public and private companies.

Classification of registered companies in Kenya

Registered companies can be classified into two types as per Section 4 of the Companies Act:

• Private limited company — This is a privately owned company. Private companies may issue shares and have shareholders, but their shares are not traded on public exchanges or issued through an initial public offering. The minimum required number of shareholders/directors has been reduced to 1.
• Public company, also called a publicly traded company — it is an organization whose shareholders are entitled to a portion of the company's assets and profits. The company trades securities on public exchanges, and the company is also required to regularly disclose its financial and business information to members of the public. Minimum number of participants — 7.

Investment requirements for foreigners in Kenya

Kenya's Investment Promotion Act requires foreigners to have a minimum of US$100,000 (Sh10 million) to obtain an investment certificate, which entitles them to incentives such as investment deductions and tax credits. Some industries, such as insurance, banking, mining and bookmaking, have additional capital requirements, which are often dictated by the regulator.

After receiving the investment certificate, the work permit application process becomes simple for the investor and employee.

Requirements for registering a foreign company in Kenya

• Notarized copy of the parent company registration certificate
• Copies of directors’ passports and local representative’s national identity cards.
• Passport size photographs of directors and local representatives
• Mailing, physical and email address, telephone number and occupation of the parent company, directors and local representative

In the process of registering a foreign company, a foreigner is required to indicate:

• Registered address in Kenya
• Company work schedule
• Official contacts of the company

Process of obtaining a work permit in Kenya

Opening a business in Kenya does not automatically give you the right to work and be a resident of Kenya. You need a work permit to live and work in Kenya. Your family is also eligible for a dependent visa once your work permit has been approved.

Work permits in Kenya are divided into the following categories:

• Class A. For investors intending to engage in mineral exploration or mining activities.
• Class B. For investors wishing to invest in agriculture and livestock.
• Class D. Investors are offered a specific job with a specific employer who is qualified to do that job.
• Class G. For investors in a specific trade, business or consulting.
• Class I. Issue to investors in the country for religious or charitable purposes.
• Class K. For investors who have guaranteed income from outside sources and agree not to accept paid work of any kind.
• Class M. Work permit issued to refugees.

Taxes applicable to business in Kenya

Like any other country in the world, the Kenyan government has developed a clear tax policy that allows it to generate revenue to finance key projects and developments in the country.

According to the Kenya Revenue Authority, businesses are subject to the following main taxes:

• Income tax

This tax is levied on legal entities such as limited liability companies in Kenya. This tax is also levied on companies based outside Kenya but having subsidiaries or branches in Kenya. The corporate tax rate in Kenya is 30%.

• Value added tax (VAT)

This tax is levied on taxable goods manufactured in Kenya or import of taxable goods into the country. Kenya's tax policy has set the value added tax rate at 16%.