Kenya has adopted the OECD’s Global Minimum Tax (Pillar Two), introducing a Domestic Minimum Top-up Tax for multinational companies.
Global Minimum Tax is a set of rules endorsed by the OECD/G20 Inclusive Framework (IF) member countries on Base Erosion and Profit Shifting (BEPS).
The objective is to reform the international corporate tax framework by ensuring that MNEs pay a minimum level of tax on their income in every jurisdiction where they operate.
Kenya Adopts OECD Global Minimum Tax for Multinational Companies
Multinational enterprises in Kenya will now have to pay at least a 15% effective tax rate on profits earned locally.
The rules apply to large multinational companies that are either residents in Kenya or have a permanent establishment (PE) in the country, such as an office, branch, or factory.
They must also be part of a multinational group and have consolidated revenues of at least €750M.
The Finance Act, 2025, requires that the minimum top-up tax be paid by the end of the fourth month following the close of the tested year of income.
This means that the first minimum top-up tax will be payable by 30 April 2026.
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The move allows Kenya to retain taxing rights on low-taxed profits within its jurisdiction, limiting the ability of other countries to collect top-up taxes under global rules.
Minimum Top-up tax was introduced through the Tax Laws Amendment Act, 2024, which took effect on 27th December 2024.
However, under the draft regulations issued on 3rd November 2025, the law applies to income years beginning on or after 1 January 2025.
How is Effective Tax Rate (ETR) Calculated
Once it is determined that a Multinational enterprise Group is in scope for the GMT, the combined effective tax rate (ETR) is calculated for each constituent entity using the following formula.
Adjusted Covered Taxes ÷ (GloBE) Net Income or Loss × 100
The computation of adjusted covered taxes and net income or loss is explained in the OECD model rules and Kenya’s (draft) Income Tax (minimum top-up tax) Regulations, 2025.
If the computed ETR is below the 15% threshold, a covered person must pay a top-up tax to reach the 15% minimum.
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When two or more covered persons are members of the same group in Kenya, this leads to jurisdictional blending, which involves calculating a single ETR for all covered persons within the same group in Kenya.
When two or more covered persons belong to the same group, their net incomes and covered taxes are combined to determine one ETR.
If the combined ETR falls below 15%, a minimum top-up tax becomes payable. This tax is then allocated among the covered persons in proportion to the net income attributable to each.
Alternatively, the computed tax may be paid by any of the CEs as deemed appropriate by the group. Where the group ETR exceeds 15%, no single CE is expected to pay top-up tax, irrespective of its ETR.
