Operating between Kenya, the UK, and the UAE can be profitable, but complex. This detailed guide explains how to manage accounting, transfer pricing, and tax compliance between these countries while staying fully aligned with KRA and international standards.
Expanding your Kenyan business into the UK or UAE opens the door to global growth, but it also exposes you to three very different financial systems, currencies, and tax laws. Many Kenyan entrepreneurs soon discover that cross-border accounting and compliance are far trickier than they appear on paper. This comprehensive guide explains, step by step, how to manage your books, stay KRA-compliant, and build a transparent, audit-ready business structure that works across all jurisdictions.
Kenya has become one of Africa’s fastest-growing business hubs, and many local entrepreneurs are now setting up subsidiaries abroad.
Commonly, Kenyan holding companies open branches or subsidiaries in the United Kingdom or the United Arab Emirates (UAE) for strategic reasons:
UK: Access to European and global capital markets, credibility with investors, and robust legal protections.
UAE: Tax-friendly environment (corporate tax introduced only recently), business-friendly policies, and proximity to trade routes linking Africa, Asia, and Europe.
However, while these advantages are real, they come with accounting and regulatory complexity. Each jurisdiction has its own tax authority, accounting framework, and compliance schedule, which must be harmonized to avoid conflicts or penalties.
Your Kenyan parent must meet KRA requirements, while your UK entity answers to HMRC, and your UAE branch follows the Federal Tax Authority (FTA).
Keeping all three happy — and coordinated — is the real challenge.
Each country interprets “profit” and “taxable income” differently.
A Kenyan company prepares financial statements under IFRS (International Financial Reporting Standards). In contrast:
The UK applies UK GAAP (Generally Accepted Accounting Principles), which, while based on IFRS, has different disclosure and presentation requirements.
The UAE follows IFRS for SMEs, with additional VAT reporting obligations introduced in 2018 and corporate tax in 2023.
When the Kenyan parent consolidates all these financials into one report, inconsistencies arise — especially around depreciation rates, revenue recognition, and tax adjustments.
If your Kenyan parent depreciates machinery over 5 years, but your UK subsidiary uses a 3-year schedule, your consolidated accounts will show different profit levels — which can mislead investors or trigger auditor queries.
The solution is group-wide accounting alignment — ensuring every entity follows consistent policies, even if the reporting frameworks differ.
“Transfer pricing” refers to how related companies (like your Kenyan parent and UK/UAE subsidiary) price goods, services, or financing between them.
This is crucial because artificial pricing can shift profits to low-tax countries, something KRA, HMRC, and the UAE FTA closely monitor.
If your Kenyan company sells consulting services to its UAE subsidiary at below-market rates, Kenya might lose tax revenue. Conversely, if you overcharge, the UAE entity’s profits shrink — raising red flags with their tax authorities.
Maintain a detailed Transfer Pricing Policy Document (TPD) in line with the Income Tax (Transfer Pricing) Rules, 2023.
Benchmark intercompany prices against independent, third-party rates (the “arm’s length” principle).
File the Transfer Pricing Disclosure Form on iTax annually.
Review pricing annually to reflect changing market conditions.
Note: In 2025, KRA increased data matching between iTax and eTIMS, meaning inconsistent or missing TP data is now an automatic audit trigger.
Funding a foreign subsidiary through internal loans is common — but it must be done properly.
If a Kenyan parent “loans” its UAE subsidiary $500,000 without charging interest, the KRA may treat this as disguised equity or a tax-avoidance scheme.
Under Kenya’s thin capitalisation rules, a subsidiary’s debt-to-equity ratio must not exceed 3:1 for interest deductions to remain allowable.
Sign a formal intercompany loan agreement with defined interest, repayment terms, and board approvals.
Apply a market-based interest rate, usually benchmarked using LIBOR or CBK rates plus a margin.
Record interest income in Kenya and expense in the foreign entity’s books.
If your UAE subsidiary borrows from your Kenyan parent, charge a commercial interest rate (say, 6%). Report this as interest income to KRA and as a legitimate cost to UAE FTA. Both entities stay compliant — and you maintain a defensible tax trail.
Dealing in multiple currencies — KES, GBP, and AED — introduces volatility that can distort your books.
Exchange gains and losses occur when payments and receipts are made at rates different from the date the transaction was recorded.
For instance, if you invoice your UK client in pounds at KES 180/GBP and get paid two months later at KES 190/GBP, the KES 10 difference must be recognized as an exchange gain.
Use the spot rate at the date of the transaction.
Recognize foreign exchange differences in Other Comprehensive Income (OCI) if they relate to long-term investments, or in profit/loss for operational items.
Maintain consistent conversion policies across entities.
Failing to record these accurately can create inconsistencies that draw scrutiny during audits — especially if profits seem inflated due to unrecognized exchange losses.
When a Kenyan company owns a controlling interest (over 50%) in a foreign entity, IFRS 10 requires the preparation of consolidated financial statements.
This process combines all group entities into one unified report.
Converting each subsidiary’s financials into Kenyan Shillings (KES) using end-of-period exchange rates.
Eliminating intercompany transactions (sales, loans, dividends).
Applying consistent accounting policies across the group.
If your Kenyan parent sold goods worth KES 20 million to your UK subsidiary, this sale and purchase must be removed during consolidation to avoid double-counting.
Tip: Use software like NetSuite OneWorld, Xero HQ, or QuickBooks Advanced that supports multi-entity consolidation — reducing manual reconciliations and human error.
Kenya has signed Double Taxation Agreements with both the UK and UAE. These treaties prevent the same income from being taxed twice — once abroad and again in Kenya.
For example, if your UK subsidiary pays management fees to your Kenyan parent, Kenya may withhold 10–15% tax unless the DTA reduces it (often to 5% or 0%).
Obtain a Certificate of Residence from HMRC (UK) or the FTA (UAE).
Submit it to KRA before remitting funds.
Keep agreements and payment proofs to validate transactions.
Without this documentation, KRA may deny DTA relief, leading to unnecessary double taxation.
Bringing profits home involves both KRA and Central Bank of Kenya (CBK) oversight.
Whether it’s dividends, royalties, or service fees, every transfer must have a valid paper trail showing:
Board resolutions approving profit distribution.
Evidence of foreign tax paid (if any).
Exchange control compliance via commercial banks reporting to CBK.
If your UAE subsidiary wires KES 10 million in dividends to Kenya, you’ll need to show KRA the UAE tax certificate, payment record, and supporting financials. This ensures that funds aren’t misclassified as untaxed income.
Operating in multiple jurisdictions increases your audit risk — especially since tax authorities now exchange financial data automatically under global anti-tax-evasion agreements.
Keep reconciled records between iTax filings and foreign financials.
Conduct internal reviews quarterly to detect mismatches.
Implement document retention policies — at least 7 years for KRA.
Engage local accountants in the UK/UAE who coordinate directly with your Kenyan finance team.
KRA can request documentation for any foreign-related transaction, including invoices, contracts, or emails — even years after the transaction occurred. Keeping everything digital and accessible can save your business during an audit.
Global expansion is the next frontier for Kenyan businesses — but without structured accounting and compliance, it can quickly become a liability.
Managing multiple currencies, standards, and tax authorities requires both discipline and documentation.
By implementing robust transfer pricing, loan documentation, and currency management systems, you can build a transparent cross-border structure that satisfies KRA, HMRC, and the UAE FTA alike.
At the end of the day, global success isn’t just about revenue — it’s about compliance, credibility, and control.
Running a business across Kenya, the UK, or the UAE doesn’t have to be complicated.
👉 Visit spondoo.ke today to book your free international accounting consultation with our cross-border specialists at Spondoo Kenya.
We’ll help you structure compliant intercompany transactions, align your group reporting, and ensure full KRA and international compliance — so you can focus on scaling, not stressing.
Act now — let’s make your global growth simple, compliant, and profitable.