Kenya has rejigged the tax structure for both startups and large firms operating under the Nairobi International Financial Centre (NIFC) framework, slashing corporate income tax rates by as much as 15 percentage points in a bid to boost investments.
These changes were introduced through the newly signed Finance Act 2025 on June 26, 2025. According to the Act’s provisions, startups will now pay a significantly lower corporate income tax rate of 15% for the first three years, and 20% for the following four years, compared to the previous standard rate of 30%.
“In the case of a start-up certified by the Nairobi International Financial Centre Authority, 15% for the first three years and 20% for the succeeding four years,” the Act said.
Under Kenyan law, a startup is defined as a private limited company recognised under Kenyan legislation, in operation for no more than 10 years, and built on strong growth potential, innovation, or a disruptive business model.
Most startups currently operate in fintech, healthtech, and agri-tech—sectors that have gained momentum across East Africa’s largest economy.
Established in July 2022, the NIFC was designed to attract capital from international financial institutions and multinational corporations.
In addition to tax relief for startups, the government has introduced generous incentives for large corporations seeking to establish operations under the NIFC framework.
Certified firms that invest at least $23.2 million into the Kenyan economy within their first three years will benefit from a reduced corporate income tax rate of 15% for 10 years, followed by 20% for the subsequent decade. These investors were also previously subject to a 30% tax rate.
“The Third Schedule to the Income Tax Act is amended…. in respect of a company certified by the Nairobi International Financial Centre Authority, 15% for the first 10 years from the year of commencement of its operations and 20% for the subsequent 10 years of its operation where the company invests at least KSE3 billion ($23.2 million) in Kenya in the first three years of operation,” the Act added.
However, these concessions are conditional.
Eligible firms must be holding companies, designate Kenya as their regional headquarters, and ensure that at least 70% of their senior management are Kenyan nationals.
The Act also introduces dividend tax exemptions. NIFC-certified firms that reinvest a minimum of $1.9 million of their earnings into Kenya will be exempt from the standard 15% withholding tax on dividends paid.
Previously, only firms involved in carbon trading and emissions exchange systems under the NIFC were allowed to benefit from the reduced tax rate.
The broader expansion of eligibility marks a significant shift in Kenya’s investment strategy.
The reforms come against the backdrop of declining foreign direct investment (FDI) into the country. Kenya’s FDI inflows fell slightly to $1.503 billion in 2024, from $1.504 billion in 2023, according to a recent report by the United Nations Centre for Trade and Development.
The decline was attributed to rising tax burdens, reduced investor incentives, and mounting macroeconomic uncertainty.
The latest tax measures show the ongoing efforts by the Kenyan government to restore investor confidence and position Nairobi as a competitive financial gateway to Africa.
Dollar conversions in this report are based on the official exchange rate of KES129.2 to $1 as of July 14, 2025, according to the Central Bank of Kenya.
