Starting a Business in Kenya as a Foreigner

Starting a Business in Kenya as a Foreigner

Starting a Business in Kenya as a Foreigner – Kenya has in the recent past been attracting a lot of foreign investment because of the numerous business opportunities, strategic location, stable political environment and improved ease of doing business. This article entails a summary of the basic considerations one has to put in mind in order to start and run a successful business in Kenya.

Types of Companies In Kenya | Important Consideration when Starting a Business in Kenya as a Foreigner

In Kenya, we have two types companies:

1. Statutory Companies: Which are companies that are created through a special act of the Kenyan parliament. The initial capital for this company is funded by the government. Its objectives, mandate and limitations are also defined in the act of parliament that brought them into existence. An example of such company is the Kenya Pipeline Company (KPC).
2. Registered Companies: these are corporations that are created under the guidelines of the company’s act as stipulated in the Kenyan constitution. The Kenyan government has no direct interests and influence on the formation and operation of this companies. Companies in this category are further classified as discussed below.

Classification Of Registered Companies In Kenya.

Registered companies can be further classified into two types according to Sec 4 of the Company’s Act.

• Private limited company in Kenya – This is a firm established under private ownership. Private companies may issue stock and have shareholders, but their shares do not trade on public exchanges and are not issued through an initial public offering. The Minimum required shareholder / Director has been reduced to 1.
• Public Companies also called a Publicly Traded Company—is an entity where the shareholders have a claim to part of the company’s assets and profits. The company’s securities trade on public exchanges and the company is also required to disclose its financial and business information regularly to the members of the public. The Minimum number of members is 7.

Further to this, a limited/private company may be:

• Limited by Guarantee.  – A memorandum of association limits the liability of shareholders to the amount contributed to the assets of the company.
• Limited by Shares.  – A memorandum of the paid shares limits shareholders liability.
• Unlimited liability.  – No limitation on the liability of its members.

Read more on the types of companies in Kenya here

Company Registration Requirements in Kenya | Timelines for Starting a Business in Kenya as a Foreigner .

The following documents are required when Starting a Business in Kenya as a Foreigner

• At least 3 names on which we are going to conduct a Name Search to ensure that the name is available for you.
• Copy of your valid Travel Passport or Kenyan ID Card (Incase you will have a Kenyan Shareholder / Director)
• Passport size Photo
• Telephone Number, Physical, email and Postal Addresses of the Directors and Shareholders
• Occupation of the Shareholders and Directors
• Shares apportionment percentage in case the company has More than 1 shareholder.
• Once you have all the requirements we go ahead and fill in the CR1, CR2, CR8 and the statement of nominal capital, which you are required to sign and send back to us to finish the process.
  If the process is successful you will be issued with a Certificate of Incorporation and CR12.

Foreigners can fully own a company in Kenya without necessarily having a Kenyan director or co-owner.

• It takes 10 working days to successfully register a company in Kenya. However, the other activities in company Setup include, Tax Registration and Bank Account opening. Approximately, these steps take a Maximum of 21 working days.

Understanding the Difference between Directors and Share Holders.

Most companies have directors and shareholders. The directors are people who manage the company and get involved in the day to day activities of the company. They are the managers in the company.

On the other hand, the shareholders are owners of the company who can also be referred to as the members of the company. Shareholders own the shares of the company. In most cases, the shareholders are not involved in the daily activities of the company.

Investment Requirements for Foreigners In Kenya | Investment Certificate In Kenya.

The Kenya Investment Promotion Act requires foreigners to have a minimum of $100,000 (Sh10 Million) to obtain an investment certificate that qualifies them for incentives such as investment deductions and tax rebates.

Once the investment certificate is obtained, the process of applying for an investor and employee work permit is easy.

Process of Obtaining Work Permits In Kenya.

Starting a Business in Kenya does not automatically qualify you to work and be a Kenyan resident. You need a Work Permit for you to Live and work in Kenya. Your family also qualifies for Dependents Visas once your work permit is approved.

This work permits in Kenya are categorized as follows:

• Class A– For investors intending to engage in prospecting for Minerals or Mining.
• Class B– For investors wishing to invest in Agriculture and Animal Husbandry.
• Class D– For investors offered specific employment by a specific employer who is qualified to undertake that employment.
• Class G– For investors in Specific Trade, Business or Consultancy.
• Class I-Issued to investors in the Country for Religious or Charitable Purposes.
• Class K –For investors who have an assured income derived from sources outside and undertakes not to accept paid employment of any kind.
• Class M– Work permit issued to Conventional Refugees.

Read More on the guidelines for work permits in Kenya here

Taxes Applicable to Businesses In Kenya

Just like any country in the world, the Kenyan government has set up a clear tax policy that enables it to generate revenue to fund key projects and developments in the country.

According to the Kenya Revenue Authority, businesses are subjected to the following main tax heads.

• Corporation Tax.

This tax levied on corporate entities such Limited companies in Kenya. This tax is also imposed on companies based outside Kenya but have subsidiaries or branches in Kenya. The corporation tax rate in Kenya is 30%.

• Value Added Tax. (VAT)

This tax is imposed on taxable goods produced in Kenya or importation of taxable goods into the country. The tax policy in Kenya has set the VAT tax rate at 16%.

 Conclusion

Starting a Business in Kenya as a Foreigner has become easy overtime especially if you engage a consultant to hold your hand throughout the process. We hope that this article has answered some of the questions you had about the whole process.

Feel Free to Contact Us Today for additional help on the same

October 19, 2023