Kenya In Brief

Below, please find issue 5 of ENS' Kenya in brief, focusing on the latest legal and regulatory updates across Kenya’s corporate commercial and banking and finance industries.

corporate commercial

• Technology and Innovation
  • Kenya gets its first law purpose-built for technology cities
    • Assented to on 11 May 2026, the Technopolis Act, 2026 (“Act”) establishes Kenya's first dedicated statutory framework for establishment, development, and governance of technopolises which are technology-focused urban developments designed to serve as integrated centres for investors, researchers, startups, and public agencies.
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  • Key features of the Act include:
    • One-stop service hubs: each technopolis will offer integrated centres consolidating licensing, permitting, and access to government services under a single governance structure, reducing administrative friction for investors and businesses.
    • Dispute resolution: the Act introduces the Technopolis Dispute Resolution Tribunal, a dedicated body to handle appeals related to licensing decisions, enforcement matters, and development approvals.
    • Investor incentives: the Cabinet Secretary may gazette specific incentives for technopolis investors, with the details to be set out in subsequent regulations and gazette notices.
    • Sustainability and support services: each technopolis is required to adopt modern integrated infrastructure, emerging technologies, and green building practices, and to offer support services including mentorship, funding access, and networking.

Non-profit sector

• NGOs transition to a new regulatory regime
  • Gazetted on 18 March 2026 and approved by Parliament in April 2026, the Public Benefits Organisations Regulations, 2026 (“Regulations”) operationalise the Public Benefits Organisations Act, 2013 (“PBO Act”) and replaced the repealed Non-Governmental Organisation Co-ordination Regulations of 1992. The Regulations complete the long-anticipated transition from the non-governmental organisation regime under the repealed Non Governmental Organisation Co-ordination Act (“NGO Act”) to the public benefits organisation regime under the PBO Act, introducing a mandatory transition process requiring non-governmental organisations registered under the NGO Act to submit documentation to the Public Benefits Organisation Regulatory Authority (“PBORA”) for issuance of new certificates or permits.
• Key features of the Regulations include:
  • Mandatory transition: organisations previously registered under the repealed NGO Act must submit prescribed information and documentation to the PBORA for issuance of a certificate or permit confirming their status as public benefits organisations under the PBO Act.
  • Localisation requirements: international public benefits organisations must have at least one-third Kenyan resident directors, maintain a physical office in Kenya, and appoint an authorised Kenyan agent to receive official summons and notices.
  • Enhanced compliance obligations: public benefits organisations are now required to prepare audited accounts, file annual reports, maintain up-to-date records including asset registers, make mandatory disclosures on funding sources, and submit electronic filings.
  • Regulatory oversight: the PBORA has been positioned as an active, ongoing regulator with inquiry powers, enhanced monitoring, and visibility over operations. The Authority has a sixty (60)-day deadline for determining registration applications and must provide at least thirty (30) days' notice before any suspension or cancellation of registration.
  • Income-generating activities: public benefits organisations may engage in income-generating activities, provided that any profits are used solely to support their public benefit objectives and comply with licensing and regulatory requirements.

Banking and finance

• Bank Capitalisation
  • Bank capital deadlines tighten with no extensions in sight
    • Under the Business Laws (Amendment) Act, 2024, minimum core capital for commercial banks is being raised in phases, with a requirement of attaining a minimum core capital of KES 5 billion by December 2026. As of March 2026, four banks remained below the earlier KES 3 billion thresholds, whilst fifteen (15) banks still needed to raise a combined KES 33.6 billion to meet the December 2026 target. The Central Bank of Kenya (“CBK”) has ruled out any extensions, setting the stage for mergers, acquisitions, shareholder injections, or potential exits from the market in the second half of 2026. This progressive capital push is expected to reshape Kenya's banking sector by increasing pressure on smaller lenders. 

Energy

• Kenya Power's retail monopoly comes to an end
  • Gazetted on 8 May 2026, the Energy (Electricity Market, Bulk Supply, and Open Access) Regulations, 2026 (“Regulations”) allow power producers to sell electricity directly to large consumers, ending Kenya Power and Lighting Company PLC’s (“Kenya Power”) decades-long monopoly on retail electricity distribution. Direct sale agreements between producers and consumers will last between one (1) and ten (10) years, with prices subject to approval by the Energy and Petroleum Regulatory Authority (“EPRA”). Kenya Electricity Generating Company PLC (“KenGen”), which supplies 59% of all electricity purchased by Kenya Power, has long sought this reform. The Regulations also introduce wholesale and retail market segments and expanded regional electricity trade within East Africa. The Regulations represent a significant step in Kenya's transition towards a more competitive electricity market. Businesses with substantial energy requirements, power project developers, investors, and financiers should assess the opportunities and regulatory implications arising from direct power procurement, open access arrangements, and the evolving wholesale electricity market.

Tax

• Tax Legislation
  • Finance Act 2026: what changes for taxpayers from 1 July
    • The Finance Act, 2026 (“Act”) was assented to in June 2026, alongside the Appropriation Act, 2026. Most provisions take effect on 1 July 2026, with some scheduled for 1 January 2027. The Act introduces a wide range of tax and fiscal reforms across several key tax statutes.
  • Key amendments include:
    • Withholding tax (“WHT”) on card payment fees: the definition of "management or professional fee" is expanded to include interchange fees and merchant service fees from card-based payment transactions, bringing them within the withholding tax net. This is a direct legislative response to the Supreme Court ruling in Barclays Bank of Kenya v Commissioner for Domestic Taxes, which had held that such fees were not subject to WHT.
    • Rental income: the tax rate on residential rental income increases from 7.5% to 10%. A new final withholding tax of 30% on gross rent from immovable property and 15% on rent from movable property earned by non-residents is also introduced.
    • Capital Gains Tax (“CGT”) expansion: CGT now applies to gains derived by non-residents from indirect share transfers where shares derive their value from Kenya, or where the transaction results in a change of group membership or property ownership in Kenya.
    • East African Community (“EAC”) dividend withholding tax: the preferential 5% withholding tax rate on dividends previously available to East African Community citizens is deleted, aligning Kenya with Uganda and Tanzania.
    • Value Added Tax (“VAT”) on digital financial services: Payment processing, settlement, merchant acquiring, gateway and aggregation services supplied for a fee or commission by payment service providers are removed from the financial services VAT exemption and will therefore be subject to VAT. This affects payment infrastructure providers and merchant payment services rather than mobile money transactions generally.
    • Tax amnesty: the amnesty on interest, penalties, and fines is reinstated, covering liabilities up to 31 December 2025, with a payment deadline of 31 December 2026.
    • Corporate tax return deadline: Individuals must file annual self assessment returns within four months after the end of their year of income. The six-month filing deadline for companies and other non individual taxpayers remains unchanged.
    • Anti-avoidance framework: the definition of "scheme" under the Tax Procedures Act is broadened to capture a wider range of tax avoidance arrangements.
    • Capital Gains Tax (“CGT”) relief for REITs: Transfers of property to a registered Real Estate Investment Trust (“REIT”) are exempt from CGT, facilitating tax-efficient property transfers into REIT structures.
• Capital Gains Tax Reform
  • Intra-group restructurings freed from capital gains tax
    • Assented to on 11 May 2026, the Income Tax (Amendment) Act, 2026 (“Act”), rationalises the administration of Capital Gains Tax (“CGT”) to align with international best practices. The Act exempts CGT on transfers of property undertaken as part of internal company reorganisations where there is no actual economic gain or third-party transaction, such as intra-group restructurings. This is a welcome development for businesses seeking to restructure their operations or consolidate holdings without triggering a CGT liability on transfers that do not involve a genuine external realisation of value. The amendment promotes tax neutrality and removes a practical barrier that had previously discouraged efficient corporate restructuring in Kenya. 

Dispute resolution

• Privatisation
  • Court clears the path for sale of eleven state-owned enterprises
    • On 19 February 2026, the Milimani High Court in Matindi v National Assembly & 2 others [2026] KEHC 2484 (KLR), dismissed a petition challenging the constitutional validity of the Privatization Act, 2025, clearing the way for the divestiture of eleven state-owned enterprises including the Kenya Pipeline Company, Kenya Airways, and the Kenyatta International Convention Centre. The ruling was critical to unlocking the Government's asset recycling strategy and the approximately KES 100 billion projected from privatisation proceeds.

Upcoming developments to watch

• Digital Assets
  • Kenya's first licensing regime for crypto businesses takes shape
    • The National Treasury gazetted the Virtual Asset Service Providers Regulations, 2026 ("Regulations") on 22 July 2026 vide Legal Notice No. 134, which operationalise the Virtual Asset Service Providers Act, 2025 and establish Kenya's first comprehensive licensing regime for cryptocurrency and digital asset businesses.
    • The Regulations apply to all persons offering virtual asset services in or from Kenya, regardless of physical presence. However, the practical licensing requirements effectively require a local footprint: applicants must provide a physical office address in Kenya, and the chief executive officer must be domiciled in Kenya, which is expected to encourage international firms to set up locally but also raises entry barriers. Stablecoin issuers are required to hold at least 30% of customer funds in trust accounts within Kenyan commercial banks, segregated for the processing of funds related to the issuance and redemption of stablecoins. Regulatory oversight is shared jointly by the Central Bank of Kenya ("CBK") and the Capital Markets Authority ("CMA"), with the CBK overseeing payments, custody, stablecoin issuance, and foreign currency conversion, whilst the CMA handles token offerings, exchange and platform listings, tokenisation, and investment advice. Under the parent Act, all VASPs currently operating in Kenya must comply with its provisions by 4 November 2026.

Competition

• New rules proposed for how dominance is measured in digital markets
  • Published on 19 February 2026, the Competition (Amendment) Bill, 2026 (“Bill”)is currently before the National Assembly and includes provisions relating to digital market regulation. The Bill proposes significant amendments to the Competition Act, with a particular focus on how dominance and market conduct are assessed in the digital economy. 
• Key proposals include:
  • Digital market dominance: dominance in respect of digital activities may be established even where an undertaking holds a market share below 40%, where the Competition Authority of Kenya (“CAK”) determines that the undertaking enjoys a "strategic market position" based on factors such as network effects, economies of scale, switching costs, and innovation driven competitive pressure.
  • Abuse of superior bargaining position: the Bill introduces a new prohibition on the abuse of a superior bargaining position, extending protections beyond traditional buyer-supplier relationships to all contractual relationships, regardless of whether the party is a supplier or purchaser.
  • Merger control: the Bill proposes to include mergers of privatised institutions within the CAK's review framework, introduce public participation in merger assessments, and align merger thresholds with evolving market realities.
• Market participants, particularly those operating digital platforms and those involved in cross-border transactions, should monitor the progress of this Bill closely.

Investment and Special Economic Zones

• Oil and gas brought into the Special Economic Zones (“SEZ”) incentive framework
  • The Special Economic Zones (Amendment) Act No. 12 of 2026 (“Act”) which commenced on 15 May 2026, broadens the scope of Kenya's SEZ framework to include oil and gas zones and petroleum operations alongside existing sectors such as agro-processing, manufacturing, mining, and advanced technology-driven production. The Act harmonises tax incentives applicable to entities operating within SEZs and strengthens the framework by providing a minimum licence tenure of ten years to accommodate the long project cycles associated with large-scale capital investments. By extending SEZ incentives to upstream and midstream petroleum activities for the first time, the Act represents a deliberate effort to reposition Kenya as a more competitive destination for long-term oil and gas capital. 

Data governance

• Draft National Data Governance Policy, 2026
  • In May 2026, the Ministry of Information, Communications, and the Digital Economy released the draft National Data Governance Policy, 2026 (“Policy”). The policy treats data as a strategic national asset and proposes a national data marketplace where businesses and researchers can purchase anonymised government datasets. It also proposes a national Application Programming Interface (API) gateway and a master data management system to enable secure data sharing across government. Implementation is expected to begin in July 2026 through a phased approach focused initially on standards and capacity building. This could significantly affect technology companies, data-driven businesses, and any organisation handling public or personal data in Kenya.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.