Kenya Targets Offshore Investor Exits With Proposed Tax

The Kenyan government has proposed a new law that would impose a 15% capital gains tax on foreign investors selling shares in local companies, aiming to capture revenue from exits previously routed through offshore jurisdictions.

Targeting Common Exit Structures

Under the Finance Bill 2026, which is currently before parliament, the Kenya Revenue Authority (KRA) would be able to tax gains made by non-resident investors when selling shares abroad if those shares derive their value from Kenyan assets. This amendment to the Income Tax Act seeks to close loopholes that have allowed foreign venture capital and private equity firms to exit investments without paying local taxes.

The proposed law specifically targets transactions where “shares derive their value from Kenya,” even if the actual sale occurs outside the country’s borders. This would apply to sectors like technology, energy, and infrastructure, where ownership is often structured through offshore holding companies in places like London, Mauritius, Delaware, or the Cayman Islands.

The Treasury also seeks powers to tax changes in ownership of Kenyan property and transactions that alter a company’s group membership.

Investor Concerns and Potential Impacts

While proponents argue this will ensure fair taxation of economic activity occurring within Kenya, critics warn it could complicate investment exits and deter future capital inflows. The Institute of Certified Public Accountants of Kenya (ICPAK) noted the broad wording might create unintended consequences for various transactions beyond traditional asset sales.

For venture capital investors focused on Kenyan startups—many of which are incorporated abroad despite operating primarily within Africa—this change adds complexity to exit strategies. Foreign investors often utilize offshore structures to simplify fundraising from international limited partners (LPs) and facilitate mergers or acquisitions.

The move follows similar actions by countries like Uganda as governments seek to tax economic value generated locally, regardless of where transactions formally occur.