Cross-Border Taxation for Kenyans Abroad

Understanding your tax obligations when you have income from multiple countries.

In Simple Terms

If you're a Kenyan resident living abroad, Kenya may still tax your worldwide income. However, you can claim credit for taxes paid to other countries to avoid double taxation. The key is understanding your residency status and which country has the right to tax your income.

Overview

Cross-border taxation refers to situations where you have tax obligations in multiple countries. For Kenyans living abroad, this typically means:

  • Kenya taxes residents on their worldwide income
  • Your country of residence may also tax your income
  • Double-taxation treaties help prevent being taxed twice
  • Foreign tax credits can reduce your Kenyan tax liability

Residency Rules

Your tax obligations depend on whether Kenya considers you a resident or non-resident.

Kenyan Tax Resident

You are considered a Kenyan tax resident if:

  • You have a permanent home in Kenya and are present in Kenya for at least 183 days in a tax year
  • You have a permanent home in Kenya and are present in Kenya for at least 122 days in each of the two tax years immediately preceding the current tax year
  • You have a permanent home in Kenya and are present in Kenya for at least 122 days in the current tax year and in each of the two immediately preceding tax years
  • You are a citizen of Kenya and are present in Kenya for at least 183 days in a tax year

Non-Resident

If you don't meet the residency criteria, you're considered a non-resident. Non-residents are only taxed on income derived from Kenya.

Worldwide Income Taxation

As a Kenyan tax resident, you must declare and pay tax on all income, regardless of where it's earned.

Important

Even if you live abroad, if you're a Kenyan tax resident, you must declare all your income (from Kenya and abroad) to KRA. Failure to do so can result in penalties and interest.

Types of Worldwide Income

  • Employment income - Salary, wages, bonuses from any country
  • Business income - Profits from businesses anywhere in the world
  • Investment income - Dividends, interest, rental income from any country
  • Capital gains - Gains from sale of assets worldwide
  • Pension income - Pensions from any country

Foreign Income Reporting

When reporting foreign income, you must convert it to Kenyan Shillings using the exchange rate at the time the income was received.

Worked Example

Scenario: You work in the UK and earn £50,000 per year. The exchange rate at the time you receive your salary is KES 150 per £1.

Step 1: Convert to Kenyan Shillings

£50,000 × KES 150 = KES 7,500,000

Step 2: Calculate Kenyan tax on this amount

Use the Kenyan tax bands to calculate your tax liability

Step 3: Claim foreign tax credit

Deduct UK tax paid from your Kenyan tax liability (subject to limits)

Foreign Tax Credits

To avoid double taxation, Kenya allows you to claim a credit for foreign taxes paid. This credit is limited to the amount of Kenyan tax payable on that foreign income.

How Foreign Tax Credits Work

  • Calculate your total Kenyan tax liability on worldwide income
  • Calculate the portion of tax attributable to foreign income
  • Claim credit for foreign taxes paid (up to the Kenyan tax on that income)
  • Pay the difference if Kenyan tax is higher

Documentation Required

  • Foreign tax returns or assessments
  • Proof of foreign tax payments (receipts, bank statements)
  • Exchange rate documentation
  • Income statements from foreign sources

Filing Requirements

As a Kenyan tax resident with foreign income, you must:

  • File an annual tax return (ITR) by June 30th
  • Declare all worldwide income
  • Claim foreign tax credits where applicable
  • Maintain records of foreign income and taxes paid
  • File online through iTax (can be done from anywhere)

Filing from Abroad

You can file your Kenyan tax return from anywhere in the world using the iTax portal. You'll need:

  • Your KRA PIN
  • iTax login credentials
  • All income documentation (Kenyan and foreign)
  • Foreign tax payment receipts
  • Exchange rate information

Common Questions

Do I need to pay tax in both countries?

Not necessarily. Double-taxation treaties prevent you from being taxed twice on the same income. You'll typically pay tax in the country where you're resident, and claim credit in the other country. However, you may need to pay the difference if one country's tax rate is higher.

What if I'm not a Kenyan resident?

If you're not a Kenyan tax resident, you only need to pay tax on income derived from Kenya. This includes rental income from Kenyan property, business income from Kenyan operations, and employment income from Kenyan employers.

How do I prove I paid foreign tax?

Keep all documentation including foreign tax returns, tax assessment notices, payment receipts, and bank statements showing tax payments. These documents will be needed when claiming foreign tax credits.

What exchange rate should I use?

Use the exchange rate at the time you received the income. KRA typically accepts rates from the Central Bank of Kenya or recognized financial institutions. Keep documentation of the exchange rate used.