Kenya proposes 15% tax on foreign VC exits in major shake-up of investment rules

Kenya is planning to introduce a 15% capital gains tax on offshore exits involving local companies, in a move that could significantly reshape how foreign venture capital and private equity investors structure deals in the country.

The proposal is contained in the Finance Bill 2026 currently before Parliament and targets transactions where foreign investors sell stakes in Kenyan businesses through offshore holding structures, even when the sale happens outside the country.

Under the proposed amendment to the Income Tax Act, any gains made by non-resident investors disposing of shares that derive their value from Kenyan assets or operations would be subject to taxation in Kenya. This means deals executed through jurisdictions such as Mauritius, London, Delaware, or the Cayman Islands could still attract local tax liability.

The Kenya Revenue Authority is also seeking expanded powers to tax ownership changes involving Kenyan assets, a move aimed at closing loopholes that have allowed some offshore transactions to escape taxation.

The proposal is expected to have wide implications for the startup and investment ecosystem, where many companies are incorporated abroad to simplify fundraising and cross-border deals. Analysts say it could complicate exit strategies for foreign investors in Kenya’s technology, energy, and infrastructure sectors.

Industry bodies, including the Institute of Certified Public Accountants of Kenya, have warned that the wording of the bill could also capture internal restructurings and capital-raising transactions, potentially increasing compliance uncertainty for investors and companies.

The move follows several high-profile disputes involving offshore transactions tied to Kenyan assets, including oil and tech-related deals, as authorities intensify efforts to capture tax revenue from value generated within the country.

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