The Finance Act, 2026 introduced a significant tax change for non-resident contractors operating in Kenya’s extractive sector, including the petroleum and mining industries.
The headline change: the corporate income tax rate is coming down from 37.5% to 30%.
What Exactly Changed?
Under the Ninth Schedule to the Income Tax Act, the corporate income tax rate for a non-resident company carrying on contractor activities in the extractive sector was reduced:
Previous rate: 37.5%
New rate: 30%
But there is another important change. The Act introduced a 15% tax on repatriated income for both:
- Non-resident licensees; and
- Non-resident contractors
This applies under Section 7B of the Income Tax Act.
Let’s Put This Into Numbers
Suppose a non-resident contractor makes KES 100 million in taxable income.
Under the old 37.5% rate:
Tax = KES 37.5 million
Under the new 30% rate:
Tax = KES 30 million
That is a KES 7.5 million reduction in corporate income tax on KES 100 million of taxable income.
However, there is an important second layer to consider. If the profits are repatriated from Kenya, the 15% tax on repatriated income will apply to both non-resident licensees and contractors.
When Does This Take Effect?
Effective date: 1 January 2027
This means businesses have time to review their structures and prepare before the new rate takes effect.
Who Needs to Pay Attention?
This change is particularly relevant to:
- Mining companies
- Petroleum businesses
- Non-resident extractive-sector contractors
- International companies providing services in Kenya’s extractive industry
Businesses should review their:
- Contracts
- Pricing arrangements
- Tax models
- Profit repatriation policies
They should do this ahead of the effective date.
The Bottom Line
From 1 January 2027, qualifying non-resident contractors in Kenya’s extractive sector will see their corporate income tax rate move:
37.5% ➡️ 30%
That is a 7.5 percentage-point reduction.
However, when income is repatriated from Kenya, 15% tax on repatriated income will apply to both licensees and contractors.
So, the tax rate reduction is important—but so is understanding what happens when profits leave Kenya.
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