KRA to start taxing foreign earnings of Kenyan remote workers after landmark ruling
KRA to start taxing foreign earnings of Kenyan remote workers after landmark ruling
Thousands of online remote workers in Kenya are set to be affected after the Kenya Revenue Authority (KRA) moved to tax income earned for projects outside the country, but the actual job is managed or controlled from Kenya.
KRA recently won a case against a German company working remotely and was being managed from Kenya after the Tax Appeals Tribunal ruled in favour of the authority.
In a March 26 judgement, the tribunal sided with KRA in a Ksh1.9 billion dispute between KRA and the German company that had argued income from projects executed outside Kenya fell outside tax reach.
According to the tribunal, because key management and control of the projects were exercised from Kenya, the income was “derived from Kenya” and therefore taxable locally.
It further held that where a business or project is partly run in and out of Kenya, the whole of the gains or profits may be treated as Kenyan income.
The ruling has come as a shock to thousands of youths in Kenya who nowadays have shifted to remote work, doing and managing tasks for foreign companies while sitting comfortably in the comfort of their homes in Kenya.
Over the past decade, Nairobi has emerged as a base for back-office teams, engineers, designers and analysts working for foreign companies without those firms setting up a formal Kenyan presence.
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Based on 2025-2026 reports from the Ministry of Labour, over 185,000 Kenyans are engaged in digital, remote, or foreign-based jobs. This is largely driven by government initiatives like Jitume Labs and growing international demand.
Key sectors include IT, customer service, and freelancing, with significant demand from U.S.-based companies.
In many cases, foreign companies pay Kenyan workers directly, assuming that without a local office and with projects serving foreign markets, Kenyan tax exposure is limited.
According to KRA, if management, oversight or coordination of work happens from Kenya, economic value is being created locally and is therefore taxable.
“Foreign income is income earned outside Kenya which would have been taxable in Kenya under Kenyan tax laws if it had been accrued or derived in Kenya or deemed to have been accrued in or derived in Kenya,” KRA says.
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