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[ESTABLISHING A BUSINESS ENTITY IN KENYA]
strengthening its fight against money laundering, Kenya has enacted the Proceeds of Crime and Anti-Money Laundering Act No.9 of 2009, which, under section 12, regulates the conveyance of monetary instruments in and out of Kenya. Specifically, individuals entering or departing the Kenyan territory while in possession of a cumulative sum exceeding the threshold of ten thousand United States Dollars (USD $10,000), or its approximate equivalent of one million, three hundred and twenty thousand Kenyan Shillings (KES 1,320,000), in physical currency, are mandated by Kenyan law to declare such assets to the competent customs authorities. Kenya boasts a dynamic economic structure characterised by a controlled floating exchange rate regime, underpinned by a capital account that has been liberalised to promote economic openness and international trade. The Central Bank of Kenya (CBK) wields volatility control mechanisms judiciously to modulate short-term price fluctuations within the financial markets. These measures are instrumental in maintaining financial stability and fostering investor confidence by mitigating undue volatility and price swings that might otherwise disrupt the country's economic equilibrium. In essence, Kenya's commitment to facilitating the free flow of investment funds while concurrently adhering to internationally recognized protocols for combating financial crimes is emblematic of its standing as an open and responsible participant in the global economic arena. These legal and regulatory frameworks reflect the nation's ongoing dedication to creating an environment that fosters both economic growth and security. Under the auspices of the Foreign Investments Protection Act, Cap 518, provision is made for the expeditious transfer of profits, as elucidated in Section 7 of the Act. An entity in possession of a valid certificate, issued in accordance with the statutory provisions, is afforded the prerogative
to transfer monies out of the Kenyan jurisdiction in the approved foreign currency, in conformity with the prevailing exchange rates. The permissible transfers encompass the following categories: (a) The profits, whether capitalized or not, following the imposition of applicable taxes, emanating from or attributed to the investments held in foreign assets. (b) The capital quantum stipulated within the certificate. (c) The principal sums and accrued interest relating to any loans specifically delineated in the certificate. It is imperative to underscore that the tax liability associated with capital gains arising from financial derivatives transactions executed by foreign entities is subject to a withholding tax rate set at 15%. It is worth noting that in situations where a corporate entity attains certification status conferred by the Nairobi International Financial Centre Authority and further commits to a substantial investment amounting to five billion Kenyan Shillings within the Kenyan economic landscape, the rate applicable for the subsequent transfer of said investment, which is permissible after a minimum period of five years, shall be predicated upon the prevailing rate at the time of the initial investment's inception. This provision is indicative of the legal framework's responsiveness to incentivizing long-term investments of significant magnitude within the Kenyan financial sector. Paper presented by Dr Cathy, Managing Partner, C. Mputhia advocates Mourice Onyango Okuon, Advocate of the High Court of Kenya
ILN Corporate Group – Establishing a Business Entity Series
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