Section 10(1) of Kenya's Income Tax Act deems a management or professional fee to be income that accrued in Kenya where a resident person pays it, whatever country the work was done in, provided the payment is incurred in producing Kenyan income or in a business carried on in Kenya. Section 35(1) makes that payer deduct at the non-resident rate.
Kenya answers the question "where did this money come from" by looking at who paid it. Section 10(1) of the Income Tax Act provides that where a resident person, or a person having a permanent establishment in Kenya, makes a payment in respect of a management or professional fee or training fee, the amount of it is deemed to be income which accrued in or was derived from Kenya. The subsection says nothing at all about where the work was done, and that omission is the whole of the rule.
Key Takeaways
- Section 10(1) deems a management or professional fee to be Kenyan-source income because a resident person paid it.
- Where the services were performed is not one of the conditions in the subsection.
- Section 35(1)(a) requires the payer to deduct tax at the non-resident rate before paying a non-resident with no permanent establishment in Kenya.
- The Kenya Revenue Authority puts that rate at 20 per cent for management, professional, training and consultancy fees.
- Kenya has no double taxation agreement with Australia, at any stage, so there is no treaty rate to claim.
The sentence the question turns on
The Income Tax Act is Chapter 470 of the Laws of Kenya, and the Kenya Revenue Authority publishes the Act itself. Section 10 is headed "Income from management or professional fees, royalties, interest and rents", and its opening subsection sets out a list of payment types. A management or professional fee or training fee is the first of them. Royalties, interest, the use of property, appearances and performances, and winnings follow.
The operative words come after the list: the amount thereof shall be deemed to be income which accrued in or was derived from Kenya.
Deeming is doing real work here. Section 3(1) charges income tax on all the income of a person, resident or non-resident, which accrued in or was derived from Kenya. Left to itself that phrase could be argued about. Section 10 removes the argument for this class of payment by fixing the answer in advance, on a fact about the payer.
What the provisos do, and what they do not do
Section 10(1) carries three provisos, and the first looks at first glance as though it might rescue a contractor working abroad. It does not.
Proviso (i) says the subsection does not apply unless the payment is incurred in the production of income accrued in or derived from Kenya, or in connexion with a business carried on, or to be carried on, in whole or in part, in Kenya. Every part of that test is about the payer's business. A Kenyan company paying for advice about its Kenyan operations satisfies it comfortably. Nothing in it asks where the adviser was sitting.
Proviso (ii) excludes a payment made by the Kenyan permanent establishment of a non-resident person to that same non-resident person, which is a rule about a business paying itself, and proviso (iii) adds that "non-resident person" there includes both the head office and other offices of that person.
So the three qualifications narrow the rule in three directions, and none of them is the direction a contractor in Australia would want.
The definition is wider than the heading
The heading says management or professional fees. Section 2 defines the term, and the definition reaches a great deal more than the two words suggest: any payment made to any person, other than a payment made to an employee by their employer, as consideration for any managerial, technical, agency, contractual, professional or consultancy services, however calculated.
Two phrases in that are worth pausing on. "Any person" is not limited to a company, so an individual invoicing in their own name is inside it. "However calculated" means the shape of the invoice does not matter: a fixed fee, an hourly rate, a retainer and a share of a result are all consideration for the service.
The one clear exclusion is employment. A payment from an employer to an employee is outside the definition and is dealt with elsewhere in the Act, under the pay-as-you-earn machinery. That is the line a person receiving money from Kenya should establish first, because it decides which regime they are in before any of the rest applies.
Who has to deduct, and on what timetable
Section 35(1) puts the duty on the payer, in wide terms: every person shall, upon payment of any amount to any non-resident person not having a permanent establishment in Kenya in respect of a management or professional fee or training fee, deduct tax at the appropriate non-resident rate. Its carve-outs are narrow ones for commissions and audit fees on exported produce, and for an air operator securing international tickets. A consultancy invoice is none of those.
Section 35(5) then sets the mechanics. On or before the twentieth day of the month following the month in which the deduction was made, the person deducting must remit the amount to the Commissioner together with a written return of the payment and the deduction, and must furnish the person paid with a certificate stating the amount of the payment and the amount of the tax deducted. That certificate is the document a contractor abroad should ask for, because it is the only formal record they will hold of what was taken.
The Revenue Authority's own withholding tax page states the deadline differently, and says so twice: withholding tax shall be deducted and remitted to the Commissioner within five working days after the deduction is made. It adds that payment is made through the Authority's online system and that a withholding certificate is then sent to the email registered there.
Five working days and the twentieth of the following month are not the same deadline, and both are published by the same body. That is the payer's problem rather than the payee's, but it is worth knowing about if a certificate is slow to arrive.
The rate, and the line it sits on
The same page carries a rate table covering every type of income withholding reaches. These are its service-fee rows, split by the residence of the person being paid.
| Type of income | Resident | Non-resident |
|---|---|---|
| Management fees | 5 per cent | 20 per cent |
| Professional fees | 5 per cent | 20 per cent |
| Training fees, inclusive of incidental costs | 5 per cent | 20 per cent |
| Consultancy and agency fees | 5 per cent | 20 per cent |
| Contractual fees | 3 per cent | 20 per cent |
| Telecommunication services and message transmission | not applicable | 5 per cent |
The gap between 5 and 20 is the practical content of the rule. The deduction is from the gross amount, not from a margin.
The page records one further change. The Finance Act 2023 introduced a new section 10(3), under which withholding tax paid on a payment to a non-resident is not refundable, and is not available for deduction against the income, where an audit adjustment has been made in respect of that payment.
Why the answer here is the opposite of the American one
A contractor in Australia who has worked for clients in more than one country will have met the other rule, and the two are built around different facts.
The Internal Revenue Service states that the place where personal services are performed generally determines the source of the income, regardless of where the contract was made, the place of payment, or the residence of the payer. On that rule work done in Australia for an American client is generally foreign-source income, outside the withholding a non-resident would otherwise meet, as the guide on receiving payment from the United States sets out at greater length, qualifications included.
Kenya starts from the other end. The performance of the service is not in section 10(1) at all. The payer's residence is, subject only to the provisos above, which ask about the payer's business rather than about the contractor.
Neither approach is unusual, and a person can be caught by both at once on two invoices in the same month. What matters is knowing which question each country asks, because a form that establishes where you are resident does not speak to a rule about who paid you.
The treaty that would change this does not exist
Where a source rule bites, a double taxation agreement is normally the instrument that softens it, either by cutting the rate at source or by putting the taxing right somewhere else.
Kenya has a substantial treaty network, and the National Treasury publishes the whole of it as a numbered table with a status against each entry. The table runs to 49 entries, and among those it marks in force are Canada, Denmark, France, Germany, Iran, Korea, Norway, Qatar, Seychelles, South Africa, Sweden, the United Arab Emirates, the United Kingdom and Zambia.
Australia is not on that table at all, under any status the table uses.
So there is no reduced treaty rate to claim in Kenya and no residence certificate that would produce one. What that does not settle is how the deducted amount is treated in Australia, a question of Australian tax law and of a person's own circumstances. This guide does not answer it; the guide to finding an accountant covers how to find somebody who can.
A note on which edition says what
The Act's wording quoted above is from the copy the Revenue Authority itself hosts, which is printed as the revised edition of 2018 [2012] and carries [Rev. 2017] running heads. Section 10 has been added to since: the Authority's live page records the Finance Act 2023 inserting subsection (3). The rate, the deadlines and the certificate here come from that live page rather than from the printed edition.
Where to look next
The Kenyan shilling to Australian dollar page carries the live reference rate, and the reverse pair covers money going the other way. For the payment itself once the deduction has been made, how international transfers work covers the route, and understanding transfer fees covers what is taken along it.
Sources
- Kenya Revenue Authority, Income Tax Act (Chapter 470) - section 10(1) and its three provisos, the section 2 definition of a management or professional fee, section 3(1) on the charge to tax, and section 35(1)(a) and 35(5) on the duty to deduct, remit and certify
- Kenya Revenue Authority, Withholding Tax - the resident and non-resident rates by type of income, the five working day remittance rule, the withholding certificate, and the new section 10(3) introduced by the Finance Act 2023
- The National Treasury of Kenya, Double Taxation Agreements - the complete table of Kenya's agreements with their status and dates, on which Australia does not appear
General information about how another country's tax rules describe a payment. Not tax advice, not financial advice, and not a statement about any particular person's circumstances. Reviewed by the Tradergy editorial team, September 2026.
Common questions
Does it matter that the work was done in Australia?
Not to section 10(1). The subsection is written around the payer: where a resident person, or a person having a permanent establishment in Kenya, makes a payment in respect of a management or professional fee or training fee, the amount is deemed to be income which accrued in or was derived from Kenya. The place where the services were performed is not one of its conditions. Its first proviso does add a condition, and that one is also about the payer: the subsection does not apply unless the payment is incurred in producing income accrued in or derived from Kenya, or in connexion with a business carried on in whole or in part in Kenya.
What counts as a management or professional fee?
Section 2 of the Income Tax Act defines it as any payment made to any person, other than a payment made to an employee by their employer, as consideration for any managerial, technical, agency, contractual, professional or consultancy services, however calculated. That is a wide definition, and the words "however calculated" mean a fixed fee, a day rate and a percentage are treated alike.
Who deducts the tax, and by when?
The payer. Section 35(1)(a) requires every person, on payment to a non-resident who does not have a permanent establishment in Kenya, to deduct tax at the non-resident rate. The Kenya Revenue Authority states that the deduction must be remitted to the Commissioner within five working days of being made, and that a withholding certificate is then sent to the payer's registered email.
What is the rate?
The Kenya Revenue Authority's own withholding table puts management fees, professional fees, training fees and consultancy and agency fees at 20 per cent for a non-resident, against 5 per cent for a resident. Contractual fees are 20 per cent against 3 per cent, and telecommunication and message transmission services sit on their own line at 5 per cent.
Is there a Kenya to Australia tax treaty that reduces it?
No. Kenya's National Treasury publishes a table of its double taxation agreements running to 49 countries and groupings, marked in force, signed, concluded or under negotiation or consideration. Australia does not appear on it at any status, so there is no treaty rate to claim and no residence certificate that would reduce the deduction.