Beyond Bricks And Mortar: Rethinking Permanent Establishment In Kenya's Digital Age

An emerging trend in recent tax disputes in Kenya suggests that the Kenya Revenue Authority (KRA) is adopting an increasingly expansive approach to Permanent Establishment (PE) and profit issues. In several ongoing appeals, KRA has sought to assert PE based on minimal or indirect local activity, and to apply the Profit Split Method (PSM) to allocate a portion of global profits to Kenya—often with limited regard for the actual scale or nature of the local contribution.

This approach appears to be driven by post-BEPS confidence, particularly following Action 7 and Actions 8–10, which emphasise economic substance and value creation over legal form. In many cases, KRA has argued that support functions such as liaison, business development, facilitation, or infrastructure access create a sufficient nexus to justify profit reallocation—even where these functions are routine or outsourced.