This paper analyses Kenya’s experience of trying to deal with transfer pricing, and looks at
difficulties facing developing and middle-income countries in the application of transfer pricing rules. It discusses the course Kenya has taken in introducing TP laws, regulations, policies and administrative training in order to audit TP transactions effectively. Section 1 sets out the background to Kenya, its position in the African continent and globally, explaining why it has been selected as a case study. Section 2 sets out the historical experience of Kenya, both in developing its TP laws, regulations and procedures, as well as building capacity of its staff on issues of transfer pricing. Sections 3 and 4 reflect on the Kenyan position as set out in Section 2, and the appropriateness of some of the changes being proposed internationally by Actions 8-10 and 13 of the BEPS project of the G20/OECD. This paper attempts to unpack the issues surrounding TP in a developing country like Kenya, and to reflect on what is really needed in the BEPS process to make it usable in developing countries. The paper concludes by stating that the issues being raised in TP have been only partially resolved through improved capacity, regulations and policy. The OECD BEPS process does not seem to resolve problems faced by countries like Kenya, but instead foists a set of complex and unwieldy rules on Kenya and other developing and middle-income countries.
