Q: How do I Become as Self-Employed in Kenya?
Learn about self-employment laws in Kenya and what you need to know to set up your own business successfully.
If you want to enjoy the self-employed life by starting a freelance business in Kenya, there are a few things to keep in mind. Although Kenya does not have many restrictions when it comes to starting your own business, it’s still good to know what you’re getting into, how to register, and what taxes you’ll have to pay. Here we break down the essential parts of self-employment in Kenya.
Ideal compliance versus reality
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Kenyan law is not extremely organized in relation to freelancing. Frequently, contracts, paperwork, and tax requirements are hashed out between the client and vendor, and there isn’t necessarily always one specific way to go about business. However, Kenyan law does say that a business should be registered, even though, in practice, self-employment is in the informal sector where registration isn’t always done. The informal sector is called Jua kali, which translates to “hot sun” in Swahili, because informal manufacturing areas are often in towns out in the open under the “hot sun” rather than in workshops or buildings.
Requirements for starting your own freelancing business in Kenya
There are very few requirements or limitations on who can register their own business. As long as you are over 18 years old, you are eligible. You must be an adult to open a business since the agreements and contracts involved in the process cannot be administered to minors.
Types of businesses you can run in Kenya
Again, there are few rules about different kinds of businesses you can run. Basically, as long as your business activities are not viewed as “criminal” under Kenyan law, then you are good to go. Still, it can be wise to do research and find out what’s relevant or needed in the area, whether supplies you need are available, etc. This way, you won’t lose any of your investments and won’t face any surprises while self-employed.
How to register a freelance business in Kenya
The first step in registering your freelance business is to create an eCitizen account. Then, continue to fill out the application by doing a name search and choosing the appropriate business type for your company. The next step is paying for the name search on the next page. Once you select your preferred payment method and complete the payment, a name search will be processed for you in about a day. Next is registering your business, which consists of four steps (source: evamtalii.com):
- Fill out a Bn2 Statement of Particulars Registration form
- Upload your ID card/passport, KRA PIN certificate and recent colored passport photographs
- Pay for the business registration certificate
- After (about) one week, your business registration certificate should be available for download from your eCitizen account
Kenyan taxes and invoicing for freelancers
You should remember not to register for VAT as a default if you make under Sh5 million in terms of tax registration. But you can register for VAT if you want or if your business requires it. Remember, if you registered for VAT, you must file a monthly return or face penalties. Consultants can expect withholding tax to be deducted if their pay is over Sh24,000 per month, but as a freelancer, you are still required to account for your full tax at the end of the year.
Companies may require you to issue your invoice in a specific way (ex: describing services, adding PINs, etc.) Make sure to discuss with your client whether they should be billed including or excluding VAT and whether they are going to withhold the 5% tax or not.
Kenya follows the standard international model when it comes to VAT taxes, meaning that VAT is charged at every point in the production/supply chain. A tax registered business can claim a VAT deduction through a monthly VAT return. VAT is due on income from taxable supplies such as domestic supplies of goods and services as well as imports.
Ready to start freelancing in Kenya
Those are the main things to keep in mind about regulations, registration, taxes, and invoices when starting your own business in Kenya. With this information, you’ll know exactly what you’re getting into and can successfully navigate your exciting new journey into self-employment. Don’t be afraid to get started with registering your own business. Just head to Kenya’s eCitizen site, and you’ll be on your way!
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Updated: January 28, 2021
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.