EQUITY GUIDE

OFFERING EQUITY TO YOUR TEAM IN

The

Kenya

Looking to offer equity to international talent joining your team? No matter where in the world your team members work, Easop makes it easy for you to offer equity compliantly to direct employees, EoR employees and contractors hassle-free, worry-free, and cost-efficiently!

Firstly, who can receive NSOs?

Direct employees

YES

NO

EOR employees

YES

NO

CONTRACTORS

YES

NO

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⚠️  The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️

A more comprehensive set of information for this country and work relationship is available on Easop.

If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡

General Taxation

Learn about equity schemes and taxation policies in
the
Kenya
.

At grant 👉No taxation.

At exercise 👉 At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income.

At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

At grant 👉No taxation.

At exercise 👉 At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income.

At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

At grant 👉No taxation.

At exercise 👉 At the time of exercise, the spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as “gross income” to be paid as part of the grantee’s installment taxes. The gain will need to be reported as income in the annual tax return.

At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Tax advantages

Learn about equity schemes and taxation policies in
the
Kenya
.

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Granting equity in 

the 

Kenya

 

Get to know everything about your taxation and reporting obligations in 

the 

Kenya

Introduction

⚠️  The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️

A more comprehensive set of information for this country and work relationship is available on Easop.

If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡

Regular employee

✅ Yes, you can grant non-qualified stock-options (NSO) to employees in Kenya.

In a nutshell, what does taxation look like?

  • At grant 👉No taxation.
  • At exercise 👉 At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income.

  • At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Employee via EoR

✅ Yes, you can grant non-qualified stock-options (NSO) to EoR employees in Kenya.

In a nutshell, what does taxation look like?

  • At grant 👉No taxation.
  • At exercise 👉 At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income.

  • At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Contractor

✅ Yes, you can grant non-qualified stock-options (NSO) to contractors in Kenya.

Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).

In a nutshell, what does taxation look like?

  • At grant 👉No taxation.
  • At exercise 👉 At the time of exercise, the spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as “gross income” to be paid as part of the grantee’s installment taxes. The gain will need to be reported as income in the annual tax return.

  • At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Pay attention to:

Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that go with it). This will never be the only factor, but what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).

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