Introduction of Withholding Tax on Shipping Income

The Finance Act 2025, assented into law on 26th June 2025, introduces a new paragraph under Section 35(1)(u) of the Income Tax Act (Cap 470), which states:
"(u) gains or profits which are chargeable to tax under section 9(1) derived from the business of a ship owner or charterer”

This amendment brings shipping income earned by non-resident shipping companies from cargo or passengers embarked in Kenya into the withholding tax (WHT) regime, thereby placing a WHT obligation on Kenyan customers making freight (shipping) payments for exports from Kenya and Detention and Demurrage (DnD) charges to such non-resident shipping companies.

Withholding tax On Maersk A/S

Your contract of carriage under which freight, DnD and related charges are billed is entered into between Maersk A/S (a non-resident company registered in Denmark) and you as the customer (either the shipper or consignee).

In many instances, Maersk Kenya Ltd, whose principal role is acting as a shipping agent, collects these charges on behalf of Maersk A/S. However, it is important to note that Maersk Kenya Ltd is not party to the contract of carriage and acts solely in an agency capacity in collection of the charges. Although the charges are paid into a Maersk Kenya Ltd bank account, they are payments to Maersk A/S and should be reported as such for WHT purposes.

Therefore, under the new law:

• Customers are required to withhold tax when making payments to Maersk A/S, irrespective of the bank account used; and
• No WHT should be withheld against Maersk Kenya Ltd, as it is not the recipient of the shipping income nor the service provider.

Exemption of Imports and Transshipments

As per Section 9 of the Income tax Act, the revenue subject to tax is the amount charged by Maersk A/S for the carriage of cargo from Kenya and Detention and Demurrage charges on both export and import of cargo. Therefore, Withholding Tax (WHT) applies exclusively to:

• Exports - All charges on exports from Kenya (Place of Receipt Kenya)
• DnD - Detention and Demurrage (DnD) charged on both imports and exports

Key Exemptions:

• Imports into Kenya: WHT does not apply to shipping revenue from cargo imported into Kenya.
• Transhipped Goods: Income earned by Maersk A/S from goods transiting through Kenya is exempt from WHT.

Applicable WHT Rate on Export and DnD Charges: 1.25%

The statutory rate as per Paragraph 3(k) of the Third Schedule to the Income tax Act is 2.5%. It should however be noted that there is a double tax treaty in place between Kenya and Denmark which reduces this rate to 1.25% in the case of Maersk A/S. This can be easily accessed in the National Treasury of Kenya Website.

Article 8(2) provides for a reduction in the rate of any local taxes on shipping related income by 50% where the transaction is between a Kenyan resident and a Danish resident. On this basis, the effective WHT rate applicable on payments to Maersk A/S, a Danish resident, should be limited to 1.25% (i.e. 50% of the statutory rate of 2.5%).

WHT certificates email- ke.tax@maersk.com

In line with Section 35(5) of the Income Tax Act, customers must issue a WHT certificate stating the amount withheld. The steps are as follows:

• WHT is declared and paid via iTax.
• Once processed, KRA will issue the WHT certificate electronically to both the customer and the payee.
• Since Maersk A/S is a Non-resident entity which does not have a Kenyan PIN, customers should ensure the email used for WHT certificate issuance is: ke.tax@maersk.com

Our Commitment

At A.P. Moller Maersk, we are committed to full compliance with all tax laws and regulations in the jurisdictions in which we operate. Where the tax regulations governing business transactions allow for different interpretations or choices, we will adopt a tax position which is supported by a reasonable legal basis. If a legal interpretation is unclear, we may seek applicable guidance and practice from external advisors or engage in transparent dialogue with the tax authorities. Only tax positions that we trust are in line with the purpose of the law and which we are prepared to defend in the appropriate tribunals or courts are adopted.

Please contact our Finance department at kenfin@maersk.com in-case you require further clarification.

We thank you in advance for your understanding and cooperation. We look forward to supporting you on all matters pertaining to your logistical needs. Should you have any further questions, please contact your local Maersk professional.