Consultancy Retainer Agreement (Kenya)
CONSULTANCY RETAINER AGREEMENT
Law of Contract Act (Cap. 23) | Income Tax Act (Cap. 470) | Value Added Tax Act No. 35 of 2013
THIS CONSULTANCY RETAINER AGREEMENT (the "Agreement") is made on [Agreement Date]
BETWEEN:
(1) [Client Name] (BRS No: [Client BRS Number], KRA PIN: [Client KRA PIN]), of [Client Address] (the "Client"); and
(2) [Consultant Name] (KRA PIN: [Consultant KRA PIN]), of [Consultant Address] (the "Consultant").
1. SCOPE OF SERVICES
1.1 The Client retains the Consultant to provide the following advisory services: [Services Description].
1.2 Services expressly excluded from this retainer: [Excluded Services].
1.3 Hours included in the monthly retainer: [Hours Included]. Additional hours beyond the retainer shall be charged at [Additional Hours Rate], subject to prior written approval from the Client.
2. RETAINER FEE AND PAYMENT
2.1 Monthly retainer fee: [Monthly Retainer Fee] (exclusive of VAT). VAT status: [VAT Applicable].
2.2 The Client shall pay the monthly retainer fee on [Payment Date] by electronic transfer to the Consultant's bank account: [Bank Account].
2.3 Withholding Tax: The Client shall deduct withholding tax at 5% from each retainer payment under Section 35 of the Income Tax Act (Cap. 470) and remit it to the Kenya Revenue Authority (KRA) via the iTax platform by the 20th of the following month. The Client shall issue a withholding tax certificate to the Consultant within 21 days of each payment.
2.4 The Consultant shall issue a VAT-compliant tax invoice to the Client by the 5th day of each month for the preceding month's retainer.
3. TERM AND TERMINATION
3.1 This Agreement commences on [Start Date] and continues until [End Date], unless terminated earlier.
3.2 Either party may terminate this Agreement by giving [Termination Notice] written notice to the other party. On termination, the Client shall pay all retainer fees accrued to the termination date.
3.3 The Consultant is an independent contractor and not an employee of the Client under the Employment Act No. 11 of 2007. The Consultant is not entitled to NSSF contributions, SHIF deductions, annual leave, or any other statutory employment benefits.
4. INTELLECTUAL PROPERTY AND CONFIDENTIALITY
4.1 All deliverables, reports, and work product created by the Consultant under this Agreement shall vest in and be assigned to the Client upon payment of the applicable retainer fee. The assignment is effective under Kenyan common law principles applied under Section 3 of the Judicature Act (Cap. 8).
4.2 The Consultant shall not disclose the Client's confidential information — including business strategies, client data, financial information, and employee records — to any third party without the Client's prior written consent, during or after the retainer period.
4.3 The Consultant shall process any personal data accessed in the course of providing services in accordance with the Data Protection Act No. 24 of 2019, administered by the Office of the Data Protection Commissioner (ODPC).
5. GOVERNING LAW AND DISPUTE RESOLUTION
5.1 This Agreement shall be governed by and construed in accordance with the laws of Kenya.
5.2 Any dispute arising from or in connection with this Agreement shall be referred to mediation, and if not resolved within 30 days, to arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 (revised 2022). The courts of [Governing County] shall have jurisdiction over matters not referred to arbitration.
IN WITNESS WHEREOF, the Parties have signed this Agreement on the date first written above.
Client / Authorised Signatory
________________
Signature
Consultant
________________
Signature
Witness
________________
Signature
What Is a Consultancy Retainer Agreement (Kenya)?
A Consultancy Retainer Agreement in Kenya is a commercial contract under which a client engages a consultant — an individual or professional services firm — to make themselves available for a specified scope of advisory or professional services over a defined period, in exchange for a fixed periodic retainer fee paid regardless of whether specific assignments are actually performed in a given month. The retainer arrangement guarantees the consultant a minimum income stream while confirming the client has priority access to the consultant's expertise and time.
The primary legal framework governing a Kenya Consultancy Retainer Agreement is the Law of Contract Act (Cap. 23), which codifies the English common law of contract as received in Kenya at the 1897 reception date under Section 3 of the Judicature Act (Cap. 8). A valid contract under the Law of Contract Act requires offer, acceptance, consideration (the retainer fee satisfies this requirement), intention to create legal relations, and certainty of terms. The Consultancy Retainer Agreement must clearly define the scope of services covered by the retainer, the monthly fee, the notice period, and any cap on the number of hours or engagements included in the retainer.
For income tax purposes, the Kenya Revenue Authority (KRA) treats retainer income paid to an individual consultant as professional or management fees subject to withholding tax under Section 35 of the Income Tax Act (Cap. 470). The client (payer) must withhold 5% from each retainer payment and remit it to KRA via the iTax platform by the 20th of the following month. The consultant must provide the client with their KRA Personal Identification Number (KRA PIN) before the first payment. Where the consultant operates through a company registered under the Companies Act No. 17 of 2015, the withholding tax obligation and tax treatment differ — a company is a separate legal person liable for its own corporate income tax at 30%.
For VAT purposes under the Value Added Tax Act No. 35 of 2013, a consultant whose annual taxable turnover exceeds KES 5 million must register for VAT with KRA and charge 16% VAT on the retainer fee. The VAT invoice must be issued to the client within 30 days of the retainer becoming due. The Data Protection Act No. 24 of 2019, administered by the Office of the Data Protection Commissioner (ODPC), is relevant where the consultant will have access to the client's customer data, employee records, or other personal data in the course of providing advisory services.
A Kenya Consultancy Retainer Agreement should be carefully distinguished from an Employment Contract under the Employment Act No. 11 of 2007 — a retainer consultant is not an employee and is not entitled to statutory leave, NSSF contributions, SHIF deductions, or protection under the Employment and Labour Relations Court (ELRC). The Kenya Revenue Authority monitors the distinction between employees and consultants and may reassess PAYE, NSSF, and SHIF obligations where an engagement categorised as a consultancy retainer exhibits the characteristics of employment.
The legal framework governing the Consultancy Retainer Agreement (Kenya) in Kenya draws on several key statutes and regulatory bodies. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Parties executing a Consultancy Retainer Agreement (Kenya) in Kenya should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Law of Contract Act (Cap. 23) sets the foundational requirements.
When Do You Need a Consultancy Retainer Agreement (Kenya)?
A Kenya Consultancy Retainer Agreement is required in several professional and commercial situations.
A Consultancy Retainer Agreement is required when a company registered under the Companies Act No. 17 of 2015 wishes to retain the ongoing advisory services of a specialist — a legal adviser, accountant, public relations consultant, IT security adviser, or HR specialist — on a standing basis rather than engaging them for individual projects only. The retainer guarantees access to the consultant's expertise without the administrative costs of multiple separate engagement letters.
A Consultancy Retainer Agreement is needed when a Kenyan NGO registered under the NGO Co-ordination Act (Cap. 134) or the Societies Act (Cap. 108) retains the services of a monitoring and evaluation (M&E) consultant, grants management specialist, or donor compliance expert on an ongoing basis for a defined programme period. International donors typically require a written retainer agreement as part of the grant sub-grantee documentation.
A Consultancy Retainer Agreement is required when a law firm, accountancy firm, or management consulting firm registered in Kenya wishes to formalize a retainer relationship with a corporate client who requires priority access to their legal, tax, or strategic advisory services at a predictable monthly cost. The Law Society of Kenya (LSK) recommends that advocates operating on a retainer basis formalise the arrangement with a written retainer letter or agreement.
A Consultancy Retainer Agreement is needed when a start-up or small and medium enterprise (SME) registered with the Business Registration Service (BRS) wishes to retain a part-time Chief Financial Officer, Chief Technology Officer, or strategic adviser on a flexible basis without the commitment and cost of a full-time senior hire. This arrangement is increasingly common in Nairobi's Silicon Savannah technology sector.
A Consultancy Retainer Agreement is required when a consultant who has provided one-off project-based services wishes to transition to an ongoing advisory relationship with a client, establishing a structured retainer fee, defined scope, and clear termination terms — replacing the informal ad hoc arrangements that create tax uncertainty for both parties under the Kenya Revenue Authority's PAYE and withholding tax enforcement framework.
Parties in Kenya should prepare a Consultancy Retainer Agreement (Kenya) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Consultancy Retainer Agreement (Kenya)
A Kenya Consultancy Retainer Agreement must include the following essential provisions to be enforceable and tax-compliant under Kenyan law.
Parties and KRA Details: Full legal names, BRS registration numbers (for companies), KRA PIN numbers, and business addresses of both the client and the consultant. The consultant's KRA PIN is required by the client to comply with the 5% withholding tax obligation under Section 35 of the Income Tax Act (Cap. 470). Each party should confirm whether it is VAT-registered under the Value Added Tax Act No. 35 of 2013.
Scope of Services: A precise description of the advisory or professional services covered by the retainer — for example, "monthly HR advisory services covering disciplinary procedure review, policy updates, and ad hoc employment law queries" or "ongoing tax compliance advisory for corporate income tax and VAT matters". Ambiguity in scope creates disputes about whether specific work falls within or outside the retainer. The agreement should specify any categories of work expressly excluded from the retainer (for example, litigation, court appearances, or specialist regulatory filings) and the fee basis for excluded work.
Retainer Fee and Payment: The fixed monthly retainer fee in Kenya Shillings (KES), the payment date (typically the first or last working day of each month), and the bank account details for payment. The fee structure should address whether the retainer covers a specified minimum number of hours or engagements, and the rate for additional work beyond the included scope. The client must withhold 5% tax from each retainer payment under Section 35 of the Income Tax Act (Cap. 470) and remit it to the Kenya Revenue Authority (KRA) via iTax by the 20th of the following month.
Availability and Response Times: The hours during which the consultant must be available (for example, normal business hours, Monday to Friday), the agreed response time for queries (for example, within 24 hours for routine queries; within 4 hours for urgent matters), and any exclusions during the consultant's annual leave or scheduled unavailability periods.
Intellectual Property: Ownership of deliverables and reports produced by the consultant under the retainer. Under Kenyan common law principles applied under the Judicature Act (Cap. 8), copyright in works created by an independent consultant vests in the consultant unless expressly assigned to the client. The agreement should contain an express IP assignment clause transferring ownership of all deliverables to the client upon full payment of the retainer fee.
Confidentiality: Obligations to protect the client's confidential information and personal data of the client's customers and employees, consistent with Section 25 of the Data Protection Act No. 24 of 2019, administered by the Office of the Data Protection Commissioner (ODPC). Non-solicitation obligations — preventing the consultant from soliciting the client's employees or customers during and after the retainer — should be included where relevant.
Term and Termination: The initial retainer period (typically 12 months) and the notice period required to terminate (typically 30 days written notice by either party). A termination fee equal to one to three months' retainer may be agreed for early termination by the client.
Governing Law and Dispute Resolution: Governed by the laws of Kenya. Disputes referred to the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 (revised 2022), or to the High Court of Kenya. The forms-legal.com Kenya Consultancy Retainer Agreement template covers all eight elements.
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note = {Free legal document template}
}Frequently Asked Questions
Withholding tax on consultancy retainer payments to individual consultants in Kenya is set at 5% of the gross payment under Section 35(1)(c) of the Income Tax Act (Cap. 470). This applies to management and professional fees paid to resident individuals. The client (payer) is responsible for deducting 5% withholding tax from each retainer payment and remitting it to the Kenya Revenue Authority (KRA) via the iTax portal by the 20th day of the month following the payment. The consultant must provide their KRA Personal Identification Number (KRA PIN) to the client before the first payment. Withholding tax is a credit against the consultant's final income tax liability — the consultant declares retainer income in their annual self-assessment return and claims the withheld tax as a credit. Where the consultant is a company (not an individual) incorporated under the Companies Act No. 17 of 2015, withholding tax on management fees still applies at 5% for resident companies under Section 35 of the Income Tax Act. Failure by the client to withhold and remit the tax makes the client personally liable to KRA for the unremitted tax plus interest under the Tax Procedures Act No. 29 of 2015.
No, a retainer consultant engaged under a Kenya Consultancy Retainer Agreement is not an employee under the Employment Act No. 11 of 2007, provided the arrangement has the genuine characteristics of an independent contractor relationship. The Employment and Labour Relations Court (ELRC) and the Kenya Revenue Authority (KRA) apply a multi-factor test to distinguish employees from consultants. Key indicators of genuine independent contractor status include: the consultant controls how and when the work is done; the consultant uses their own tools, equipment, and premises; the consultant can engage their own staff or sub-contractors; the engagement is for a defined scope rather than employment in a role; the consultant is free to provide services to other clients; and the consultant bears their own business costs and insurance. Where the engagement in substance resembles employment — the client controls working hours, the consultant works exclusively for the client, and the arrangement has no defined deliverables — the ELRC may recharacterise it as employment, making the client liable for PAYE, NSSF, SHIF, Housing Levy arrears, and statutory leave entitlements under the Employment Act No. 11 of 2007. A well-drafted Consultancy Retainer Agreement that clearly reflects the independent nature of the arrangement provides important — though not conclusive — evidence of contractor status.
A Consultancy Retainer Agreement does not need to be in writing to be legally binding under the Law of Contract Act (Cap. 23) — oral contracts for professional services are enforceable under Kenyan law. However, a written agreement is strongly recommended and is effectively required in practice for several reasons. The Kenya Revenue Authority (KRA) requires documentary evidence of the consulting relationship — the written agreement, together with invoices and payment records — to support the client's withholding tax deductions and the consultant's income tax declarations. Banks regulated by the Central Bank of Kenya (CBK) require written service agreements to support business accounts and audit requirements. International donors and development finance institutions operating in Kenya require Kenyan NGO counterparties to have written agreements with all consultants. In disputes before the High Court of Kenya (Commercial Division) or arbitration at the Nairobi Centre for International Arbitration (NCIA), the written agreement is the primary evidence of the agreed scope, fee, and termination terms — oral evidence of the parties' intentions at the time of contracting is unreliable and often disputed. A written agreement also reduces the risk of the Kenya Revenue Authority recharacterising the arrangement as employment.
Yes. A consultant engaged under a Kenya Consultancy Retainer Agreement is typically free to provide services to multiple clients simultaneously, and this multi-client freedom is one of the defining characteristics that distinguishes a genuine independent contractor from an employee under the Employment Act No. 11 of 2007. The Consultancy Retainer Agreement may include a conflict of interest clause requiring the consultant to disclose any actual or potential conflicts arising from concurrent engagements with competing clients — for example, a strategy consultant retained by two competing telecommunications companies must disclose the conflict and obtain consent from both clients. An exclusivity clause — prohibiting the consultant from working for named competitors during the retainer period — is permissible under the Law of Contract Act (Cap. 23) provided it is reasonable in scope, duration, and geographic coverage, consistent with restraint of trade principles applied by the High Court of Kenya under received English common law. Overly broad exclusivity clauses may be struck down as an unreasonable restraint of trade. The consultant's tax position is not affected by the number of clients — withholding tax at 5% is deducted by each client independently, and the consultant consolidates all income in their annual self-assessment return filed with the Kenya Revenue Authority (KRA).
If a client fails to pay a consultant's retainer fee under a Kenya Consultancy Retainer Agreement, the consultant has several remedies under the Law of Contract Act (Cap. 23). First, the consultant should issue a formal written demand to the client specifying the overdue amount and requiring payment within a stated period — typically 7 to 14 days. If the client fails to pay within the demand period, the consultant may suspend services and give formal notice that the agreement is treated as repudiated by the client's breach. The consultant may then terminate the agreement and claim the outstanding retainer fees plus any fees accrued to the termination date as a liquidated debt. Claims for retainer fees up to KES 1,000,000 may be filed in the Small Claims Court, which provides a faster and cheaper resolution pathway than the High Court of Kenya. For claims above KES 1,000,000, the High Court (Commercial Division) has jurisdiction. The consultant should also note that the 5% withholding tax obligation under the Income Tax Act (Cap. 470) applies to payments actually made — if the client does not pay, the consultant does not receive a withheld tax credit for the unpaid amounts, and any income tax liability depends solely on income actually received. The consultant should document all attempted collections and maintain invoices, payment records, and correspondence with the client for use in any legal proceedings.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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