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Kenya Investment Series – Investment Incentives (3)

Sep 10, 2021UP!

Investment Incentives

In this section, we will focus on the investment incentives available to foreigners considering investment in Kenya. Some of these incentives are not limited to foreigners, but are also available to Kenyans.

The Investment Promotion Act

First, I will refer to the Investment Promotion Act enacted in 2004, which came into effect on October 3, 2005. The purpose of the Act, as stated in the preamble, is to “encourage and promote investment by assisting and incentivizing foreign nationals to obtain the necessary licenses for investment and related purposes.” In effect, in order to make Kenya more attractive for investment purposes, the Act provides streamlined rules for the investment process required by investors.

As part of this, Kenya has established the Kenya Investment Authority (Section 14 of the Act). The Authority is a body established primarily for the purpose of facilitating and promoting investment in Kenya (Section 15 of the Act). It provides information to potential investors, facilitates the implementation of new investment incentives projects, provides aftercare for new and existing investments, and conducts national and international investment promotion activities. It is also in the business of issuing investment permits under the Investment Promotion Law.

Investment permits

With this permit, investors can enjoy many benefits such as the ability to start business immediately (Article 12 and 13 of the Act). (Article 12 and 13 of the Act). However, it is not mandatory to obtain this permit before investing in Kenya. As stated in Chapter II of the Act, a foreign investor who meets the conditions prescribed by the Act and who has made an investment of at least US$100,000 which will benefit Kenya shall be entitled to obtain this permit (Section 4 of the Act). After completing the application to the authorities and obtaining the Investment Permit, the investor is entitled to the following benefits2 – In principle, the investor may request the issuance of licenses necessary for business operations (Article 12 of the Law). – With respect to immigration laws, entry permits, etc. may be granted to certain persons (Article 13). 

Incentive Programs

There are three main incentive programs to promote exports:

1) Export Processing Zones

Export Processing Zones (EZs) are areas where businesses can import plant equipment, machinery, equipment, etc. for export. Within the zone, certain benefits such as exemption from tariffs can be obtained. Currently, there are 40 export processing zones in Kenya, located in Nairobi, Athi River, Mombasa, Kiligi, Malindi, Voi and Kimwarer. According to “Kenya – Country Profile”, KPMG Services Propriety Limited, 2012, as of January 2012, 77 companies were using export processing zones. As of January 2012, 57% of the companies are owned by foreign investors and 19% by Kenyan companies.

As of January 2012, 57% of the businesses are owned by foreign investors, 19% are Kenyan businesses, and the rest are joint ventures.1 In order to use an export processing zone, an investor must obtain a license from the export processing zone authority. There are several types of licenses. There are several types of licenses: EPZ developer/operator license, EPZ enterprise license, and EPZ Business Service Permit, depending on the nature of the business being operated. The annual cost depends on which license is obtained. For example, the annual fee for an EPZ developer/operator license is US$5,000 and for an EPZ enterprise license is US$1,000.

According to the Export Processing Zones Act, the applicable tax incentives are as follows :

  • Exemption from corporate income tax for 10 years and tax rate of 25% for the following 10 years
  • Exemption from withholding tax on dividends for 10 years 
  • Exemption from stamp duty, etc.

2) Duty Remission Facility

Under this program, manufacturers may be exempted from taxes and VAT on raw materials used to manufacture export products.

3) Manufacturing Under Bond Program

This program is offered to both local and foreign investors to encourage export of products. This program is offered to both local and foreign investors to encourage the export of products. Under this program, the investor is controlled by the Kenyan tax authorities. Under the scheme, the investor is managed by the Kenyan tax authorities. Under certain conditions, there are investment tax exemptions and import duty and VAT exemptions applicable to plant and equipment, machinery, equipment and buildings.

It should be noted that I am an expert of Japanese law and not a specialist in Kenyan law. We recommend that you consult with a lawyer or other expert in Kenya for further details.

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