Investment promotion programmes in Kenya

last updated on 14 October 2024 | reading time approx. 4 minutes

Kenya has two main investment promotion programmes, the Export Processing Zones (EPZ) programme and the Special Economic Zones (SEZ) programme. The programs have many similar features but different fiscal incentives which we discuss below in summary.

The EPZ Programme »
EPZ Developers/Operator License »
EPZ – Enterprise Licence »
Special Economic Zones Programme »

The EPZ Programme

The Export Processing Zones Act, 1990 (the “EPZ Act”) provides for the establishment of Export Processing Zones for promotion and facilitation of export-oriented investments and the development of an enabling environment for such investment. The EPZ Act establishes the Export Processing Zones Authority (the “EPZA”) whose mandate is to oversee the enforcement of the EPZ Act.

EPZs are designated areas within the country which are considered as being outside the customs territory and within which businesses enjoy various fiscal and other incentives including the following:

10-year corporate tax holiday, 25 percent for the next ten years
10-year withholding tax holiday on dividends and remittances to non-residents
100 percent investment deduction on buildings and machinery
Exemption from payment of stamp duty on legal instruments
Exemption from VAT and customs import duty on inputs
Exemption from exchange controls
Exemption from rent and tenancy controls
Green channel port and custom clearance
One-stop shop government services facilitation

The EPZ Program is open to any new businesses, foreign or locally owned, who wish to conduct manu facturing, commercial or service activities. The business must be export oriented, with a minimum of 80 per cent of its sales to persons outside the East Africa Community. Local sales can be upt o a maximum of 20 percent of its sales with ministerial approval. There are several categories of EPZ license holders i.e. EPZ developers, operators and enterprises. Below we set out the requirements for the licenses.

EPZ Developers/Operator License

The license is issued to those who intend to develop the infrastructure and buildings on EPZ gazetted land and to those who provide and maintain facilities to be used in the zone by EPZ enterprises. An applicant for an EPZ Developer/Operator license is required to prove that:

they intend to set up in Kenya for the sole purpose of developing and operating an EPZ and or being an EPZ enterprise. Approval must be sought from the Authority before incorporation of the company.
they have the necessary capital and expertise required for developing the EPZ; and
any other matters that may be determined by the EPZA

The licence application fee is currently USD 250 with an annual licence fee of 5,000 US dollars. The appli cation takes about three months to be processed, but this may be longer. A lot of time is spent in the preparatory phases before submission of a complete application to the EPZA, e.g. purchasing/leasing land, conducting the EIA, site inspections, compliance amongst others.

EPZ – Enterprise Licence

This licence is issued to the business that will be conducting the export-oriented business within a gazetted EPZ. This licence can also be granted to the EPZ Developer/Operator.

The enterprise licence is granted by the Authority if the proposed business enterprise:

is incorporated in Kenya, whether or not it is one hundred percent foreign owned, for the sole purpose of producing goods or services for export within an EPZ. It is important to note that approval must be sought from the Authority before incorporation of the business enterprise;
proposes to engage in any activity or activities eligible to be undertaken by an EPZ enterprise in the EPZ;
shall not have a deleterious impact on the environment, or engage in unlawful activities, impinging on national security or may prove to be a health hazard. The business enterprise must therefore undergo an Environment Impact Assessment and acquire a National Environmental Management Authority (NEMA) certificate; and
conducts business in accordance with the laws for the time being in force save for any exemptions that may from time to time be granted

The application fee is currently 250 US dollars and the license and annual license renewal fee is 1,000 US dollars. EPZA takes about 1-2 months to process the application.

Special Economic Zones Programme

The Special Economic Zones Act (“SEZ Act”) provides for the creation of special economic zones (‘SEZs’). The SEZ Programme was intended to overhaul and improve upon the EPZ Programme.

The main differences between the two programmes are the incentives given which include the following:

Corporate tax – 10 percent first 10 years, 15 percent next 10 years subsequent years 20 percent

Withholding tax – 5 percent interest, management and royalties
Dividends to non-residents exempt from tax
100 percent investment deduction on buildings and machinery
Exemption from payment of stamp duty on legal instruments
Exemption from VAT, customs import duties on imported goods
Zero rated VAT for local supplies
Exempt from local government fees relating to advertisement and business permits
Exemption from exchange controls
Exemption from rent and tenancy controls
One-stop shop government services facilitation

Further the SEZ programme does not have a threshold on the level of exports. The licence and annual licence renewal fee is 1000 US dollars. The licence types and requirements are similar. Though technically possible, there is less of an incentive, and it may be impractical to attempt to develop and operate an SEZ for one’s own use as there is a good amount of modern and well developed SEZs in the market.

In the event one chooses to join an existing zone, one would approach the respective SEZ operator who would present its permitted activities, terms on rates for rent, facilities and amenities. All that the business would have to do is to apply for the SEZ enterprise licence.