As highlighted last week, the Government of Kenya has earmarked trade
as a key factor towards the achievement of the Big 4 Agenda, and
ultimately the realisation of Vision 2030. With a view toward harnessing
Kenya’s trade potential, Kenya seeks to unlock the tried and tested
economic benefits offered by Special Economic Zones (SEZ), as evidenced
by the largely successful SEZ regimes of India and China. This in itself
indicates a shift from reliance on Export Processing Zones (EPZ) which
failed to attain the desired economic impact.
as a key factor towards the achievement of the Big 4 Agenda, and
ultimately the realisation of Vision 2030. With a view toward harnessing
Kenya’s trade potential, Kenya seeks to unlock the tried and tested
economic benefits offered by Special Economic Zones (SEZ), as evidenced
by the largely successful SEZ regimes of India and China. This in itself
indicates a shift from reliance on Export Processing Zones (EPZ) which
failed to attain the desired economic impact.
Special Economic
Zones, established and defined by the Special Economic Zones Act 2015
(The Act), refer to designated geographical areas where
business-enabling policies are implemented and sector-appropriate
on-site and off-site infrastructure and utilities are provided for by
the Kenyan Government. Under the SEZ regime, participating investors
stand to benefit from a trade enabling environment. Notably, the Act
highlights integrated infrastructure facilities, access to business and
economic incentives as well as removal of trade barriers and impediments
as being key benefits accorded through the SEZ regime.
Zones, established and defined by the Special Economic Zones Act 2015
(The Act), refer to designated geographical areas where
business-enabling policies are implemented and sector-appropriate
on-site and off-site infrastructure and utilities are provided for by
the Kenyan Government. Under the SEZ regime, participating investors
stand to benefit from a trade enabling environment. Notably, the Act
highlights integrated infrastructure facilities, access to business and
economic incentives as well as removal of trade barriers and impediments
as being key benefits accorded through the SEZ regime.
Drilling
down to the incentive angle of SEZs, the major selling point of SEZs in
Kenya are the tax shields offered within the confines of an SEZ.
Particularly, from a tax perspective, SEZs are considered to be outside
the customs territory of Kenya, thereby operating within a
jurisdictional bubble that shields them from taxes and similar
regulatory hurdles that directly or indirectly impede trade.
Consequently, licenced SEZ enterprises, developers and operators benefit
from various tax rebates such as exemption from excise duty, customs
duty, value added tax and stamp duty, advantageous corporate income tax
rates and preferential withholding tax rates, especially in relation to
profit repatriation.
down to the incentive angle of SEZs, the major selling point of SEZs in
Kenya are the tax shields offered within the confines of an SEZ.
Particularly, from a tax perspective, SEZs are considered to be outside
the customs territory of Kenya, thereby operating within a
jurisdictional bubble that shields them from taxes and similar
regulatory hurdles that directly or indirectly impede trade.
Consequently, licenced SEZ enterprises, developers and operators benefit
from various tax rebates such as exemption from excise duty, customs
duty, value added tax and stamp duty, advantageous corporate income tax
rates and preferential withholding tax rates, especially in relation to
profit repatriation.
With a raft of tax and non-tax benefits, GoK
expects that not only will foreign investors be encouraged to invest in
Kenya, but that local industry players will also be afforded an
opportunity to competitively access international markets.
expects that not only will foreign investors be encouraged to invest in
Kenya, but that local industry players will also be afforded an
opportunity to competitively access international markets.
The above notwithstanding, Kenya should be cautious in her handling
of SEZs. Particularly, we should be willing to learn from the teething
problems experienced in other jurisdictions that operate SEZs. High risk
issues that may impede the success of SEZs in Kenya include regulatory
and legislative issues surrounding labour, transportation networks and
logistical hubs as well as institutional and governance challenges.
of SEZs. Particularly, we should be willing to learn from the teething
problems experienced in other jurisdictions that operate SEZs. High risk
issues that may impede the success of SEZs in Kenya include regulatory
and legislative issues surrounding labour, transportation networks and
logistical hubs as well as institutional and governance challenges.
Singling
out transportation networks and logistical hubs, a good transportation
network plays a significant role in the success of SEZs. This is
particularly important in relation to high-tech, modern and high value
sectors as businesses and companies in these sectors are often very
time-sensitive. With this in mind, projects targeted at unlocking Kenya,
such as the SGR, are of critical importance toward the overall success
of the SEZ regime in Kenya.
out transportation networks and logistical hubs, a good transportation
network plays a significant role in the success of SEZs. This is
particularly important in relation to high-tech, modern and high value
sectors as businesses and companies in these sectors are often very
time-sensitive. With this in mind, projects targeted at unlocking Kenya,
such as the SGR, are of critical importance toward the overall success
of the SEZ regime in Kenya.
