Foreign investors setting up shop at the Special Economic Zones (SEZ) will have tax equivalent to their investment written off.
Treasury has proposed amendment to the Income Tax Act to allow enterprises licensed under SEZ to deduct 100 per cent of the investment cost of building and machinery.
This will enable enterprises to recover cost of investment within the first year of utilisation.
“I further propose to amend the Miscellaneous Fees and Levies Act to exempt from export duty and Import Declaration Fees respectively for goods exported to and imported by an enterprise licensed under the SEZ Act,” said Treasury CS Henry Rotich.
“These measures are meant to reduce the cost of doing business, inspire foreign direct investment, position Kenya as a premier business hub and increase employment opportunities,” said Mr Rotich.
The Treasury also proposed to amend the Income Tax Act to exempt dividends payable to non-residents by the enterprises operating in SEZ (formerly EPZs) from tax to ensure they get a good return for their investment.
Also to be reduced is withholding tax on interest payable to non-residents by SEZ enterprises from 15 per cent to five per cent.
With the SEZ authority fully operational, the government has started rolling them out in key urban areas.
This is part of Vision 2030 to diversify manufacturing activities, create employment and boost the country’s investment profile.
Under the SEZs, the government will provide a host of incentives for industries to operate in and boost creation of modern urban centres.
These incentives include exemption on VAT, reduced corporate tax rates for a defined period, access to quality infrastructure and one-stop shops for licenses.