Investors who put up large bulk storage and handling facilities costing at least Sh10 billion to support usage of the standard gauge railway (SGR) will enjoy a lower tax in the year they set up the facility.
The Business Laws (Amendment) Bill 2019 wants 150 percent of the construction costs deducted from the income earned to incentivise investors with lower tax. This will, however, apply to facilities with a minimum capacity of 100,000 metric tonnes.
“There shall be deducted in computing the gains or profits of the persons incurring the expenditure for the year of income in which the bulk storage facilities were first commenced or used a deduction referred to as an investment deduction,” reads the Bill in part.
The Cabinet has approved the Bill, which is now before Parliament. Its passage is expected to spur investments along the SGR line and boost the efficiency of cargo transport.
Traders have also been complaining of higher costs of storing and transporting goods from the SGR terminals to various destinations, leading to muted growth in volumes of cargo transported via the train.
Cargo charges on the SGR line from Mombasa to Nairobi were increased by up to 79 percent from January in a bid to raise more revenue to pay the China Communications Construction Company, the operator.
The Bill, if passed, will amend the Income Tax Act which already gives the 150 percent investment deduction on capital expenditure on buildings and machinery used for manufacturing under bond, in export processing zones as well as special economic zones.
The government is looking to improve the storage and logistics facilities along the SGR as it fights against criticism on the viability of the railway. Critics have taken issue with the Nairobi-Naivasha phase terminating at Suswa, especially after China pulled the plug on funding for Suswa-Kisumu phase 2B.
Kenya Railways had budgeted to earn Sh24 billion from the cargo service in the year to June but managed Sh8.4 billion, being 65.56 percent below target.