Kenya has expanded and simplified tax incentives it offers for investment in special economic zones (SEZs) in a bid to attract investment into those zones, the Industrialisation ministry said.
The ministry said in a notice the new regulations would “provide clarity on the operations of various actors, including to guide the movement of people, goods and services within the special economic zones.”
The SEZs are designated areas aimed at promoting and facilitating export-oriented investments.
Observers have raised concerns that Kenya is falling behind other countries in the region like Ethiopia and Rwanda in winning investment from companies moving supply chains out of China to escape higher tariffs amid the US-China trade war, despite it being East Africa’s largest economy.
The draft regulations are set to simplify rules on its existing tax holiday incentives for investors looking to build facilities in special zones, the ministry said.
They propose the government to grant investors a tax break based on the size of the investment.
“No customs import duties or other charges shall be applied to the import of any goods or services to a special economic zone,” they read in part.
“No trade-related restrictions, including quantitative restrictions, shall be applied to the import of any goods or services to a special economic zone.”
According to the draft rules, SEZ enterprises shall not be subject to minimum export requirements, minimum quotas or minimum quantitative restrictions when selling the goods originating in the areas, whether to other areas outside or within the customs territory.
The proposed rules are expected to undergo public participation from January 10.
Local and foreign investors have been seeking licences to put up 100 SEZs, the ministry said. The ministry earlier said the applications are being scrutinised, with priority given to those eyeing production with locally produced raw materials.
In July 2019, the government designated 9,000 acres of land in Naivasha, Mombasa and Machakos as SEZs in efforts to boost manufacturing.
Trade and Industrialisation Cabinet Secretary Peter Munya gazetted the zones meaning they enjoy special tax and infrastructure that facilitate a wide range of activities such as storage, export and re-export.