Kenya offers several investment incentives to investors. Investors may apply for the issuance of an Investment Certificate to the Kenya Investment Authority. To qualify for the certificate, a foreign investor must invest at least USD 100,000 in a venture beneficial to Kenya. A successful applicant need not apply for each individual operating license required but is issued with several licenses upon grant of the Investment Certificate. The holder of an Investment Certificate is also issued with entry permits for management, technical staff and owners, shareholders and partners as required.
The Kenya Investment Authority is the body charged with the promotion of investment in Kenya. The Authority’s functions include assisting foreign and local investors and potential investors to obtain any necessary licenses, permits and tax incentives.
Kenya has ratified and domesticated the Convention on the Settlement of Investment Disputes between States and Nationals of other States. This acts as a channel for settling disputes between foreign investors and host governments. Kenya has also enacted the Foreign Investment Protection Act which protects investors against expropriation of foreign investment property by the government.
There are certain tax incentives available in Kenya, but none are investor-specific. Companies operating in Kenya enjoy an accelerated capital allowance referred to as Investment Deduction (ID) which is deducted against profits, on capital expenditure on qualifying buildings, equipment or machinery. It is given only once: in the first year of use and is set at 100%.
The Income Tax Act also provides for an Industrial Building Allowance (IBA) which is an annual allowance computed on a straight-line basis at 25% of the cost (net of any ID) of an industrial building. Major renovation or rehabilitation costs are also eligible for IBA.
Wear and Tear Allowance (WTA), on a reducing balance basis, is available for equipment, plant and machinery. Other capital allowances include: soft furnishings deductions, farm works deduction and mining deductions.
There are Export Processing Zones (EPZ) designated in Kenya where any goods and services produced are generally regarded (in so far as import duties and taxes are concerned) as being outside the Kenyan tax jurisdiction. Companies that operate in these areas enjoy a 10-year tax holiday and a reduced corporate tax rate for a further 10 years. EPZ incentives are only available to companies that are incorporated in Kenya with the purpose of carrying out permitted activities.
The Income Tax Bill 2018 proposes certain changes to the income tax landscape which include: Corporation tax rate of 35% for companies with an annual taxable income of more than KShs 500 million (USD 5 billion), instead of the previous 30%; Individual income tax rate of 35% for annual income of more than KShs 9 million (USD 90,000); Revision of the thin capitalization down to 2:1 and replacement of the tax holiday for EPZ with a lower corporate tax of 10% for the first 10 years, then 15% for the next ten years among others.
The Income Tax Bill 2018 had not been passed into law as at the date of publication of this article.