Main tax incentives
Many incentives —including reduced tax rates, tax holidays, capital deductions, VAT exemption, duty exemption— are offered to investors. The following table provides a summary of main tax advantages offered to investors.
Overview of main tax incentives
Benefit |
Rate |
Eligibility criteria and/or comments |
|---|---|---|
| Reduced corporate income tax rate | 0% for the first ten years, 25% for the succeeding ten years |
Export Processing Zones (EPZ) enterprises not engaging in local commercial activities |
| 10% for the first ten years, 15% for the succeeding ten years |
Special Economic Zones (SEZ) enterprises, developers, and operators. | |
| 15% | Companies constructing at least 400 residential units annually, subject to approval by the Cabinet Secretary responsible for housing. | |
| 15% for the first five years (or ten years if extension) | Local assemblers of motor vehicles. | |
| Capital deductions | Investment deduction: 150% | Qualifying investment (buildings and machinery used in manufacturing) exceeding KES 200 million, located outside Kisumu, Mombasa and Nairobi- including SEZ enterprises. |
| Investment deduction: 100% | Buildings and machinery used in manufacturing- including SEZ enterprises.
Hotel buildings. |
|
| Farm works: 100% | ||
| Industrial building allowance: 50% | Certified education buildings | |
| Industrial building allowance: 25% | Qualifying rental residential or commercial building allowance | |
| Industrial building allowance: 1% | Other qualifying buildings (including hotels) | |
| Wear and tear allowance:
Class 1: 37.5% Class 2: 30% Class 3: 25% Class 4:12.5% |
Plant and machinery (reducing balance)
Class 1: Heavy earth moving self-propelling equipment Class 2: Office electronic machinery and equipments Class 3: Other self-propelling machines Class 4: Other non-self-propelling machine |
|
| 20% | Telecommunication equipment Computer software |
|
| Exemption of WHT on dividends | 0% | Paid by SEZ enterprises, developers and operators to non-residents |
| Exemption of WHT on dividends and other remittances | 0% (first ten years) | Paid by EPZ enterprises not engaging in local commercial activities to non-residents |
| Reduced WHT on management fees, professional fees, training fees, and royalties | 5% | Paid by SEZ enterprises, developers and operators to non-residents |
| Reduced WHT on interests payments | 5% | Paid by SEZ enterprises, developers and operators to non-residents |
| Exemption of VAT on inputs | 0% | SEZ enterprises, developers and operators EPZ enterprises |
| Exemption of customs import duty on inputs | 0% | EPZ enterprises |
| Exemption of stamp duty on legal instruments | 0% | EPZ enterprises |
Note: last update: 2018. WHT stands for withholding tax. Specific regulations apply to the extractive industry
Sources: Kenya Revenue Authority, Export Processing Zones Authority, Deloitte, PricewaterhouseCoopers
Double tax treaties
On top of national tax incentives, foreign companies can also benefit from a reduced tax burden by taking advantage of double taxation agreements