State to revive Nairobi financial hub plan after stuttering start

The Finance Bill 2025 has proposed to increase to 20 years the time that some of the firms running under the innovation hub will pay lower corporate taxes. [File, Standard] The government is seeking to attract global financial services sector players to the Nairobi International Financial Centre (NIFC) by offering more incentives as it seeks to accelerate the take-off of the innovation hub. The Finance Bill 2025 has proposed to increase to 20 years the time that some of the firms running under NIFC will pay lower corporate taxes. Dividends that the NIFC-certified firms will pay will also be tax-exempt, but on the condition that they reinvest Sh250 million in the country. NIFC, which commenced operations in 2022, is a virtual platform and a regulatory framework that offers incentives to international financial services sector players to set up in Nairobi. It was seen as having the potential to transform Kenya into a continental financial services hub. Currently firms certified by the NIFC Authority pay 15 per cent corporation tax over the first 10 years, after which they are expected to transition to the normal rate of 30 per cent. Through the Bill, Treasury has proposed to extend the period by another 10 years, during which they will pay a corporate tax of 20 per cent, higher than what they will pay during the first 10 years but still significantly lower than the 30 per cent they would pay on expiry of their stay at NIFC. This will be through the revision of the Income Tax Act, according to the proposals by the Finance Bill 2025. The Income Tax Act currently requires firms certified by NIFCA to operate carbon market exchanges or emission trading systems to pay 15 per cent corporate tax for the first 10 years. Treasury has, however, put in place conditions for companies operating under the centre to continue enjoying the incentive of lower corporate tax. The companies will be required to invest "at least Sh3 billion in Kenya in the first three years of operation" and "where the company is a holding company, at least 70 per cent of its employees in senior management are citizens of Kenya". In instances where such companies have their regional headquarters in Kenya, they will be required to have at least 60 per cent of their employees in senior management be Kenyan citizens. "In the case of a start-up certified by NIFCA, 15 per cent for the first three years and 20 per cent for the succeeding four years," reads the Finance Bill. The Bill has also proposed to exempt from taxes "dividends paid by a company certified by the Nairobi International Financial Centre Authority where the company reinvests at least Sh250 million in that year of income." Following its launch in 2022, NIFCA, together with the Nairobi Securities Exchange, signed an agreement with the Air Carbon Exchange Group of Singapore to set up the first carbon exchange in the region. This was, however, never actualised, with Treasury now seemingly attempting to resuscitate the carbon exchange with the proposals in the Finance Bill 2025. The government also recently lowered the Capital Gains Tax to five per cent for firms investing in Kenya through NIFC, which is compared to the 15 per cent CGT rate that other firms have to pay. The exchange was expected to bring closer to home a platform for the trade in carbon credits that has always felt alien to many, especially small businesses and organisations. This is despite many local firms being in climate-friendly ventures and standing to gain from the sale of carbon credits, one of the ways designed to clean the planet by making polluters pay to offset carbon footprints. Other firms that were expected to join NIFC at launch included insurance firm Prudential and Arc Ride, which is an assembler of electric motorcycles and vehicles. In attracting such investors to Kenya, NIFC was expected to pull in investments to the tune of Sh230 billion by the year 2030.

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