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Investors wary of law on special zones

By Patrick Alushula | February 21st 2018
Interpretation of the tax laws on Special Economic Zones proving to be a major hurdle to investors. [Photo: Courtesy]


Some of the tax incentives offered by the Government are ambiguous to investors interested in setting up businesses in the special economic zones, a lawyer has said.

According to commercial law firm IKM’s managing partner, James Kamau, many foreign investors who have sought interpretation of the Special Economic Zones (SEZs) Act say some of the incentives are not clear.

Speaking recently in Nairobi during an event to discuss the opportunities presented by the SEZ regime, Mr Kamau urged the Industrialisation Ministry and the National Treasury to address the uncertainties.

“There appears to be an alignment of laws in principle, but the practical implementation is what is posing a challenge. There’s is a need for the two ministries to harmonise the various tax rates for effective implementation of these incentives,” he said.

President Uhuru Kenyatta assented to the SEZ Act in September 2015, creating tax incentives for investors in a bid to spur manufacturing.

Investors in SEZ regions are granted preferential treatment on stamp duty, value added tax, withholding tax, export levies, and import declaration fees.

In addition, they are supposed to enjoy a 10 per cent tax rate in the first 10 years of operation and 15 per cent thereafter.

However, interpretation of the tax laws is proving to be a major hurdle, with some investors delaying their investment decisions, according to Mr Kamau.

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