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KENYA: New Rules Introduced for Special Economic Zones

Kenya will soon introduce new regulations to simplify tax incentives for companies operating in country’s special economic zones (SEZs) and to clarify operations within the zones.

On the advice of The Special Economic Zones Authority, the country’s Ministry of Industry, Trade and Cooperatives recently released its draft Supplemental Special Economic Zones Regulations 2019 and Proposed Amendments to the SEZ Regulations 2016, aimed at boosting the zones’ attractiveness for investment.

SEZ stakeholders have been asked to review the drafts and provide feedback, which will be considered for incorporation into the final supplemental regulations that will then be gazetted and become law. The deadline for stakeholder submissions was on 15 January 2020. No date has been given for publication of the final version.

The new regulations fulfil the need to “provide clarity on the operations of various actors, including to guide the movement of people, goods and services within the special economic zones”, according to the ministry’s official public notice. The new rules also clarify existing tax holiday incentives for investors in SEZs and propose that the government grant tax breaks to investors based on the size of the investment. All current tax and VAT incentives, such as those provided for in the recent Finance Act, 2019, will remain in force.

The draft regulations also make clear that no customs import duties or other charges shall be applied to the import of any goods or services to an SEZ, regardless of whether they are for purposes of storage, exhibition, assembly, manufacture, further processing, or re-exporting. Moreover, no trade-related restrictions, including quantitative restrictions, will be applied to the import of any goods or services into an SEZ. Enterprises in the zones will neither be subject to minimum export requirements, nor minimum quotas or quantitative restrictions, when selling goods originating in the zone.

There are also some recommendations for simplifying and improving customs clearance procedures in line with international standards. These include developing a standardised single, consolidated and electronic customs declarations procedure in compliance with UNCTAD standards; and for introducing post-entry, documentary, electronic, or on-line inventory audit measures and facilities, including those relating to risk profiling and risk management information and communications technology for potentially dangerous goods.

A full version of the draft regulations distributed for public consultation can be downloaded here.

Content provided by Picture: HKTDC Research
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