With the aim of boosting the private sector development, the Government of Kenya has introduced outstanding tax advantages for investors. Extra-incentives are available for enterprises that export locally manufactured products.

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