The Special Economic Zones Authority (SEZA) Amendment Bill 2023 is a proposed alteration to the Income Tax Act aimed at granting more incentives to companies operating within Kenya’s many gazetted SEZ’s.
The goal of the bill is to encourage long-term planning by investors. It also seeks to reinforce policy stability and heighten Kenya’s competitiveness in the region. The proposed tax incentives elevate Kenya’s SEZ policies to a higher competitive level than even most Western countries.
The key takeaways from the draft include:
- Extending the SEZ license term from 1 to 10 years.
- Changing the schedule of Corporate Income Tax on SEZ-based operations – 0% for domestically-sourced income for the first 10 years (down from 10%), 15% for the second set of 10 years, and the standard rate afterward.
- Increasing the fine (300,000 KSh to 5,000,000 KSh) and minimum imprisonment term (6 months to 1 year) for SEZ operators and developers failing to comply with the necessary licensing and account requirements.
There are several more proposed changes to the SEZ Act 2015 (No. 16 of 2015) but the mostly involve the SEZ board structure and additional criteria for who can serve as an SEZ CEO.
The bill went through public participation forums hosted across the country which concluded last year and is widely supported by the Special Economic Zones Authority (SEZA).
The Two Rivers International Finance & Innovation Center (TRIFIC) is the latest SEZ in Kenya, uniquely focused on service-sector companies particularly in the technology and startup ecosystem in addition to consulting, investment, call centers, etc.
Brenda Mbathi, CEO of TRIFIC SEZ, emphasized the transformative impact of the SEZ Amendment Bill 2023, describing it as a pivotal legislation that will reshape the landscape for both SEZ developers and operators. In a recent interview with The Kenyan Wall Street, she highlighted the bill’s significance in aligning investor interests with Kenya’s overarching goal of fortifying its SEZ strategy, thereby bolstering our competitive position on both regional and continental fronts.
Ms. Mbathi expressed her optimism about the positive implications of the proposed changes, stating, “This Amendment Bill will play a crucial role in shaping our endeavors at TRIFIC. Being a service-sector SEZ, we are currently drawing considerable attention from international fintech startups, venture capital investors, and other key players. The revisions to the SEZ Act 2015 directly address concerns and challenges raised by these stakeholders, providing a more conducive environment for collaboration and sustained growth.”
The SEZ Amendment Bill 2023 also introduces a variety of terminology to the SEZ Act 2015 in line with the private-sector priorities of the current government and the trajectory of the technology industry. ‘Business service park’ is one such addition to the legislation describing the activity and focus of service-sector SEZ’s like TRIFIC.
SEZ’s play an important role in the Kenyan business environment, not only helping to encourage business but also to create jobs and attract Foreign Direct Investment (FDI). With the most noticeable changes being made to the licensing timeline and corporate income tax provisions, the bill is expected to have a significant positive impact on SEZ’s across the country.
For companies considering an expansion in Africa or specifically in Kenya, SEZ’s are a great way to jump start your company expansion and be able to access high-level leaders in the Kenyan economy. TRIFIC specifically, with the eventual passage of the SEZ Amendment Act 2023, will be the perfect place for service-sector companies to set-up shop.