Incorporation of a Special Economic Zones (SEZ) Company in Kenya

Introduction 

With its strategic geographic location, Kenya acts as a gateway to the East and Central Africa, region making it an attractive destination for investors looking to tap into the vast African market. The government of Kenya, in a bid to enhance investment and trade, has been implementing favourable policies, among of which is the establishment of Special Economic Zones (SEZs). Incorporating a company as an SEZ in Kenya offers a plethora of benefits, streamlining operations for businesses looking to maximize their potential in and beyond the region. In this article, we discuss what SEZs are, how they are registered and the benefits of registering an SEZ company. 

1. Understanding Special Economic Zones (SEZs) 

Special Economic Zones are designated areas within a country that operate under unique economic regulations that differ from other areas in the same country. The SEZ program in Kenya is designed to attract Foreign Direct Investment (FDI), spur economic growth, create employment opportunities, and enhance the development of infrastructure. These zones are categorized into industrial parks, free trade zones, information communication technology parks, free ports, science and technology parks, business service parks, tourism and recreation parks, agricultural zones and livestock areas, each tailored to cater to specific industry needs. 

2. The Process of Incorporating an SEZ Company in Kenya 

The Special Economic Zones Act establishes the Special Economic Zones Authority (SEZA) whose mandate is to recommend sites for designation as SEZs, appraise applications and grant licenses. The SEZA grants three main licenses: SEZ developer license, SEZ operator license and SEZ enterprise license. A Developer Licence is issued to a corporate entity engaged in the development of integrated infrastructure facilities in a designated Special Economic Zone. On the other hand, an Operator Licence is issued to a corporate entity engaged in the management of a Special Economic Zone. An Enterprise Licence is issued to a corporate entity carrying out business in a Special Economic Zone. 

Incorporating an SEZ company in Kenya involves a series of well-delineated steps, guided by the SEZA. These steps are:  

1. Present a developer/operator or Enterprise project interest request letter to SEZA. 
2. Fill and submit the SEZA Developer/Operator application or project investment proposal form and attached relevant supporting documents as listed on the form. 
3. SEZ Authority Licensing department assess and review the application forms and either recommends or defer with a communication to the investor. 
4. Once recommended, Approval in Principle will be issued with conditions to be fulfilled. 
5. SEZA issues a letter of No Objection to the Business Registration Service (BRS) to enable investor to register/incorporate an SEZ company in Kenya. 
6. Upon incorporation, the investor submits the newly incorporated company incorporation documents to SEZ Authority and other relevant documents like NEMA approvals/license. 
7. Once the documents are received, SEZA will issue an Invoice to the investor for payment of Developer/Operator licensing fee of USD 5,000/= or Enterprise Licensing fee of USD. 1,000/= 
8. SEZA will Issue a SEZ Developer/Operator or Enterprise License to the investor upon payment. 

 
3. Benefits of Registering a Company as an SEZ in Kenya 

The incentives for registering a company as an SEZ in Kenya are substantial, offering a conducive environment for businesses to thrive. Some of the key benefits include: 

a. Administrative incentives.  

• One stop shop to offer support such as in the areas of labour regulations, work permits, import-export logistics, application for utility connections, and registration with tax authorities etc. through a customer/investor centric platform. 
• Operation under a single operating licence aimed at minimizing bureaucracy and administrative procedures. 
• Rapid Project approval and licensing. 
• Onsite custom documentation and inspection by customs staff. 
• Work permits of up to 20% of full-time employees. 
• Exemption from rent and tenancy controls. 
• Exemption from payment of advertisement fees and business service permit fees levied by respective County Governments’ Finance Acts. 
• Exemption from manufacturing licence under the Tea Act. 
• Exemption from licence to trade in unwrought precious metals under the Trading in Unwrought Precious Metals Act. 

b. Tax incentives 

• Corporate tax – 10% for the first 10 years, thereafter 15% for the next 10 years and 30% for subsequent years. 
• VAT – local supplies are zero rated. Imported goods are exempt. 
• Stamp duty – Exempt 
• Withholding tax – dividends and gains on transfer of property are exempt. Royalties, interest and service fees are exempt for the first 10 years. 
• Capital gains tax – exempt 
• Excise duty – exempt 
• Import duty – exempt 

Conclusion 

Incorporating an SEZ company in Kenya serves as a strategic move for businesses aiming to leverage the growing opportunities within Kenya and the East and Central Africa region. The SEZ program not only offers a suite of financial and operational benefits but also positions companies in a prime location for regional and global trade. As the Kenyan government continues to support the SEZ framework, businesses that take the initiative to incorporate under this program stand to gain a competitive edge in their respective industries, fostering growth and development in the Kenyan economy and beyond. 

At CM Advocates LLP, we have a team of corporate lawyers who can help you obtain the necessary approvals and register an SEZ company. The team can also help you draft shareholders agreement, offer company secretarial services, tax advisory as well as employment and labour law advisory among other services. We also have a team of immigration and global mobility lawyers who can help you acquire work permits for foreign investors, directors and employees, and dependant passes for their dependants.  

If you would like to consult on this article or any other legal issue pertaining to incorporation of an SEZ company in Kenya, or any other matter, you may contact the contributor on the email below or the commercial team through commercial@cmadvocates.com. 

You can also visit our website https://cmadvocates.com/en for more information about us and our services. 

Contributor 

Caiphas Chepkwony – cchepkwony@cmadvocates.com