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Safeguarding Foreign Investment in Kenya

CM Advocates > Legal News  > Safeguarding Foreign Investment in Kenya

Safeguarding Foreign Investment in Kenya

1. INTRODUCTION

In our earlier article (here) on work authorization for foreign nationals intending to work and invest in Kenya, we discussed the various categories and classes of permits that foreign nationals are required to obtain based on the nature of their investments and specific industry, to enable their endeavours in Kenya.

By this article, we highlight the process, requirements and benefits of registration of foreign investors in Kenya under the auspices of the Foreign Investment Protection Act Chapter 518 and the Investment Promotion Act, Chapter 485B laws of Kenya which include the right to be issued with a designated number of work permits and dependent passes for the foreign investors and their family members among other benefits.

2. BACKGROUND

Kenya has positioned itself as an attractive hub for foreign investment in Africa. This is evident through the many international organizations and Multi-National Corporations (MNC’s) that have set up their regional offices in Nairobi City as the gateway to the East and Central Africa region.

To attract and keep foreign investors, the government has made provision within the legislative framework of Kenya to ensure that foreign investors are adequately protected and motivated to continue to invest in Kenya.

The Foreign Investments Protection Act, Chapter 518 laws of Kenya (the “Act”) was enacted in the year 1964 immediately after Kenya gained her independence from Britain. The Act has since undergone several amendments to reflect the changing times and advancements in global trade.

Section 3 of the Act provides that a foreign investor may apply and be granted a certificate indicating that they intend to invest in an enterprise approved by the Cabinet Secretary for Finance. Issuance of this certificate is discretionary upon proof and satisfaction that the intended enterprise would be beneficial to the economy of Kenya.

Another notable piece of legislation is the Investment Promotion Act, Chapter 485B laws of Kenya which was enacted to promote and facilitate investment by assisting investors both local and foreign in obtaining the licenses necessary to invest in Kenya and by providing other assistance and incentives and for related purposes.

3. REQUIREMENTS FOR ISSUANCE FOR A CERTIFICATE AS AN APPROVED ENTERPRISE UNDER THE PROVISIONS OF THE FOREIGN INVESTMENT PROTECTION ACT (THE “ACT”)

A prospective foreign investor must in their application to be recognized as an approved enterprise under the Act, provide the following details:

  1. their names and nationality.
  2. the name and a description of the enterprise/ intended investment.
  3. the amount of foreign assets invested or to be invested by the applicant.
  4. The capital for the investment/intended investment which should be expressed in Kenyan currency or the relevant foreign currency.
  5. whether they intend to invest through a loan either in Kenyan currency or the relevant foreign currency.
  6. the foreign currency invested/ to be invested in Kenya.
  7. the period of their investment/intended investment in Kenya.

3.1 Benefits accruing to an approved enterprise under the Act

An approved enterprise is allowed to transfer their net profits and retained earnings out of Kenya subject to payment of withholding tax in the case of a subsidiary. A branch of a foreign entity registered as such here in Kenya is not amenable to payment of withholding tax on repatriation of profits and retained earnings. Needless to say the corporate tax levies shall apply to both entities.

An approved entity also enjoys protection accorded to its assets and properties and may not be deprived of ownership thereof or have the same compulsorily acquired unless by lawful order.

An approved enterprise also stands to benefit from special arrangements for promotion and protection of foreign investment that may from time to time be declared by the government of Kenya.

4. ISSUANCE OF A FOREIGN INVESTMENT CERTIFICATE UNDER THE INVESTMENT PROMOTION ACT, CHAPTER 485B LAWS OF KENYA

As indicated above, another piece of legislation meant to spur investor growth is the Investment Promotion Act, Chapter 485B enacted in the year 2004. The object of this Act is to promote and facilitate investment by assisting investors in obtaining the licences necessary to invest and by providing other assistance and incentives to the investors. The Act applies to both local and foreign investors while setting capital requirements at not less than 1 million Kshs for local investors and 100,000 USD foreign investors.

The Investment Promotion Act also establishes the Kenya Investment Authority which is a body corporate established to promote and facilitate investment in Kenya by: –

  • Issuing investment certificates.
  • Assisting in obtaining any necessary licences and permits.
  • Assisting in obtaining incentives and exemptions under the Income Tax Act, the Customs and Excise Act, the Value Added Tax or other legislation.
  • Promoting locally and internationally investment opportunities in Kenya.
  • Reviewing the investment environment and making recommendations to the government.

4.1 The considerations for investors to be entitled to Investment Certificates

The Investment Promotion Act sets out the conditions which an investor should fulfill in determining whether an investment is beneficial to Kenya and to qualify for an Investment Certificate in Kenya. They are as follows;

  1. creation of employment for Kenyans;
  2. acquisition of new skills or technology for Kenyans;
  3. contribution to tax revenues or other Government revenues;
  4. a transfer of technology to Kenya;
  5. an increase in foreign exchange, either through exports or import substitution;
  6. utilization of domestic raw materials, supplies and services;
  7. adoption of value addition in the processing of local, natural and agricultural resources;
  8. utilization, promotion, development and implementation of information and communication technology
  9. any other factors that the Authority considers beneficial to Kenya

4.2 Benefits of Procuring Investment Certificate in Kenya

Upon issuance of an Investment Certificate, the investor thereunder (both local and foreign) shall be entitled to issuance upon application and payment of prescribed fees, of the licenses specified in the investment certificate or the Second Schedule to the Investment Promotion Act depending on the nature of their investment. This shall only be applicable to the initial license after the expiration of which the relevant laws shall apply for renewal, extension, revocation etc.

In addition to procuring the licenses above, the holder of an investment certificate is entitled to the following work permits under the Citizenship and Immigration Act, 2011:-

  1. Three Class A work permits for technical or management personnel in relation to prospecting and mining activities;
  2. Three Class F work permit for investors intending to engage in specific manufacturing business;
  3. Three Class G for investors intending to engage in trade, business or consultancy not falling within a specific industry; and
  4. Three Class C work permits for members of a prescribed profession.

With respect to the work permits issued above, the holder of an investment certificate is entitled to have the same renewed upon expiry or to have the same issued to a different employee, partner, owner, or shareholder who meets the prescribed requirements.

To every holder of a work permit specified above, their dependents shall be entitled to be issued with dependent passes and re-entry passes in connection thereof.

It goes without saying that the applicants for the guaranteed permits above as well as their dependents must meet the prescribed requirements under the law for issuance of the same and must pay the prescribed fees; and meet any other lawful conditions/requirements prescribed.

Conclusion

We at CM Advocates LLP, offer expertise guidance and assistance to our foreign and local investor clients in procuring relevant approvals and certificates under the Foreign Investment Protection Act and the Promotion of Foreign Investment Act as discussed herein.

In addition, we offer bespoke world class legal services on all your immigration, labour and employment matters. We are practical in our approach and offer quick turnaround timeframes for all applications. We will be delighted to receive your feedback and enquiries on this and any other of our articles.

In case of any queries and or if in need of any clarification, do not hesitate to contact the undersigned or route your queries through immigration@cmadvocates.com and +254716209673.

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