UNDERSTANDING SPECIAL ECONOMIC ZONE IN KENYA

Background

A Special Economic Zone (SEZ) is a designated geographical area where business enabling policies, integrated land uses and sector-appropriate infrastructure and utilities are provided. It includes a geographical area which has the potential of being developed on either public basis, private basis or public-private partnership basis and development of the zone infrastructure and goods introduced in the customs-controlled area exempted from customs duties in accordance with customs laws.

SEZ are designated geographical area with the following characteristics:

1. Customs-controlled and non-customs-controlled areas;
2. Integrated land uses and sector-appropriate onsite and off­-site infrastructure and utilities to be provided or developed, whether on a public, private or public-private partnership basis;
3. Zone infrastructure and goods introduced in customs-controlled area are exempted from customs duties in accordance with customs laws; and
4. Goods introduced and specified services provided in the customs-controlled area are regarded, in so far as import duties and taxes are concerned, as being outside the customs territory.

An area declared as a Special Economic Zone may be designated as a single sector or multiple sector Special Economic Zone, and may include, but not limited to:

1. free trade zones.
2. industrial parks.
3. free ports.
4. information communication technology parks.
5. science and technology parks.
6. agricultural zones.
7. tourist and recreational zones.
8. business service parks.
9. livestock zones.
10. convention and conference facilities.

Kenya has a number of areas designated as SEZ and the country aims of create an enabling environment for businesses and investors intending to benefit from economic incentives and integrated infrastructure facilities developed in these areas. Below are the areas designated as SEZ in Kenya:

Public SEZ

1. Naivasha SEZ located on 1000 acres of land in Nakuru County.
2. Konza Technopolis SEZ also known as “Silicon Savannah” located on 5000 acres master-planned city in southeast of Nairobi.
3. Dongo Kundu SEZ located on 3000 acres land in Mombasa County.

Private SEZ

1. Tatu City SEZ located on 5000 acres land in Kiambu County.
2. Compact FTZ located on 20 acres stretch of Land in Embakasi Nairobi County.
3. Africa Economic Zone SEZ located on a 1400 acres land in Eldoret, Uasin Gishu County.
4. Two Rivers International Finance and Innovation Centre SEZ (TRIFIC) a business services focused SEZ situated in Nairobi County.
5. Northlands SEZ located in Ruiru, Kiambu County.
6. SBM SEZ located on 11000 acres of land in Kwale County.
7. Mt. Kipipiri Golf & Resort SEZ in Nyandarua County.
8. East Africa Free Zone SEZ.

Benefits of setting up in a SEZ

1. Exemption from VAT;
2. Exemption from duties and taxes under the EAC Customs Management Act.
3. Waiver of Exchange controls for repatriation of profit and capital to the parent country.
4. Exemption from License fees, stamp duty, and advertisement fees at the County government level.
5. Enjoy corporate tax rate at the rate of 10% for the first 10 years and 15% for the next 10 years.

SEZ Regulator

Special Economic Zones Authority (SEZA) is the statutory body established under the Special Economic Zones Act No. 16 of 2015 with the mandate of developing policies and regulations on Special Economic Zones and reviewing applications for grant of licenses to special economic zone Developers, Operators and Enterprises among other functions.

How to enter a SEZ in Kenya

In Kenya, an entity may enter the Special Economic Zone either as a Developer, an Operator or an Enterprise.

Entering SEZ as a Developer

The Special Economic Zones Act No. 16 of 2015 defines a “special economic zone developer” as a corporate body which is engaged in or plans on developing a special economic zone.

If your entity plans or intends to develop the SEZ, it then must apply for a Developer Licence from the Special Economic Zone Authority. A Developer Licence is a license issued to a corporate entity engaged in the development of integrated infrastructural facilities on a designated Special Economic Zone.

Requirements for a Developer Licence

The current licensing requirements for a Developer Licence are provided for on the Developer Application Form, which in summary provides that an investor applicant should submit:

• A developer’s project interest request letter to SEZA;
• Duly filled application form attached with the following relevant supporting documents:
• Copy of certificate of incorporation & Articles/Memorandum of Association.
• Instrument of appointment of current board members, chairman and CEO/Legal instrument setting the signatory rights/List of shareholders with respective shareholding.
• List of all ultimate beneficiary owners of the proposed entity including their Nationalities and Identification Numbers or Passport Numbers.
• Verified financial resources and funding plans for the proposed Zone activity.
• Net worth of the Applicant (including Group companies) duly supported by Audited Accounts of the Developer for the last 3 years.
• Project implementation plan and the detailed development plans including Bills of Quantities.
• Proposed timeframe to commence and complete the design and construction of the planned Zone and Infrastructure.
• Master List of the required Capital Equipment and Building Material.
• The project Strategic and/or Environmental Impact Assessment.
• Any other relevant document or additional information as the Authority may require.

Approval procedure

Upon receipt of the application, the SEZ Authority’s Licensing department will assess and review the application forms and either recommend or defer with a communication to the investor why it has been deferred. If recommended, Approval will be issued with conditions to be ful­filled.

SEZA will then issue a letter of No Objection to the Business Registration Service (BRS) to enable the investor to register/incorporate an SEZ company in Kenya (this is applicable to new companies). Upon incorporation, the Applicant will then submit the company incorporation documents to SEZ Authority and other relevant documents.

Once Document are received, SEZ Authority will issue an Invoice to the investor for payment of licensing fee of USD 5,000. Thereafter SEZA will then issue SEZ Developer License, valid for one year renewable at the end of each period, to the investor once the licensing fee is paid.

Entering SEZ as an Operator

The Special Economic Zones Act No. 16 of 2015 defines a “special economic zones operator” as a corporate body engaged in the management of a special economic zone and designated as such under the Act.

If an entity intends to engage in the management of an SEZ it must apply for an Operator Licence from the Special Economic Zone Authority. An Operator Licence is a licence issued to a corporate entity engaged in the management of a Special Economic Zone.

Requirements for an Operator Licence

The licensing requirements for an Operator Licence are provided for on the Special Economic Zone Operator application form, which in summary provides that an investor applicant should submit:

• An Operator’s project interest request letter to SEZA;
• Duly filled application form attached with the following relevant supporting documents:
• Copy of certificate of incorporation & Articles/Memorandum of Association.
• Instrument of appointment of current board members, chairman and CEO/Legal instrument setting the signatory rights/List of shareholders with respective shareholding.
• List of all ultimate beneficiary owners of the proposed entity including their Nationalities and Identification Numbers or Passport Numbers.
• Verified financial resources and funding plans for the proposed Zone activity.
• Net worth of the Applicant (including Group companies) duly supported by Audited Accounts of the Developer for last 3 Years.
• Project implementation plan and the detailed development plans including Bills of Quantities. if applicable
• Proposed timeframe to commence and complete the design and construction of the planned Zone and Infrastructure. If applicable
• Master List of the required Capital Equipment and Building Material. If applicable
• The project Strategic and/or Environmental Impact Assessment. If applicable
• Any other relevant document or additional information as the Authority may require.

Approval procedure

The SEZ Authority Licensing department will then assess and review the application forms and either recommend or defer with a communication to the investor why it has been deferred. If recommended, Approval will be issued with conditions to be ful­filled.

SEZA will issue a letter of No Objection to the Business Registration Service (BRS) to enable the investor to register/incorporate an SEZ company in Kenya (for new companies). Upon incorporation, the Applicant will Submit the company incorporation documents to SEZ Authority and other relevant documents.

Once Document are received, SEZ Authority will issue an Invoice to the investor for payment of licensing fee of USD 5,000. SEZA will then issue SEZ Operator License, valid for one year renewable at the end of each period, to the investor upon payment of the licensing fee.

Entering the SEZ as an Enterprise

The Special Economic Zones Act No. 16 of 2015 defines a “”special economic zone enterprise” to mean a corporate body which has been licensed to carrying out business in a Special Economic Zone.

To carry out business in a SEZ an entity must apply for an Enterprise Licence from the Special Economic Zone Authority. An Enterprise Licence is a licence issued to a corporate entity engaged in business within a Special Economic Zone.

Requirements for an Enterprise Licence

The licensing requirements for an Enterprise Licence are provided for on the Enterprise Licence application form, which in summary provides that an investor applicant should submit:

• An Enterprise project interest request letter to SEZA;
• A duly filled SEZA project investment proposal form; and
• A duly filled SEZ Enterprise application form attached with the following relevant supporting documents:
• Copy of certificate of incorporation & Articles/Memorandum of Association.
• KRA PIN of the applicant Company.
• Tax Compliance Certificate of applicant Company.
• Legal instrument /Power of Attorney appointing the signatory rights.
• List of shareholders with respective shareholding and/or CR12.
• List of all ultimate beneficiary owners of the proposed entity including their nationalities and Identification Numbers or Passport Numbers.
• Bank Reference letters of the Directors of the proposed SEZ Company.
• Letter of No objection/SEZ Developer recommendation/Letter of Offer/(Sale/Lease Agreement).
• Implementation Framework and Timelines.
• Production Flow Chart (For Manufacturers).
• NEMA license/approval letter.
• Any other relevant information relating to the proposed business activity as the Authority may require.

Approval procedure

The SEZ Authority Licensing department will then assess and review the application forms and either recommend or defer with a communication to the investor why it has been deferred. If recommended, Approval will be issued with conditions to be ful­filled.

SEZA will issue a letter of No Objection to the Business Registration Service (BRS) to enable the investor to register/incorporate an SEZ company in Kenya (for new companies). Upon incorporation, the Applicant will Submit the company incorporation documents to SEZ Authority and other relevant documents.

Once Document are received, SEZ Authority will issue an Invoice to the investor for payment of licensing fee of USD 1,000. SEZA will then issue SEZ Enterprise License, valid for one year renewable at the end of each period, to the investor upon payment of the licensing fee.

At A.O. WANGA ADVOCATES we are happy to assist you in all issues relating to SEZ in Kenya. Contact us on
info@aowangaadvocates.com or +254794600191.
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