Plenty of incentives for investors in manufacturing sector

August 27, 2015
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Cabinet Secretary, Ministry of East African Affairs, Commerce and Tourism Phyllis Kandie. Photo/ file
Cabinet Secretary, Ministry of East African Affairs, Commerce and Tourism Phyllis Kandie. Photo/ file

, NAIROBI, Kenya, Aug 27 – To lure more investments into the country, especially local participants, the government has laid out plans to inject incentives into various sectors. This is in a bid to make venturing into those projects easier.

According to Cabinet Secretary, Ministry of East African Affairs, Commerce and Tourism Phyllis Kandie, the government is focused on promoting private sector participation in sectors and industries that provide fast-paced growth and spur a wave of investment opportunities for companies around the world.

“Kenya boasts of a number of attractive investment strengths, including its strategic location as a gateway to East Africa, a fully liberalized economy, a large domestic market, access to a skilled human resource pool and advanced infrastructure,” said Kandie on a Kenya Investment Authority (KenInvest) manual guide on investing in Kenya.

The government has therefore put incentives in key sectors which includes the manufacturing sector.

Export Processing Zones (EPZ), for instance, are big beneficiaries of the incentives. According to the manual, they stand to receive an initial ten-year corporate income tax holiday and 25 percent corporation tax.

Non-resident EPZs also stand to benefit as they get to acquire a ten-year withholding tax holiday on dividends and other remittances.

On the same hand, inputs such as raw materials, machinery, office equipment, certain petroleum fuel for boilers and generators and building materials will get perpetual exemption from VAT and customs import duty.

Local purchasers are also not left behind. According to the manual, buyers of goods and services supplied by companies in the Kenyan customs territory or domestic market will also get VAT exemptions.

More gains will be to investors eyeing to build EPZ buildings and machinery which are applicable for over twenty years as they stand to get a 100 percent investment deduction.

“There shall also be perpetual exemptions from payment of stamp duty on legal instruments,” reads the manual.

Another form of incentive is the tax remission for exports.

For instance, investors operating outside an EPZ, incentives will be provided through the remission of taxes incurred in respect of exports of taxable goods by the Tax Remission Export Office. This will apply to where a person incurs VAT on goods imported under bond for manufacture of exports.

The discharge of VAT paid will also be allowed in respect of capital goods, with an exception of vehicles, imported or purchased for investment in industries such as oil exploration or prospecting for minerals.

Further incentives for EPZs also include manufacturing under bonds.

This incentive will be available to investors manufacturing for exports. It will allow duty and VAT free importation. However, investors will be required to pay corporation tax while their operations will be bonded by a custom officer.

The last incentive that goes to manufacturers is the capital investment allowances which will be offered to those investing in capital projects on a reducing balance.

They include industrial building allowances which is granted on capital expenditure incurred on the construction of an industrial building, investment deduction which is granted to encourage development in manufacturing industries and shipping investment deductions granted at a 40 percent on capital expenditure and only one such deduction can be allowed in respect of the same ship.

Other sectors that are receiving incentives to lure investors include ICT, housing, education and tourism among others.

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