The Government policy is to create an enabling environment for private sector investment. The following is a summary of investment incentives:
- Investment Allowance
Investors in manufacturing and hotel sectors outside Nairobi and Mombasa are eligible for an investment allowance of 85 percent on plant, machinery, buildings, and equipment. Investments located in Nairobi and Mombasa are eligible for the investment allowance at 35 percent. For manufacturers under bond, the applicable rate is 100 per cent for all locations. - Depreciation
Liberal rates are allowed for depreciation of assets based on book value as follows:
- Hotels…………………….4% per year,
- Industrial buildings…..25% per year,
- Plant and machinery..125% per year,
- Vehicles, trucks, and tractors ……………………….25-37% per year.
- Loss Carried Forward
- Business enterprises that suffer tax losses can carry forward such losses indefinitely to be offset against future taxable profits.
- Remission From Customs Duties
Duties on machinery and equipment may be reduced to 10% where the investment is expected to have net foreign exchange earnings or savings for Kenya. Imported plant and equipment intended for industries located outside major towns are also charged custom duties at 10%. A 50 per cent remission of duties and tax is granted to industries established within designated boundaries of Nairobi, Mombasa and other urban centres. - Duty Remission Facility
Materials imported for use in manufacture for export or for the production of duty free items for sale domestically are eligible for duty remission, irrespective of the source of financing. This programme is open to all types of investment whether they are for expansion, replacement or rehabilitation or new manufacturing plants. - Manufacturing Under Bond
To encourage manufacturing in Kenya for world markets, the Government has established an in-bond programme open to both local and foreign investors. Enterprises operating under the programme are offered the following incentives:
- Exemption from duty and VAT on imported plant, machinery and equipment, raw materials and other imported inputs.
- 100 per cent investment allowance on plant, machinery, equipment and buildings. Bonded manufacturing enterprises can be licensed to operate in Nairobi, Mombasa, Kisumu, Eldoret, Nakuru, Nyeri and Thika or within the immediate environs of these towns.