EPZ Program

EPZ PROGRAM

The Export Processing Zone (EPZ) program in Kenya was established in 1990 with the enactment of the Export Processing Zone Act (CAP 517, Laws of Kenya). The program, managed by the Export Processing Zones Authority (EPZA), promotes export oriented industrial investment within designated zones. It offers a range of attractive fiscal, physical and procedural incentives to ensure lower cost operations, faster set up and smoother operations. The EPZ program aims at:

  • Promoting and facilitating export oriented investments.
  • Developing an enabling environment for investment in the export sector.
  • Addressing infrastructural and institutional constraints for efficient export-led production.

All licensed EPZ companies, enjoy the following incentives, as established by the EPZ Act;

Fiscal Incentives
  • 10-year Corporate Tax Holiday and 25% tax thereafter (not applicable to EPZ commercial licenses)
  • 10-year Withholding Tax Holiday on remittances to non-residents (not applicable to EPZ commercial licenses).
  • 100% investment deduction on new investment in EPZ buildings and machinery, applicable over 20 years.
  • Perpetual exemption from payment of stamp duty on legal instruments
  • Perpetual exemption from VAT and customs import duty on inputs – raw materials, machinery, office equipment, certain petroleum fuel for boilers and generators, building materials, other supplies. VAT exemption also applies on local purchases of goods and services supplied by companies in the Kenyan customs territory or domestic market. Motor vehicles which do not remain within the zone are not eligible for tax exemption.
Procedural Incentives
  • Operation under essentially one license issued by EPZA. EPZA seeks to minimize bureaucracy and administrative procedures and facilitate licensing, set up and operations of EPZ projects. This includes exemption from compliance with various laws such as the Import, Export and Essential Supplies Act, the Standards Act, the Industrial Registration Act, the Factories Act, and the Statistics Act. The EPZ Authority acts as the primary licensing and regulatory agency on behalf of the government, and collects the necessary information and data from the companies
  • Rapid Project approval and licensing within 30 days (with exception of projects requiring environmental license from National Environmental Management Agency NEMA)
  • No Exchange Controls – liberalized foreign exchange regime and easy repatriation of capital and profits, access to foreign currency accounts, domestic and offshore borrowing.
  • Onsite customs documentation and inspection by Customs Staff. All zones have a resident Customs office for on-site customs documentation and clearance. A Senior Revenue Officer is attached to the EPZA management to assist in all matters relating to customs and excise.
  • Unrestricted investment by foreigners
  • One Stop Shop service for facilitation and aftercare – EPZA Investor Support Division assists new companies and provide help and advice in the areas of staff recruitment, labour regulations, work permits, import-export logistics, application for utility connections, and registration with tax authorities etc.

The EPZ SME Development Programme

This is a programme whose aim is to nurture SME exporters with majority local Kenyan shareholding desiring to set up under the EPZ programme.

Target Sectors

The programme targets SMEs from the following sectors:

  • Horticulture / food processing
  • Textile / apparel
  • Leather
  • Commercial crafts
  • BPO and ICT

Incentives to EPZ SMEs

The following are the incentives currently accessed by EPZ SMEs:

  • EPZ Tax incentives: similar to other large EPZ enterprises
  • Purpose-built infrastructure with smaller godowns: located at the Athi River EPZ.
  • Reduced rent rate and service charge: US$2 per sq.ft. per annum and 10% service charge for the first 5 years of operation. With rent free period of 4 months to allow for setting up.
  • Capacity building: Business Development Services are provided to the SMEs in various areas such as strategic business planning, quality/financial management, human resource management, export marketing etc.

Selection Criteria

SMEs desiring to set up under the programme are selected using the following selection criteria:

  • Operate from the target sectors
  • Are not start-ups but are a new version of existing business
  • Total initial capital investment should be less than Kshs. 40million
  • Initial total employment should be less than 100 workers
  • Local Kenyan shareholding should be at least 75%
  • Space requirements should be consistent with what is available (less than 750sqm)
  • Are prepared to accept the rules and Business Development Services provided under the programme

How to apply

  • Present business plan of proposed EPZ activity and fill EPZ project proposal / application form + application fee of US $250.
  • Register EPZ company after EPZA project approval.
  • Obtain NEMA certificate.
  • Obtain EPZ licence at annual fee of US $1,000.

EPZ Licenses

The EPZ Authority issues 3 main types of licenses or permits.  They are as follows:

EPZ Developer/Operator License

EPZ Enterprises License

EPZ Business Service Permit