Overview
The Business Laws (Amendment) Act, 2024 (the Act) was recently enacted into law on 11 December 2024 and came into force on 27 December 2024. Following its passage by the National Assembly and presidential assent, it introduces several significant amendments to the Special Economic Zones Act, No. 16 of 2015 (the SEZ Act).
We highlight below the amendments and their effects:
Conferment of powers upon the Cabinet Secretary in relation to the considerations for declaration as a special economic zone
The Act clarifies that the Cabinet Secretary for Investments, Trade and Industry, on the recommendation of the Special Economic Zones Authority (the Authority), may declare any area a special economic zone (“SEZ”), without the need to consult the Cabinet Secretary for National Treasury and Economic Planning.
The Cabinet Secretary may also set:
- The minimum acreage size of any such land to be declared as a SEZ, and
- The minimum amount that should be invested on such land for it to qualify as a SEZ.
Entitlement of goods sold and that remain within a customs-controlled area to benefits under the SEZ Act
The Act clarifies that goods sold and that remain within the customs-controlled area of a SEZ are not deemed to have entered the customs territory and therefore, enjoy the benefits and exemptions conferred under the SEZ Act. This clarification is welcomed in light of the increased trade between entities within the customs-controlled areas of a SEZ.
Enlargement of the mandate of the Authority
The Act expands the mandate of the Authority, further authorising it to:
- Determine the investment criteria including the investment threshold and the minimum investment value;
- Review applications and grant SEZ business service permits;
- Establish and administer a “one-stop” centre through which SEZ enterprises can channel all their applications for permits, approvals, licences and facilities not directly handled by the Authority; and
- Recommend to the Cabinet Secretary to suspend or cancel the licence of a SEZ enterprise or SEZ developer, who violates any applicable law. Previously, the Authority only had the power to recommend to the CS cancellation or suspension of licences concerning breaches of the SEZ Act, the East African Community Customs Management Act, and the Value Added Tax Act.
Granting eligibility to public entities for licencing as SEZ developers and SEZ operators
Previously, only companies incorporated in Kenya were eligible to apply for SEZ developer and SEZ operator licences. However, the Act expands this, by permitting public entities to apply for licences as SEZ developers or SEZ operators.
This change allows public entities, such as ministries, state departments, state corporations, county departments, or agencies of the national or county Government, to develop and/or manage SEZs.
Introduction, issuance, and renewal of SEZ business service permits
The Act introduces SEZ business service permits, which may be obtained by any person intending to provide a service within the SEZ for which no incentive or benefit accrues under the SEZ Act. The rights, licence period, and obligations applicable to such permits will be prescribed under subsequent regulations.
The introduction of this new category of licence for business service providers is welcomed, as it allows such firms to provide services to entities that are licenced as SEZ developers, SEZ operators or SEZ enterprises.
Expansion of the categories of persons to whom SEZ land or buildings may be leased, sub-leased, or sold by a SEZ developer
The Act includes SEZ business service permit holders and residents among the persons to whom SEZ lands or buildings may be leased, sub-leased, or sold by SEZ developers.
Adjustment of penalties
The Act adjusts the penalties to be imposed on SEZ developers or SEZ operators who fail to maintain adequate and proper accounts and other records related to their activities, employment statistics, and business operations.
The penalty of imprisonment for a term not exceeding six (6) months has been removed. Instead, the fine payable for such failure to maintain adequate and proper accounts and other records of their activities has been increased from three hundred thousand shillings (KES 300,000) to five million shillings (KES 5,000,000), or such administrative sanction as the Authority shall deem fit, or both.
Incentives and tax benefits granted to SEZ developers, operators or enterprises
The Act provides that the incentives and tax benefits granted to SEZ developers, operators or enterprises will apply for a period of ten (10) years from the date of the licence.
This amendment is welcomed as it offers investors certainty regarding the duration of their entitlement to these benefits, fostering a more predictable investment environment.
Conclusion
The Act was assented to on 11 December 2024 and came into force on 27 December 2024, and therefore, the amendments to the SEZ Act are now in effect. Bowmans remains available to offer further guidance on the amendments and their impact on your business.
