Companies operating in Kenya's Special Economic Zones (SEZ) have been exempted from paying Sh1.98 billion in taxes and other fees in the nine years to 2023, Parliament has been told.
Incentives include protection from corporate tax, withholding taxes, and value-added tax, and are offered to developers and companies in special economic zones to encourage local investment.
The Kenya Revenue Authority (KRA) told the Parliamentary Committee on Finance and National Planning that for the period from 2015 to 2023, a total of Sh4,085,454,461 has been calculated for the 37 SEZs.
“A total of Shs 2,090,251,963 was paid in taxes by SEZ entities that were issued customs codes and operate from the customs zone,” said David Ontweka, KRA Deputy Commissioner for Policy and Customs.
The KRA administration appeared before the committee chaired by Molo MP Kuria Kimani to answer questions raised by Mbeere North MP Geofrey Ruku on taxes waived in special economic zones.
Rocco had sought a detailed table of tax exemptions for each category of tax exempted between 2015 and 2023 and for each institution in the special economic zone.
Mr Ontweka told MPs that the KRA began facilitating SEZs in 2022 and issued guidelines for the designation or operation of SEZs, which were published on June 9, 2022, through Gazette Notification No. 6930.
He said the KRA has issued import/export codes to 31 special economic zones to facilitate the work of entities.
“The issuance of tokens effectively integrates SEZ operators into dedicated systems for various customs transaction purposes,” Mr. Ontoika said.
“The Special Economic Zones Authority (SEZA) has facilitated the declaration and issuance of 37 SEZs in the country, of which 30 are private zones and seven are public zones.”
He said the general SEZs include Naivasha SEZ, Konza City SEZ, Dongo Kundu SEZ, Sagana Agro-Industrial City SEZ (SAIC), East African Free Zone and Special Economic Zone, and Africa Economic Zone.
B.S. said: Abubakar Hassan, Investment Promotion, said 56 companies have established businesses in the 12 special economic zones currently operating.
“So far, $960 million in investments have been generated and about 5,000 jobs created,” Mr. Hassan said.
The report submitted by Mr. Ontoika shows the International Committee of the Red Cross, Tatu City, Two Rivers Mall, Eco Ross Limited, Unity West Special Economic Zone Limited, Impact North Special Economic Zone Limited, Twiga Tatu Limited, Ziara Special Economic Zone Limited, Geochem Supplies Company, Mt. Keepberry. Golf and Resort (SEZ) was the biggest beneficiary of the tax breaks.
The tax breaks ranged from Sh2.35 million to Sh604 million annually.
Esther Wahome, deputy committee officer in charge of local policy and taxation, told the committee that 12 special economic zones had been assessed and the taxes calculated amounted to Sh154.74 million. She said a total of Sh37.77 million was exempted from imputed taxes, and Sh116.97 million was paid by SEZ entities.
“The scope of exemptions and exemptions has been extended to SEZ developers and operators and companies in relation to corporate tax, withholding tax, value added tax, including import VAT and import duties every year,” Ms Wahome said.
“The customs duties waived for SEZ entities from 2015 to 2023 are estimated at Sh1,987,249,558. This includes the import declaration form.”
She said the estimated VAT waived for the period from 2015 to 2024 amounts to Sh545.78 million for SEZ entities, while the estimated income tax (corporate tax) waived in the period under review for SEZ entities is estimated at Sh167 million. On pay-as-you-go taxes paid by each of the 12 SEZs, Sh1,049,088,204 was collected between 2015 and 2023.
“The SBM Special Economic Zone and the Mombasa Industrial Park Special Economic Zone do not have a VIN,” Ms Wahome said.
“The Northlands, Dongo Kundu and Naivasha SEZs do not have a payment obligation. The payment obligation is not mandatory.
Mr Kimani and Mr Roko demanded to know what safeguards are in place to ensure that KRA collects taxes from the SEZs.
Mr Roko claimed that there is a massive tax evasion scheme by the SEZs which falls squarely on some offshore companies owned by each SEZ.
“Some of these companies made profits but did not pay dividends. Some SEZs conducted land transactions and sales but did not pay taxes,” Kimani said.
The KRA said it is seeking to change the law to tighten controls and management of SEZs to ensure all taxes are paid.