SEZ Draft Bill-Final

8/3/2019 SEZ Draft Bill-Final

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The Special Economic Zones Bill, 2010

THE SPECIAL ECONOMIC ZONES BILL

ARRANGEMENT OF SECTIONS

PART I PRELIMINARY

Section

1. - Short title2. - Interpretation

3. Objective and purpose of the Act

PART II ESTABLISHMENT, FUNCTIONS AND POWERS OF THE SPECIAL

ECONOMIC ZONES AUTHORITY

4. Establishment of the Special Economic Zones Authority

5. - Functions and powers of the Authority

6. Board of Directors7. - Tenure of office

8. - Termination of appointment

9. - Remuneration10. - Meetings of the Board

11. - Committees of the Board

12. - Disclosure of interest

13. - Common seal of the Authority14. - Chief Executive Officer

15. - Staff

16. Protection from personal liability17. - Liability in Tort or contract

PART III FINANCIAL PROVISIONS

18. - General Fund of the Authority

19. - Financial year 20. - Annual Estimates

21. Accounts and Audit

PART IV- DECLARATION OF A SPECIAL ECONOMIC ZONE

22. - Declaration of a special economic zone

23. - Activities permitted within a special economic zone24. Facilities within a special economic zone

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PART V LICENSING PROVISIONS.

25. - Licenses

26. - Register of licenses

PART VI SPECIAL ECONOMIC ZONE DEVELOPERS AND OPERATORS.

27. - Qualifications of special economic zone developer and operator

28. Powers of an economic zone developer

PART VII- SPECIAL ECONOMIC ZONES ENTERPRISES.

29. - Establishment of special economic zones enterprises

PART VIII- OPERATIONS WITHIN A SPECIAL ECONOMIC ZONE.

30. - Goods considered to be exported and imported into Kenya.

31. - Goods within a special economic zone

32. - Prohibited activities within the special economic zone33. - Removal of goods from the special economic zone

34. - Receipts and payments of special economic zone enterprises

PART IX BENEFITS TO SPECIAL ECONOMIC ZONES ENTERPRISES

35. - Benefits accruing to special economic zone enterprises

PART X DISPUTE RESOLUTION

36. Disputes

PART XI- MISCELLANIOUS PROVISIONS

37. - Power of the Minister to give directions

38. - Regulations39. - General provisions of the Minister

PART XII- TRANSITIONAL PROVISIONS

40. Repeal41. Saving provisions

SCHEDULE Limitations on imports

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SPECIAL ECONOMIC ZONES BILL, 2010

A Bill for an Act of Parliament to provide for the establishment of specialeconomic zones; to provide for the promotion and facilitation of global and local

investors, the development and management of enabling environment for such

investments; to repeal Export Processing Zones Actand for connected purposes.

Enacted by the Parliament of Kenya as follows:-

PART I PRELIMINARY

Short title. 1. This Act may be cited as the Special Economic ZonesBill, 2010.

Interpretation.

Cap.486

2. In this Act, unless the context otherwise requires-

authority means the Special Economic Zones Authority

established under section 4;

Board means the Special Economic Zones Authority Boardestablished under section 6;

business incubation means an economic development tooldesigned to accelerate growth and success of entrepreneurial

companies through business support resources and services.

company has the meaning as in section 2 of the Companies

Act or a company incorporated outside Kenya but registered in

Kenya under the Companies Act;

commercial activity means trading in, breaking bulk, grading,repacking or re-labelling of goods and industrial raw materials

customs control means the measures applied to ensure

compliance with the laws and regulations which the customs

officers are responsible for enforcing;

customs officer means a customs officer appointed under the

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Cap. 472

Customs and Excise Act

customs territory means the territory in which the customs

laws of Kenya apply in full, but does not include a specialeconomic zone;

director means a member of the Board;

duty means the fiscal, customs and excise duty for the time

being levied under any written law;

East African Community Common Market means the Partner

States markets integrated into a single market in which there isfree movement of capital, labour, goods and services;

export means to-

(i) take or cause to be taken out goods or services out ofthe customs territory or into a special economic zone

by land, sea or air or by any other mode, whether

physical or otherwise.

(ii) supply or provide services, from the customs

territory to a Special Economic Zone

(ii) provide goods or services from one Special Economic

Zone Enterprise to another or Special Economic Zone

Developer in the same or different Special EconomicZone

export processing zone means a designated part of a special

economic zone predominantly oriented for exportmanufacturing;

free port means a special economic zone adjacent to a port of

entry (lake port, seaport, or airport) where imported goods may be unloaded for immediate transhipment, storage, re-packing,

sorting, mixing or otherwise manipulated;

free trade zone means a special economic zone where any

goods introduced are generally regarded, in so far as import dutyand taxes are concerned, as being outside the customs territory

and are not subject to the usual customs control;

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Cap. 472

Cap.469

Fund means the general fund established under section 18;

goods include all kinds of articles, wares, merchandise andstock and, where any such goods are sold under the Customs and

Excise Act, include the proceeds of sale;

information communications technology park means adesignated area in a special economic zone where information

technology related knowledge and service industries are attracted

and facilitated through availability of buildings, specific orgeneral infrastructure, available technical workforce and

business support services.

industrial park means a special economic zone with integrated

infrastructure and environmental controls specific to the needs of

an industrial area.

import duties and taxes means customs duties and all other

duties, taxes, fees or other charges which are collected on or in

connection with the importation and exportation of goods butdoes not include fees and charges which are limited in amount to

the costs of services rendered under this Act;

Kenya Revenue Authority means the Authority established

under section 3 of the Kenya Revenue Authority Act.

licence means a licence issued under this Act;

manufacture means to make, produce, fabricate, assemble,

process or bring into existence by manual, mechanical, chemicalor biochemical methods into a new product having a distinctive

name, character or use and includes processes such as

refrigeration, cutting, polishing, blending, repair, re-making and

re-engineering.

Minister means the minister for the time being responsible fortrade.

negative list" means a list of activities not allowed to beundertaken by special economic zone enterprises.

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primary activities includes agriculture, aquaculture, animal

husbandry, floriculture, horticulture, pisciculture, poultry,silviculture, sericulture, viticulture and mining.

regional headquarters means an entity of regional executives

and directors who are employed by foreign companies and are

based in Kenya for the purpose of managing the affairs of those

companies.

science and technology park means a designated part of a

special economic zone devoted to scientific and technologicalresearch including educational or research institutions for the

development of science and technology based industries.

special economic zone means a designated geographical area

with liberal economic laws and with highly developed

infrastructure or which has the potential to be developed as perthe activities listed under Section 23(1) of the Act, and where

any goods introduced and services provided are generally

regarded, in so far as import duties and taxes are concerned, as

being outside the customs territory but are duly restricted bycontrolled access and wherein the benefits provided under this

Act apply;

special economic zone enterprise means a corporate body;

which has been licenced under this Act;

special economic zone export means any product sold by a

special economic zone enterprise for exportation direct or

through the customs territory;

special economic zones developer means a corporate body

established to develop and administer a special economic zone

under this Act;

special economic zone import means any input or service

supplied to a special economic zone enterprise within a specialeconomic zone ,whether from outside or inside the customs

territory;

special economic zone operator means a corporate body

engaged in the management of a special economic zone

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Objectives

and purposes

designated under section 27;

services means tradable services which-

(i) are covered under the General Agreement on Trade in

Services annexed as 1B to the Agreement

establishing the World Trade Organisation concluded

at Marrakesh on the 15th day of April, 1994.

(ii) may be prescribed by the Government of Kenya for

the purposes of this Act

tourist and recreational centre means a designated part of aspecial economic zone where accommodation and recreationalfacilities in accordance with guidelines issued by Special

Economic Zones Authority.

3. (1) The principal objectives of the Act shall be to-

(a) develop all aspects of special economic zones with particular emphasis on developing integrated

infrastructure facilities, provision of advice on the

removal of impediments to, and creation of incentives fortrade, services and manufacturing in areas designated as

special economic zones; and

(b) regulate and administer approved activities within the

special economic zones.

PART II ESTABLISHMENT, FUNCTIONS AND

POWERS OF THE SPECIAL ECONOMIC

ZONES AUTHORITY

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Establishment

of the SpecialEconomicZonesAuthority.

Functions andpowers of the

Authority.

4. There is established the Special Economic ZonesAuthority as a body corporate with perpetual succession and a

common seal which shall be capable in its corporate name of-

(a) suing and being sued;

(b) taking, purchasing or otherwise acquiring, holding,charging and disposing of movable and immovable

property;

(c) having and managing its own general fund including

borrowing and lending money;

(d) entering into contracts;

(e) doing or performing all such other things or actsnecessary for the proper performance of its functions

under this Act which may lawfully be done by a

corporate body.

5. For the purposes of carrying out the objectives

specified in section 3, the Authority may exercise, perform

and discharge all or any of the following powers, duties andfunctions-

(a) advise the Minister on all aspects of establishment ofspecial economic zones;

(b) implement the policies and programmes of the

Government with regard to the establishment of thespecial economic zones;

(c) identify and map the areas to be designated as special

economic zones;

(d) plan the development and maintenance, and to financethe basic infrastructure up to the perimeter of special

economic zones;

(e) undertake the provision of water and sewerage services in

special economic zones;

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(f) examine and process application for establishment ofspecial economic zones and issue relevant approvals;

(g) examine and process applications for licences by special

economic zone developers, operators, and enterprises;

and issue relevant licences;

(h) promote and market special economic zones among

investors;

(i) issue certificates of origin to special economic zone

enterprises for the purposes of a generalized system of preferences and other trade preferences given underbilateral or multilateral trade agreements;

(j) act as a one-stop centre through which specialeconomic zone enterprises can channel all their

applications for permits and facilities not handled directly

by the Authority;

(k) process building plans and issue relevant approvals in

consultation with the Ministry responsible for Physical

Planning and other relevant Authorities;

(l) perform administrative functions in relation to the

designated special economic zones as would normally beperformed by local authorities;

(m) maintain current data on the performance of the

programme in each individual special economic zone andenterprises;

(n) enforce within the special economic zone compliancewith customs procedures and other requirements for

preventing the unauthorized use of designated specialeconomic zones, enterprises and business incubators;

(o) enforce compliance with the banking procedures andother requirements for preventing the unauthorized use of

approved special economic zone activities;

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Cap. 472

Cap. 476

(p) draw up and regularly update a negative list of activitiesthat are not allowed in the Special Economic Zones;

(q) approve business services to be rendered within a special

economic zone.

(r) suspend or cancel the licence of a special economic zoneenterprise or a special economic zone developer which is

in the violation of the Customs and Excise Act, and the

Value Added Tax Act; and

(s) do all such other acts as may be incidental or conduciveto the attainment of the objective of the Authority or theexercise of its powers under this Act.

(2) Without prejudice to the generality of the powersconferred under this Act, the Minister shall make rules in

consultation with the Authority as may be required for the

purpose of ensuring orderly and fair development and operation

of special economic zones, enterprises and export businessincubator enterprises, and in particular rules to-

(a) determine application procedures and criteria for theapproval of special economic zones, developers,

operators, enterprises or business incubators; and

(b) determine procedures for providing the benefits accruing

to special economic zone developers, operators and

enterprises;

(c) ensure adequate security within the special economic

zones;

(d) determine the form of the licences to be issued under this

Act and the procedures for amendment and revocation ofthe licences;

(e) determine entry of personnel into a special economiczone; and

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Cap 480

(f) require information from special economic zone

developers, operators and enterprises.

(3)The Authority shall be exempt from payment of any stampduty chargeable under the Stamp Duty Act.

Board ofDirectors.

6. (1) There is established a Board of Directors of

the Special Economic Zones Authority and shall consist of

the following directors-

(a) a chairman to be appointed by the President;

(b) the Permanent Secretary to the Treasury;

(c) the Permanent Secretary in the Ministry for the timebeing responsible for Industry;

(d) the Permanent Secretary in the Ministry for the timebeing responsible for Trade;

(e) the Permanent Secretary in the Ministry for the time

being responsible for Information and CommunicationsTechnology;

(f) the Permanent Secretary in the Ministry for the timebeing responsible for Transport;

(g) the Permanent Secretary in the Ministry for the time

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being responsible for Regional Development Authorities;

(h) the Commissioner General, Kenya Revenue Authority;

(i) the Commissioner of Lands;

(j) the Chief Executive of the Kenya Investment Authority;

(k) the Chief Executive of the Kenya Export Promotion

Council;

(l) the Chief Executive of the Kenya Private Sector Alliance;

(m)not more than three other directors appointed by theMinister from the private sector, who have experience

and expertise in any of the following:-

(i) manufacturing,

(ii) information communications technology,

(iii) trade,

(iv) law,(v) financial matters; and

(vi) agriculture and agro-processing.

(n) a Chief Executive appointed by the Minister after

consultation with the Board who shall be an ex-officio

director and secretary to the Board.

(2) The Board shall have the overall management,

development and control of the Special Economic Zones and all

functions vested to the Authority by this Act.

Tenure ofoffice.

7. The chairman or a director appointed under section 6 (j)

shall hold office for a period of three years and shall be eligiblefor re-appointment for one other term.

Terminationof

appointment

8. The Minister may terminate the appointment of a director

of the Board appointed under section 6(j) if the director-

(a) delivers to the Minister a written resignation of the

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appointment;

(b) is, on the advice of the Board, incapacitated by mental or

physical illness or is otherwise unable or unfit todischarge the functions of a director or is unable to

continue as a director;

(c) is, without reasonable cause, absent for three consecutivemeetings of the Board;

(d) is adjudged bankrupt or enters into a compositionscheme or arrangements with his creditors;

(e) is sentenced by a court to imprisonment for a term of sixmonths or more; or

(f) is convicted of an offence involving dishonesty; fraud ormoral turpitude.

Remuneration.

9. The directors of the Board shall be paid such remuneration

and allowance out of the general Fund of the Authority as may

be determined by the Minister.

Meetings ofthe Board.

10. (1) The chairman of the Board shall convene a meeting at

least once every three months and whenever the chairman

receives a written request by at least two directors, and in the

absence of the chairman, meetings shall be convened by theChief Executive and the directors present shall elect one of the

directors to preside as chairman.

(2) The quorum of the Board shall be one half of the totalnumber of the Board.

(3) The Board may, subject to the requirements of the

quorum, regulate the procedure in regard to meetings and the

transaction of business at the meetings.

(4) If the chairman of the Board by reason of extended

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illness or absence, is temporarily unable to perform the duties of

his office, the directors may elect a director among the directorsappointed under section 6(j) to act in the place of the chairman

during the period of absence;

(5) The chairman may, at any time resign by a letter

addressed to the President and the resignation shall take effect

upon being accepted by the President.

Committees of

the Board.

11. The Board may from time to time establish committeesfor the better carrying out of its functions, powers and duties

under this Act.

Disclosure ofinterest.

12. (1)Any director of the Board who has a direct or indirect

personal interest in a matter being considered or to be considered

by the Board shall, as soon as reasonably practicable after therelevant facts concerning the matter have come to his

knowledge, disclose the nature of the interest to the Board.

(2) A disclosure of interest made under subsection (1)

shall be recorded in the minutes of the meeting of the Board, andif either the director or majority of the directors of the Board

believe that the interest of that director in the matter mayinfluence his judgement, that director shall not participate in the

consideration or discussion of or vote during any deliberations

on the matter by the Board.

Common sealof the

Authority.

13. (1) The common seal of the Authority shall be kept in

the custody of the Chief Executive and shall not be affixed toany instrument or document except as authorised by the

Authority.

(2) All documents other than those required by law to be

under seal, made by, and all decisions of the Authority may be

given under the hand of the chairman, or, in the case of a

decision taken at a meeting at which the chairman is not present,under the hand of the director presiding at that meeting.

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ChiefExecutiveOfficer.

14. (1) There shall be a chief executive officer of theAuthority appointed by the Minister, on the recommendation of

the Board on terms and conditions specified in the instrument ofhis appointment.

(2) The Chief Executive shall, subject to the general

direction and control of the Board, be responsible for themanagement of the Authority, the exercise, discharge and

performance of its objectives, functions and duties, and the

administration and control of the staff.

(3) The Minister may, on recommendation of the Board,terminate the appointment of the chief executive officer.

Staff. 15. (1) The Board may appoint staff as it considersnecessary for the efficient discharge of its responsibilities and

functions.

(2) The staff appointed under subsection (1) shall beremunerated at a rate to be determined by the Authority and shall

be subject to conditions of service as may be determined by the

Authority.

Protectionfrom personal

liability.

16. (1) The directors or staff of the Authority shall not be

personally liable for an act which is done or purported to be donein good faith by that person, on the direction of the Authority or

in the performance or intended performance of any duty or in the

exercise of any power under this Act or the regulations made

thereunder.

(2) Any expenses incurred by a person referred to in

subsection (1) in any suit or prosecution brought against him

before any court in respect of any act which is done or purportedto be done by him under this Act on the direction of the Board

shall, if the court holds that that act was done in good faith bepaid out of the general fund of the Authority, unless the expenses

are recovered by him in that suit or prosecution.

Liability in

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tort orcontract.

17. The provisions of section 16 shall not relieve the Board

the liability in tort or contract, to pay compensation or damagesto any person for any injury to him, his property or any of his

interests caused by the exercise of any power conferred by thisAct, or any other written law.

PART III- FINANCIAL PROVISIONS

General Fundof theAuthority.

No. 5 of 2004.

18. (1) There is established a general fund of the Authority.

(2) The funds of the Authority shall comprise all suchsums of money as may be-

(a) appropriated by Parliament;

(b) paid as fees, rents or service charge for use

of properties belonging to the Authority

under this Act; and

(c) received by the Authority as grants,

donations, loans for its operations subject toGovernment Financial Management Act.

(3) There shall be paid out of the fund all such sums ofmoney required to defray the expenditure incurred by the

Authority in the exercise, discharge and performance of its

objectives, functions and duties under this Act.

Financial

Year.

19. The financial year of the Authority shall be the period of

twelve months ending on the 30th June every year.

AnnualEstimates.

20. (1) The Board shall, before the commencement of every

year cause to be prepared the estimates of revenue andexpenditure of the Authority for that financial year.

(2). The annual estimates shall make provisions for all

the estimated expenditure of the Authority for the financial yearconcerned and in particular shall provide for-

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a) payment of salaries, allowances and

other charges in respect with the staff ofthe Authority;

b) payment of pensions, gratuities and

other charges in respect of retirements

benefits which are payable out of the

funds of the Authority;

c) the funding of promotion and marketingof Special Economic Zones;

d) the funding of training, research anddevelopment activities of the Authority;

e) the acquisition, maintenance, repair andreplacement of equipment and other

movable and immovable property of the

Authority;

f) the creation of reserve funds to meet

future or contingent liabilities; and

g) to fund the expenditure incurred by the

Authority in the exercise, discharge, and

performance of its objectives, functionsand duties under this Act.

(3) The annual estimates shall be approved by the Board

before the commencement of the financial year which theyrelate.

Accounts andAudit.

21. (1) The Authority shall cause proper books of accounts

to be kept of its income and expenditure, assets and liabilitiesand all other financial transactions of the Authority.

(2) The Board shall within three months from the end

of the financial year submit to the Controller and Auditor-

General or an auditor appointed under subsection (3), theaccounts of the Authority together with a statement of-

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(a) income and expenditure during the

year; and

(b) assets and liabilities of the Authorityon the last day of that year.

(3) The accounts of the Authority shall be audited by

and reported upon in accordance with the provisions of thePublic Audit Act.

PART IV DECLARATION OF A SPECIAL ECONOMIC

ZONE AND ACTIVITIES WITHIN A SPECIAL

ECONOMIC ZONE.

Declaration ofSpecial

EconomicZones .

22. (1) The Minister may, on the recommendation of the

Authority, and by notice in the Gazette, declare any area

including land and premises in Kenya to be a special economiczone.

(2) A declaration of a special economic zone under

subsection (1) shall define the limits of the zone and shall remainin force until revoked by the Minister, on the recommendation of

the Authority, by order in the Gazette.

Activitiespermitted

within aspecial

economiczone

23.(1) The activities eligible to be carried out within special

economic zones includes primary activities, industrial activities,

service activities, ICT and related services, tourism andrecreational services, regional supervisory services, applied

research and development activities, commercial activities, other

services not listed under this section and classified under the

business service permit.

(2) Where manufacturing and commercial activities

involving goods manufactured outside Kenya are carried on by a

special economic zone enterprise, the two activities shall bephysically separated.

(3) Where commercial activities involve goods

manufactured outside Kenya, such goods shall be clearly

labelled as products of the country where such goods weremanufactured.

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(4) The Authority shall give notice to the Kenya Revenue

Authority of every special economic zone enterprise licencedunder this section specifying:-

(a) the activities in respect of which the enterprise is

licenced; and

(b) any conditions attached to the licence.

Facilitieswithin a

specialeconomic

zone

24.(1)The Authority may require the special economic zonedeveloper to provide and maintain in a special economic zone

such facilities including adequate enclosure to separate a specialeconomic zone from the customs territory, as it may considernecessary for the proper and efficient function of the zone.

9 (2) The Authority may at its discretion order the exclusion orremoval from a special economic zone of any goods or

discontinuance of any activity or operations which in its opinion

are dangerous or prejudicial to public interest, health or safety:

Provided that the Authority shall not issue an orderunder this section without first giving such a person

an opportunity of being heard.

(3) The customs officer in each special economic zone

shall offer on-site inspection to the special economic zone for

imports into, and exports out of, the special economic zone.

(4) A person who contravenes this section commits an

offence and is liable on conviction to a fine not exceeding two

million shillings or to imprisonment for a term not exceedingthree years or both.

PART V LICENSING PROVISIONS

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Licenses

25. (1) A person shall not carry on business as a special

economic zone developer, operator or an enterprise or export business incubator or hold himself out as providing or

maintaining activities or facilities within a special economiczone unless that person has been licensed as a special economic

zone developer or operator or enterprise or export business

incubator enterprise as the case may be.

(2) The Authority shall render its decision on the

designation of a special economic zone and all other approvals

required under this Act within two working days from the dateon which the completed application form together with relevant

supporting documents for the relevant approval or the licencehas been received by the Authority.

(3) A licence issued under this subsection shall be in

the prescribed form.

Register oflicences.

26. The Authority shall keep in a form as it considers

appropriate, a register of the holders of current licences issued

under this Act specifying-

(a) the company name; and

(b) the address of the principal place at which the company

carries on business;

(2) Where-

(a) the holder of the licence ceases to carry on the business

to which the licence relates; or

(b) a change occurs in any particulars which are required to

be entered in the register of licence holders with respect

to the holder of a licence,

the holder shall within fourteen days of the occurrence of theevent concerned give to the Authority particulars of the change

in the prescribed form.

PART VI SPECIAL ECONOMIC ZONE DEVELOPERS

AND OPERATORS

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Qualificationsof a specialeconomiczone

developer andoperators.

27. (1) A special economic zone developer and operator shall-

(a) be a company incorporated in Kenya for the sole purpose

of developing and operating a special economic zone;

(b) have the necessary capital and expertise required for

developing the special economic zone; and

(c) except for a special economic zone operator appointed

under section 22, own or lease land or premises for a

minimum period of thirty years within the specialeconomic zone.

(2) A special economic zone developer shall, onapplication, receive a special economic zone operators licence

from the Authority if it qualifies under the criteria prescribed by

the Authority.

28.A special economic zone developer shall have powers to;

(a)act or appoint a special economic zone operator to

undertake management and administration of the specialeconomic zone on its behalf subject to section 24;

(b) lease, sub-lease or sell land or buildings to licensedspecial economic zone enterprises, and charge rent or

fees for other services that may be provided, in

convertible foreign currency;

(2) The special economic zone developer shall-

(a) make improvements to the special economic zone siteand its facilities according to the plans approved by the

Authority;

(b) provide or facilitate provision of infrastructure and other

services according to the design and engineering studies

submitted to the Authority together with the application;

(c) provide adequate enclosures to segregate the zone area

from the customs territory for the protection of revenue

together with suitable provisions for the movement of

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persons, conveyances, vessels and goods entering or

leaving the zone;

(d) provide adequate security on the site officeaccommodation and facilities for customs as determined

by the Authority;

(e) adopt rules and regulations for businesses within thezone, which shall promote its safe and efficient

operations;

(f) maintain adequate and proper accounts and other records

in relation to its business and report on zone activities, performance and development to the Authority on anannual basis or as required by the Authority, the Kenya

Revenue Authority, the Central Bank, the Kenya

National Bureau of Statistics or other relevant authorities;and

(g) register any lease agreements and services.

(3) The accounts and records required under paragraph (f)

shall be maintained in English.

(4) A special economic zone developer or a special

economic zone operator who fails to maintain

adequate and proper accounts and other records asrequired by this section commits an offence and

liable to a fine not exceeding three hundred

thousand shillings or to imprisonment not

exceeding six months or both.

PART VII SPECIAL ECONOMIC ZONESENTERPRISES

Establishmentof special

economiczoneenterprises.

29. (1) A special economic zone enterprise shall not be

established, and the benefits described in part IX shall not accrueto any enterprise, unless the special economic zone enterprise

holds a valid licence issued by the Authority.

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(2) The Authority shall grant a licence if the application meets

the objectives of this Act and if the proposed business enterprise-

(a) is incorporated in Kenya, whether or not it is one hundredpercent foreign owned, for the sole purpose of producing

goods or services for export within a special economic

zone;

(b) proposes to engage in any activity or activities eligible to

be undertaken by a special economic zone enterprise or

export business incubator enterprise in the specialeconomic zone;

(c) shall not have a deleterious impact on the environment orengage in unlawful activities, impinging on national

security or may prove to be a health hazard; and

(d) conducts business in accordance with the laws for the

time being in force save for any exemptions that may be

granted from time to time.

PART VIII OPERATIONS WITHIN SPECIAL

ECONOMIC ZONES

Goods to beconsidered to

be exportedand importedinto Kenya.

30. Unless otherwise provided under this Act or under any otherwritten law-

(a) goods which are taken out from any part of the customsterritory and brought into the special economic zone or

services provided from part of the customs territory to a

special economic zone shall be deemed to have beenexported from Kenya and shall be paid for in convertible

currency; and

(b) goods which are brought out of a special economic zone andtaken into any part of the customs territory for use therein or

services provided from a special economic zone to any part

of the customs territory shall be deemed to be imported.

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Goods withina specialeconomiczone

31.(1) Subject to section 30, goods within a special economic

zone shall not be taken out of the zone except-

(a) for export; or

(b) for export into the customs territory, with the approval of

the Authority and subject to the import and customs

procedures and payment of import duties; or

(c) for repair and maintenance or processing or conversion

with prior approval of the Authority and undersupervision of customs and subject to any conditions as

may be imposed.

(2) Subject to section 30, services provided by a special

economic zone enterprise shall be provided to-

(a) persons outside Kenya; or

(b) other special economic zone enterprises in furtherance of

the export activities of such enterprises subject toapproval of the Authority; or

(c) persons in the customs territory subject to approval of theAuthority.

Prohibitedactivities

within aspecialeconomiczone

32.(1) No retail trade in goods produced in the special

economic zone or imported into the special economic zone shallbe conducted within the special economic zone except with the

approval of the Authority and in areas designated as retail outlets

licensed by the Authority.

(2) Goods manufactured in a special economic zone shall not

be used in the zone for personal consumption.

(3) A person shall not carry on business in a Special

Economic Zones involving the importation or handling of used

apparel, including used clothing or footwear.

(4) A person who contravenes this section is guilty of an

offence and is liable to a fine not exceeding two million shillingsor imprisonment for a term not exceeding three years or to both.

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Removal ofgoods from aspecialeconomic

zone

33.(1) Subject to this Act, goods within a special economic zonemay-

(a) be removed under supervision of a customs officer fromthe zone for export or sent into another special economic

zone or bonded factory, either in its original package or

otherwise;

(b) unless otherwise directed by the Authority-

(i) be stored, sold, exhibited, broken up, repacked,assembled, distributed, sorted, graded, cleaned,

mixed, or otherwise manipulated or be manufactured

in accordance with the provision of this Act; or

(ii) be destroyed under the supervision of the Customs

Officer.

(2) Subject to this Act, goods of any description whichwould be used directly for the manufacture of other goods by alicensed special economic zone enterprises and business

incubator or goods manufactured in any part of the customs

territory which are meant for export may be brought into a

special economic zone.

(3) A person who contravenes this section is guilty of an

offence and is liable to a fine not exceeding two million shillingsor imprisonment for a term not exceeding three years or both and

the goods shall be forfeited under the Customs and Excise Act

and the EAC Customs Management Act.

Receipts andpayments ofspecial

34. (1) Unless otherwise provided under this Act or under

any other written law-

(a) payments of funds by a special economic zone enterprise

which may be received by a resident or non-resident of

the customs territory and debited from the foreign

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economiczonesenterprises.

currency account legally maintained and operated by a

special economic zone enterprise shall be subject to theprovisions of the Central Bank Act applicable to all

transactions between such persons and non-residents;

(b) receipts of funds by special economic zone enterprises

which may be paid by residents or non-residents as

defined under the Banking Act shall only be credited intoforeign currency accounts legally maintained and

operated by the special economic zone enterprises

provided those payments arise in relation to authorizedspecial economic zone products or other transactions

duly approved under the Central Bank Act; and

(c) all currency transactions between special economic zone

enterprises and non-resident persons, resident outside the

customs territory, shall be in accordance with the CentralBank Act.

(2) Notwithstanding subsection (1), all financial

transactions, including payment of salaries and wages, betweenspecial economic zones enterprises and persons resident in

Kenya shall be carried out through commercial bank accounts.

PART IX BENEFITS TO SPECIAL ECONOMIC

ZONE ENTERPRISES

Benefitsaccruing to

specialeconomiczoneenterprise.

Cap.472

Cap476

Supra

35 (1) The special economic zone enterprises, developers,

operators and the export business incubator enterprises shall be

granted exemption from all existing and future taxes and duties payable under the Customs and Excise Act, EAC Customs

Management Act and Value Added Tax Act on all special

economic zone imports for use in the eligible business activitiesof the special economic zone enterprise including, machinery

and equipment, spare parts, tools, raw materials, intermediate

goods, construction materials and equipment, office equipment

and supplies, and transportation equipment subject to thelimitations on goods specified in the First Schedule to this Act

and in accordance with the conditions specified in the Customs

and Excise Act, EAC Customs Management Act and the Value

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Cap.470

Added Tax Act.

(2) Subject to subsection (1), the special economic zone

enterprises, developers, zone operators and the export businessincubator enterprises shall be granted the following exemptions-

(a) exemption from the payment of income tax in respect of

Freeport, free trade zone, and commercial enterprises ;

(b) exemption from the payment of income tax as specified in

the Income Tax Act as follows;

(i) Special Economic Zone Developers andOperators-

for the first ten years from the date of completion

of the development, except that the income taxrate shall be limited to twenty per cent for the ten

years following the expiry of the exemption

granted under this paragraph.

(ii) Special Economic Zones Business

Incubators-

For the first ten years from the date of the first

sale except that the income tax shall be limited to

twenty per cent for the next ten years followingthe expiry of the exemption granted under this

paragraph.

(iii) Export Processing Zones Exportmanufacturing and Export Service enterprises-

for the first ten years from the date of the first

sale, except that the income tax rate shall belimited to twenty per cent for the next ten years

and twenty five per cent thereafter.

(iv) Special Economic Zones Technology Park

Enterprises-

for the first ten years from the date of the first

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Cap 486

sale, except that the income tax shall be limited to

twenty per cent thereafter for the life of theEnterprise.

Provided that this exemption shall not apply in

respect of Industrial Parks, Agricultural Free Zone

Enterprises and Tourism and Recreational

Enterprises and Regional Headquarters Enterpriseswho shall pay income tax rate at twenty per cent.

(b) exemption from the payment of withholding tax ondividends and any other payments made to non-residents

during the period that the special economic zone enterprise isexempted from payment of income tax under paragraph (c);

(c) exemption from stamp duty on the execution of any

instrument relating to the business activities of specialeconomic zone enterprise; except for Agricultural Free Zone

enterprises, Regional headquarters and Industrial Park

Enterprises who shall be entitled to a fifty per cent reduction

of stamp duty payable;

(d) exemption from quotas or other restrictions or

prohibitions on import or export trade with the exception oftrade in firearms, military equipment or other illegal goods;

(e) exemption from the provisions of the Companies Actrelating to allotment of shares to non-residents

(h) exemption from the provisions of the Foreign Investment

Protection Act relating to certificate for approved enterprise;

(i) exemptions from the provisions of the Statistics Act;

(j) exemption from the payment of advertisement fees and

Business service permit fees levied by Local Authorities and by

laws made under that Act;

(k) exemption from Hotel licences, and Restaurant licence issued

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Cap. 518.

No. 4 of 2006.

Cap. 265

Cap 494.

Cap 121.

Cap 254.

Cap 343.

Cap 333

Cap. 318

Cap 340

Cap 341.

Cap. 336

under the Hotels and Restaurants Act;

(l) exemption from general liquor licence and hotel liquor

Licence under the Liquor Licensing Act;

(m) exemption from licence under the Food, Drugs and

Chemical Substances Act to use premises to sell,

prepare, store or display for sale, any food;

(n) exemption from manufacturing licence under Tea

Act;

(o) exemption from licence to buy, sell, mill, warehouse, exportor otherwise deal in or transact business in coffee under theCoffee Act

(p)exemption from registration of large scale farms under section22(6) of the Agriculture Act;

(q)exemption from licence for a factory under the Sisal Industry

Act;

(r) exemption from registration, Dairy Managers and Retail

licence and licence as a purveyor of milk under the DairyIndustry Act;

(s)exemption from certificate of registration and licence to catchfish or for a foreign vessel under the Fisheries Act;

(t)exemption from manufacturing licence under the Pharmacy

and Poisons Act;

(u)exemption from Private Carriers licence under the Transport

Licensing Act;

(v)exemption from licence to deal in motor vehicle components

or accessories under the Motor Vehicle Components andAccessories Act;

(w)exemption from licence to trade in unwrought preciousmetals under the Trading in Unwrought Precious Metals Act;

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Cap 378.

Cap 224

Cap. 404

Cap 520

Cap 309

Cap. 310

Cap. 222

Cap. 301

Cap. 411A

(x)exemption from Diamond Dealers Licence under the

Diamond Industry Protection Act;

(y)exemption from Filming Licence under the Films and StagesPlays Act;

(z) entitlement to Class A expatriate work permits for technical,

supervisory and managerial staff granted within forty days ofapplication with a limit of up to five per cent of total workforce

and Class H work permits for directors within thirty days of

application;

(aa)exemption from rent or tenancy controls under the Landlordand Tenant (Shops, Hotels and Catering establishments) Act;

(bb)exemption from licences issued under the Kenya

Information and Communication Act;

(cc)any other exemptions as may be granted by the Minister by

notice in the Gazette.

PART X - DISPUTE RESOLUTION

Disputes 36. (1) Where a dispute arises between a special economic zone

enterprise and the Authority or the Government in respect of abusiness enterprise, all efforts shall be made to settle the dispute

through negotiations and mutual agreement for an amicable

settlement.

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No 4 of 1995.

(2) A dispute under subsection (1) which is not settled may, atthe option of the offended party, be submitted to arbitration in

accordance with any of the following methods as may bemutually agreed by the parties-

(a) in accordance with the rules of procedure forUnited Nations

UNCTRAL; or

b) within the framework of any bilateral or multilateral

agreement on investment protection to which theGovernment and the country of which the investor is a

national or are parties; or

(c) In accordance with the Arbitration Act.

(3) If the parties do not agree to the mechanisms of settlement ofdispute under subsection 2(a) and (b) within fourteen days, the

Arbitration Act shall apply.

PART XI MISCELLANEOUS PROVISIONS

Power of the

Minister togivedirections.

37. (1) The Minister may give directions to the Authority

as the Minister may consider necessary for the properfunctioning of a Special economic zone or for the purpose of

protection of revenue and foreign exchange earnings.

(2) The Minister may from time to time direct theAuthority to furnish in such form as he may require returns,

accounts and any other information with respect to the work of

the Authority.

38. The Minister may make regulations in respect of any

matter required by the Act to be prescribed or in respect of which

regulations are authorized to be made.

. 39. (1) The Minister may, for health, environmental or

public security reasons and by order published in the Gazette,exclude goods or services from the provisions of this Act.

(2) The Minister may, for health, environmental or public

security reasons and by order published in the Gazette prohibits

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any goods from being taken into a special economic zone

PART XII - TRANSITIONAL PROVISIONS

Repeal

Cap.517

40. The Export Processing Zones Act is repealed.

Saving

provisions.

Cap.517.

41. (1) Notwithstanding the repeal of the Export ProcessingZones Act all the licences issued under that Act and in force

immediately before the commencement of this Act shall beconsidered to have been granted under the provisions of this Act,

and shall remain in force until revoked in accordance with any

terms set out in the licence or renewed under this Act.

(2) Any regulation or other instrument made or issued

under the Export Processing Zones Act shall continue to haveeffect as if such regulation or other instrument were made or

issued under this Act.

(3). All the property, assets, rights and liabilities,obligations and agreements including (any contracts of

employment) vested in, acquired, incurred or entered into by or

on behalf of the Export Processing Zones Authority shall beconsidered to be vested in or to have been acquired by the

Special Economic Zones Authority and accordingly every such

right, liability, obligation or agreement may be enforced by oragainst the Special Economic Zones Authority.

(4) All persons who, before the commencement of this Act

are employed by the Export Processing Zones Authority shall atthe commencement of this Act be considered employees of the

Special Economic Zones Authority and employed in accordance

with this Act.

(5) Where at the commencement of this Act any penalty

other than dismissal has been imposed on any employee of theExport Processing Zones Authority in accordance with the

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disciplinary proceedings against that employee, and the penalty

has not been or remains to be served by that employee, thatemployee shall, on his transfer to the Special Economic Zones

Authority, serve or continue to serve such penalty to its full termas if it had been imposed by the Special Economic Zones

Authority.

SCHEDULE

LIMITATIONS ON IMPORTS

The following goods may be imported free of import duty and

value added tax by a special economic zone enterprise or aspecial economic zone developer.

Subject to the following limitations:-

i) One motor vehicle for each of the Directors of

a special economic zone enterprise, Developer and Operator

provided that it is registered in the name of the said Director;

ii) Not more than three motor vehicles of any type whether

passenger, utility or vessel by a special economic zone

developer, operator or enterprise for use in its eligiblebusiness activities subject to the prior approval in writing

by the Authority.

Amos Kimunya,

Minister for Trade

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