Setting Up a BPO or Shared Services Operation in Kenya: EPZ, SEZ and the Investment Structure

Kenya’s business process outsourcing sector grew by close to a fifth in the year to 2024 and investment promoters now market the country as a serious alternative to India and the Philippines for voice, back-office and shared services work. A group of the country’s largest outsourcing firms formed an alliance in early 2026 specifically to lobby for policy support and a further 100,000 jobs. Before any of that growth reaches a specific operator, though, the investor has to choose a legal structure, and Kenya offers two distinct special zone regimes that get confused with each other more often than they should.

Two Different Zone Regimes, Not One

An Export Processing Zone under the Export Processing Zones Act and a Special Economic Zone under the Special Economic Zones Act are separate legal frameworks with separate authorities, separate licences and separate incentive structures. A BPO investor evaluating “zone status” in Kenya needs to know which one it is actually applying for, because the eligibility tests and the tax treatment are not interchangeable.

The EPZ Route: Built for Export-Oriented Operations

Under section 23 of the Export Processing Zones Act, an EPZ enterprise must be incorporated in Kenya “for the sole purpose of producing goods or services for export within an export processing zone.” Section 19 requires a licence to operate as an EPZ enterprise, and the Authority must consult the Kenya Revenue Authority before licensing any enterprise for commercial activities. In return, section 29 offers a ten-year income tax exemption from first sale, followed by a rate capped at 25% for a further decade, plus exemption from VAT registration, excise duty and duty on imported machinery and raw materials used in the zone. The regime is built around exported output, which fits a BPO operation serving clients entirely outside Kenya cleanly, but sits less comfortably with an operator that also wants to service the domestic or regional market from the same facility.

The SEZ Route: A Category Built for BPO by Name

The Special Economic Zones Act takes a different approach. Section 2 defines a “business service park” as a zone “declared as such under section 4 to facilitate the provision of services including but not limited to regional headquarters, business processing outsourcing centres, call centres, shared service centres, management consulting and advisory services and other associated services.” Unlike the EPZ regime, this category is not framed around an export test, a business service park licence contemplates BPO and shared services activity as the core purpose of the zone, whether the client base is local, regional or international. A separate “information communication technology park” category exists for the broader tech sector. What a special economic zone enterprise actually is, under section 2, comes down to one thing: “a corporate body which has been licensed under this Act.” The substance of the incentive is set elsewhere in the Act and, since the Business Laws (Amendment) Act 2024, is capped at ten years from the date of licence rather than running indefinitely, a material change for any investor modelling a payback period against zone incentives.

Choosing Between Them

An investor building a pure offshore delivery centre, voice or back-office work performed in Kenya and billed entirely to an overseas client, will generally find the EPZ regime’s export framing a natural fit and its ten-year full exemption more generous up front than the SEZ’s capped incentive period. An investor that wants to serve Kenyan and regional clients alongside international ones, or that values being licensed under a regime that names business process outsourcing directly in its own statute, will generally look to a business service park under the SEZ Act instead. The two are not mutually exclusive across a corporate group, but a single enterprise cannot mix and match the incentive terms of one regime with the operating flexibility of the other.

Land and the Non-Citizen Investor

Whichever regime applies, a foreign-owned BPO investor taking a site inside a zone still has to reckon with Article 65 of the Constitution, which restricts a company that is not wholly citizen-owned to leasehold land tenure capped at 99 years. We cover this in more detail, alongside the same 2024 SEZ incentive change, in our piece on structuring a data centre investment in Kenya, much of the land and zone-status analysis carries over directly to a BPO or shared services facility.