The Business Laws (Amendment) Act 2024 changed the calculus for anyone weighing a Special Economic Zone investment in Kenya, pharmaceutical manufacturing included, by putting a hard limit on how long the zone’s incentives actually last. An investor modelling an SEZ project on the assumption that its tax benefits run indefinitely is now modelling against a law that no longer exists in that form.
The 10-Year Cap on SEZ Incentives
Before this Act, certain benefits granted to a special economic zone developer, operator, or enterprise did not carry a defined expiration date. The Business Laws (Amendment) Act 2024, effective from 27 December 2024, changed that: the benefits granted to an SEZ developer, operator, or enterprise are now limited to a period of 10 years from the date the relevant licence is issued. For a pharmaceutical manufacturer sizing a capital investment against the tax position an SEZ location was expected to deliver, this converts what may have been treated as an open-ended incentive into a fixed 10-year window that needs to be built into the investment’s own return timeline from day one, not discovered partway through.
Minimum Investment Thresholds
The Act also gave the Cabinet Secretary authority to set minimum investment thresholds for SEZ-designated areas, acting on recommendations from the Special Economic Zones Authority. This is a mechanism for change rather than a change in itself: the specific thresholds are set administratively rather than fixed in the Act’s own text, which means a prospective SEZ investor needs to confirm the current threshold for their intended zone directly with the Special Economic Zones Authority rather than relying on a figure that may already be out of date by the time an investment decision is made.
The New SEZ Service Permit Category
A structurally significant addition is the Special Economic Zones service permit, a new permit category for individuals and entities providing services within an SEZ where no incentives or benefits are conferred under the Act. This creates a formal distinction between two different kinds of SEZ participant: an enterprise receiving the zone’s tax and duty incentives in exchange for meeting the zone’s conditions, and a service provider operating within the zone’s boundaries without receiving those benefits at all. A logistics, maintenance, or professional services provider working inside a pharmaceutical manufacturing SEZ, for instance, may now need this service permit specifically, distinct from the licence the manufacturing enterprise itself holds. An SEZ enterprise contracting with third-party service providers for its own operations should confirm that those providers hold the correct permit for their role, rather than assuming a single zone-wide authorisation covers everyone working within the zone’s boundaries.
What This Means for a Pharmaceutical Manufacturing Investment
For life sciences investors specifically, these changes sit on top of an already complex choice between SEZ and Export Processing Zone regimes for a manufacturing investment. The 10-year cap does not make an SEZ location a worse choice than before in every case, since a pharmaceutical manufacturing investment with a realistic path to profitability within a decade may still find the zone’s incentives, now clearly bounded, entirely sufficient. What has changed is that the planning has to be done with a defined end date in view rather than an assumption of permanence, and that assumption needs to be revisited in any SEZ feasibility analysis still using pre-2024 figures.
A manufacturer already operating under an SEZ licence issued before the amendment took effect should also confirm directly with the Special Economic Zones Authority how the 10-year period is being applied to their existing licence, since the Act’s practical transition treatment for licences already in force at commencement is a detail worth verifying against the current position rather than assumed either way.
Reading This Alongside the Finance Act 2025
The 10-year cap is not the only change affecting SEZ economics from this period. The Finance Act 2025, enacted roughly six months later, separately restricted capital gains tax exemptions to licensed SEZ operators specifically, tightening treatment that had previously been broader. A pharmaceutical manufacturer modelling an SEZ investment needs to read both changes together: the licence that now carries a fixed 10-year incentive window under this Act is the same licence status the Finance Act 2025 uses to determine capital gains treatment.
How We Can Help
Clay & Associates Advocates advises pharmaceutical manufacturers and other investors on structuring investments through Kenya’s Special Economic Zones under the current, post-amendment rules. Our guide to choosing between SEZ and EPZ regimes for pharmaceutical manufacturing is a useful companion for weighing this decision from the ground up. Contact our Life Sciences & Healthcare practice to model an SEZ investment under the current 10-year incentive framework.
Sources: Business Laws (Amendment) Act, 2024 (effective 27 December 2024); Special Economic Zones Act, 2015, as amended.
Frequently asked questions
Do SEZ tax incentives now expire after 10 years for every enterprise?
The Business Laws (Amendment) Act 2024 limits the benefits granted to an SEZ developer, operator, or enterprise to 10 years from the date of licence issuance. This applies going forward under the amended framework; existing licence holders should confirm their specific position rather than assume automatic continuation of open-ended terms.
Is the minimum SEZ investment threshold fixed in the Act itself?
No. The Act empowers the Cabinet Secretary to set minimum investment thresholds for SEZ-designated areas based on the Special Economic Zones Authority’s recommendations, meaning the actual figure is set administratively and should be confirmed directly with the Authority for the zone in question.
Who needs the new SEZ service permit?
Individuals and entities providing services within an SEZ who are not receiving the tax and duty incentives that an SEZ enterprise receives. This is a separate category from the licence held by an incentivised SEZ manufacturer or developer.
Does the 10-year cap make SEZs a worse option than EPZs for pharmaceutical manufacturing?
Not automatically. Whether an SEZ or EPZ regime suits a given manufacturing investment depends on factors like the investment’s expected payback period and target market, and a defined 10-year incentive window can still be entirely workable for many projects. It does mean the comparison needs to be run with the current, bounded terms rather than an assumption of indefinite benefits.
