Kenya currently runs two separate statutory zone regimes side by side, not one. Which one an investor should use depends less on the label than on how much of the output will actually leave the country.

The older regime is the Export Processing Zones Act, administered by the Export Processing Zones Authority (EPZA). It is built for enterprises whose business is substantially export, with local sales into Kenya or the EAC treated as a limited exception rather than the model. The newer regime is the Special Economic Zones Act, 2015, administered by the Special Economic Zones Authority (SEZA). The SEZ Act does not describe a single kind of zone: section 4 lets a zone be declared single-sector or multi-sector, and the Act recognises free trade zones, free ports, industrial parks, ICT parks, science and technology parks, agricultural zones, tourist and recreational zones, business service parks, and livestock zones, all under the same developer, operator, and enterprise licensing structure. “Industrial park” and “free trade zone” are therefore not competing regimes in Kenyan law; they are categories of SEZ.

The practical split. A manufacturer whose output is close to 100% export, and who wants the deepest available tax holiday, is generally still better served by an EPZ enterprise licence: a full corporate tax holiday in the early years is not matched by the SEZ regime. A manufacturer who expects to sell a meaningful share of production into the Kenyan or EAC market, or who wants the flexibility to shift that mix over time, is usually better served by SEZ enterprise status, which does not carry the EPZ regime’s tight export orientation. A developer building serviced industrial land, warehousing, or a business park for other investors to lease into is an SEZ developer or operator case almost by definition, since that is exactly what the “industrial park” and “free port” categories in the Act are for. General manufacturers who do not want zone status at all, and simply need import duty relief and an investment certificate, sit outside both regimes under the Kenya Investment Authority’s general investor framework, covered in Chapter IV.

Getting an SEZ licence runs through one of two tracks: joining an already-gazetted zone as an enterprise, or gazetting a new zone as a developer or operator. The two tracks share a regulator but not a timeline.

Enterprise licence, inside an existing gazetted zone. A business setting up as an SEZ enterprise submits an SEZ Investment Project Proposal Form with a letter of interest, a concept note, a business plan, and feasibility material. If SEZA approves, the investor files the full Enterprise Licence Application Form. Approval in principle follows, with conditions that typically include company incorporation, environmental permits, land-use plans, and any sector-specific registrations. The investor then incorporates a Kenyan SEZ company through the Business Registration Service, using SEZA’s letter of no objection, and submits the payment receipt and incorporation documents before the licence issues. Under section 29 of the Act, enterprise licensees must be incorporated in Kenya and engaged in an eligible activity that does not carry a negative environmental or security impact.

Developer or operator licence, gazetting a new zone. This is the longer path: expression of interest, full application, project evaluation, land search and site evaluation, SEZA Board recommendation, submission to the Cabinet Secretary, a Gazette Notice actually declaring the area an SEZ, then licence issuance and operationalisation. Section 28 requires a developer to be a Kenya-incorporated company with demonstrated financial capacity, technical expertise, and a relevant track record, and to own or lease the land in question. Section 33 lets a developer appoint a separate operator to run day-to-day zone administration. Both routes run through SEZA’s e-Citizen portal.

What changed under the Business Laws (Amendment) Act, 2024. That Act, effective 27 December 2024, opened SEZ developer and operator licensing to public entities (ministries, state departments, state corporations, and county government departments or agencies), not just private companies. It gave the Authority and the Cabinet Secretary express power to set minimum acreage and investment criteria for applicants, introduced a separate SEZ Business Service Permit for service providers who do not qualify for the full incentive package, raised the penalty for inadequate SEZ record-keeping from KES 300,000 to KES 5,000,000 while removing imprisonment as a sanction, and fixed the incentive period itself at ten years from the date a licence is issued, replacing an earlier, less clearly bounded structure.

A further Business Laws (Amendment) Bill was before Parliament in late 2025, proposing a full withholding tax exemption on dividends to both resident and non-resident shareholders, a capital gains exemption on intra-SEZ property transfers, and enhanced benefits tied to a minimum of 200 full-time employees and full export orientation.

Kenya’s standard corporate tax rate for resident companies is 30%, with VAT charged at the standard rate on most domestic supplies. Both the SEZ and EPZ regimes exist to displace that baseline for a defined period, and the two regimes do it differently.

SEZ corporate income tax. SEZ developers, operators, and enterprises are taxed at 10% for the first ten years of operation, 15% for the following ten years, and the standard 30% rate from year 21 onward. This is confirmed directly against SEZA’s own fiscal incentives page and is consistent with PwC’s Worldwide Tax Summaries for Kenya. Set against the Business Laws (Amendment) Act 2024’s separate ten-year incentive-period rule described in Chapter II, an investor should confirm with SEZA which of the two time frames, the ten/fifteen-year tax tier or the flat ten-year incentive window, actually governs a given licence, since the two provisions are not obviously reconciled in the public material reviewed here.

SEZ VAT and customs. SEZ enterprises are not required to register for VAT, and supplies of goods or taxable services into an SEZ are zero-rated rather than exempt, a distinction that matters because zero-rating preserves the supplier’s right to recover its own input VAT, where an exemption would not. Goods and services entering an SEZ from the rest of Kenya are treated as exports; goods leaving an SEZ into the Kenyan market are treated as imports and become dutiable under the East African Community Customs Management Act, in line with the SEZ Act’s own treatment of a zone as outside the customs territory for tax purposes. Imports into an SEZ are exempt from VAT, excise duty, import duty, and the import declaration fee, and stamp duty on SEZ transactions is also exempt.

SEZ withholding tax and capital allowances. On SEZA’s current published position, withholding tax on dividends and on capital or property transfer gains is exempt; withholding tax on royalties, interest, and service fees paid to non-residents is exempt for the first ten years and taxed at 10% after that; other cross-border payments such as commissions and rent are taxed at 10% throughout. SEZ entities also get a 100% capital allowance on qualifying expenditure on buildings and machinery.

EPZ corporate income tax. EPZ enterprises get a full ten-year corporate tax holiday, a 0% rate, followed by a preferential 25% rate for as long as the enterprise continues to operate under its EPZ licence, well below the standard 30% rate. EPZ enterprises also get a perpetual exemption from VAT and customs import duty on inputs, a perpetual stamp duty exemption on legal instruments, and a 100% investment deduction on new capital investment in EPZ buildings and machinery.

The three routes into a Kenyan incentive regime, SEZ, EPZ, and the general Kenya Investment Authority certificate, carry different capital expectations, and none of them is a rubber stamp.

SEZ developer or operator. SEZA’s own published guidance sets a minimum capital requirement of KES 500 million for a corporate applicant seeking a developer or operator licence. The SEZ Act itself does not fix this figure in its text; section 5 instead gives the Authority power to set investment criteria when it evaluates a zone proposal, and the Business Laws (Amendment) Act 2024 confirmed the Cabinet Secretary’s power to prescribe minimum acreage and investment thresholds by regulation. Treat the KES 500 million figure as SEZA’s current administrative benchmark rather than a fixed statutory number, and confirm it is still current before it goes into an investment model.

SEZ enterprise. SEZA’s site does not publish a fixed minimum investment threshold for an enterprise licence, as distinct from a developer or operator licence. Eligibility instead turns on the activity itself: it must be one of the SEZ Act’s recognised categories, must not carry a negative environmental or security impact, and the applicant must be prepared to operate through a Kenyan-incorporated entity.

EPZ, including the SME track. A general EPZ enterprise licence has no separate published minimum capital figure beyond the underlying business case and the export orientation described in Chapter I. EPZA runs a distinct SME Development Programme for smaller manufacturers, aimed at businesses with initial capital investment under KES 40 million, fewer than 100 employees, and at least 75% Kenyan ownership, concentrated in horticulture, textiles, leather, crafts, business process outsourcing, and ICT.

The general investment certificate. Outside either zone regime, a foreign investor can apply to the Kenya Investment Authority for an Investment Certificate under the Investment Promotion Act. Section 4(1)(b) of that Act sets the minimum foreign investment at USD 100,000 or its equivalent in any other currency. A certificate holder gets expedited access to the licences listed in the Act’s Second Schedule and is entitled to three Class A entry permits for management or technical staff and three further entry permits for owners, shareholders, or partners, without needing zone status at all. This route suits a manufacturer that wants duty and licensing facilitation but does not want, or does not qualify for, the export orientation that SEZ and EPZ status assume.

An SEZ is, first and foremost, a gazetted area. Nothing about SEZ status attaches to a piece of land until the Cabinet Secretary has actually declared it so, and that step is the real bottleneck for a new zone.

Joining an existing gazetted zone. The fastest route to production is a site inside a zone that is already gazetted. SEZA’s own material confirms Dongo Kundu SEZ, on the Mombasa coast, and Naivasha SEZ as gazetted zones. Several further zones are widely reported as gazetted, including sites at Athi River and Eldoret, alongside privately developed gazetted SEZs such as Tatu City and the Nairobi Gate Industrial Park. An enterprise applicant taking a unit or plot inside one of these zones inherits the zone’s existing gazettement and can move directly into the enterprise licensing sequence described in Chapter II, without needing its own Gazette Notice.

Developing a new private SEZ. A developer that wants to build its own industrial park or free zone on land it already owns still has to take that land through the full gazettement sequence set out in Chapter II: expression of interest, land search and site evaluation, SEZA Board recommendation, Cabinet Secretary submission, and a Gazette Notice, before a developer licence issues and before any enterprise can be licensed within it. A developer applicant must produce unencumbered title documents, a feasibility study covering market demand, a schematic master plan, an economic impact assessment, and an environmental and social assessment, and, for a conversion of an existing business into a developer, three years of audited financial statements and a current tax compliance certificate.

Public and private SEZs are treated the same way under the Act once gazetted: the distinction is only in who develops the underlying infrastructure, government agencies for a public SEZ such as Dongo Kundu, and a private developer under its own licence for a private SEZ such as Tatu City. Either way, the enterprise licensing conditions in Chapter II, including environmental permits and land-use plans, still apply to each business setting up inside the zone.

The tax position described in Chapter III depends on a customs fiction: goods inside a gazetted SEZ are treated as if they were outside Kenya’s customs territory. That fiction only works cleanly where the customs mechanics around it are actually in place.

Under the SEZ Act’s own framing, goods and services moving from the rest of Kenya into an SEZ are treated as exports, and goods and services moving from the SEZ into the domestic market are treated as imports, subject to ordinary customs duty under the East African Community Customs Management Act. Where a finished product is made wholly from domestic Kenyan materials, sales from the SEZ into the domestic market can qualify for a duty exemption on that basis, which matters for a manufacturer doing local sourcing or partial import substitution rather than pure re-export.

Customs clearance for SEZ goods is typically handled onsite, or through the zone’s One-Stop Shop, rather than requiring a separate trip through a general port or inland container depot process. Nairobi Gate Industrial Park was reported in 2023 as the first Kenyan SEZ to secure its own formally gazetted Customs Control Area, distinct from its underlying SEZ gazettement, which points to a practical detail worth checking on any candidate site: SEZ gazettement and a gazetted Customs Control Area are not automatically the same event, and a developer or enterprise should confirm which one a given zone actually has before assuming full onsite customs clearance is available from day one.

The EPZ regime works on the same underlying logic, treating a gazetted EPZ as outside the customs territory for duty purposes, with perpetual exemption from customs import duty on production inputs, and ordinary duty applying only where output is sold into the domestic market rather than exported.

Zone status changes an enterprise’s tax and customs position. It does not change Kenya’s underlying labour and immigration law, and a manufacturing investor should plan staffing on that basis.

Bringing in foreign staff. The standard route for a foreign employee filling a specific role is the Class D work permit, issued by Kenya’s Directorate of Immigration Services. It is available where the role calls for skills or qualifications not available in Kenya and where the engagement benefits the country, and it requires a named Kenyan understudy, evidence of an unsuccessful local recruitment attempt, and a valid tax compliance certificate for the employer. As of this research, the processing fee is KES 20,000, non-refundable, and the issuance fee is KES 500,000 per year, with East African Community citizens exempt from the fee entirely. Both SEZ and EPZ zones typically route work-permit facilitation through their One-Stop Shop service alongside licensing, which speeds up coordination with the Directorate but does not replace the underlying Class D application and its documentary requirements.

Statutory obligations do not pause for zone status. An SEZ or EPZ enterprise employing staff in Kenya still owes PAYE, NSSF, SHIF, and Housing Levy deductions from the first hire, still needs WIBA injury cover and DOSH workplace registration, and still pays the NITA training levy. None of these are suspended by SEZ or EPZ licensing, and a staffing budget that only accounts for the headline corporate tax holiday while ignoring these statutory payroll obligations will understate the true cost of the Kenyan workforce.

Put next to each other, the two regimes trade off in a fairly consistent way: EPZ offers a deeper early tax holiday and a tighter export requirement; SEZ offers more domestic-market flexibility and a broader range of eligible activities, at a shallower but longer-running preferential rate.

The comparison is not a ranking. A pure-export manufacturer with a large, capital-intensive plant is usually better off under EPZ’s ten-year zero rate. A manufacturer building for the East African market, or a developer building infrastructure others will lease into, is usually better off under SEZ, where the ten-percent opening rate still beats the standard rate substantially and the activity list is far wider.

Most SEZ and EPZ problems this firm sees are not disputes over the incentives themselves. They are timing and documentation failures that quietly cost an investor part of an incentive it would otherwise have kept.

Treating a land purchase as gazettement. Buying land does not make it an SEZ. Gazettement is a discrete act by the Cabinet Secretary under section 4, following SEZA Board recommendation, and it can be deferred or declined. A construction budget or lease should never assume gazetted status until the Gazette Notice itself is published.

Assuming a zone’s SEZ gazettement includes a Customs Control Area. As discussed in Chapter VI, these can be separate gazettement events. An investor that assumes onsite customs clearance without checking can find goods routed through a general customs process instead, with the delay and cost that implies.

Operating through a foreign entity instead of a Kenyan SEZ company. Section 29 requires enterprise licensees to be Kenya-incorporated. A foreign investor that tries to run SEZ operations directly through its home-country company, rather than through a properly licensed Kenyan subsidiary, is not eligible for the licence at all, regardless of how compelling the underlying business case is.

Confusing zero-rating with exemption. SEZ supplies are zero-rated for VAT, not exempt. An enterprise that books them as exempt loses its right to recover input VAT on its own purchases, which is a real cash-flow cost, not a technicality.

Ignoring the global minimum top-up tax. The Tax Laws (Amendment) Act 2024 introduced a minimum top-up tax targeting multinational groups whose Kenyan effective tax rate falls below 15%. An SEZ enterprise taxed at 10% in its first ten years, or an EPZ enterprise on a 0% holiday, can fall squarely into that gap if it is part of a qualifying multinational group, meaning part of the Kenyan incentive can effectively be clawed back at the group level rather than genuinely reducing the group’s worldwide tax bill. This should be modelled before the incentive is presented to a parent company as a straightforward saving.

Missing the ten-year incentive clock. Under the Business Laws (Amendment) Act 2024, the incentive period runs from the date the licence is issued, not from the date operations actually begin. An investor that delays licensing while finishing construction is shortening its own incentive window relative to one that secures the licence first and builds afterward.

A working, at-a-glance version of Chapters II, IV, V and VI: the points worth confirming before an SEZ or EPZ application goes in.

Kenya’s SEZ and EPZ regimes are genuinely useful tools, and genuinely capable of being applied incorrectly by an investor working from a generic incentive summary rather than a current, verified source. Four things distinguish how this firm handles a zone licensing matter.

Regime selection before paperwork. The right choice between SEZ, EPZ, and general investor status depends on the specific business, its export mix, and its ownership structure, not on which regime happens to be better known. That choice is made first, before an application is drafted.

Four mandates, one firm. Advocates, Notaries Public, Commissioners for Oaths, and Patent Agents under one roof, so a licensing application, a land search, and an incentive opinion do not need three separate relationships.

Fee transparency. Every fee we quote is drawn from our own published Schedule of Fees, not an estimate pulled from memory.

Primary-source rigour. Every legal point in this guide traces to a named Act, regulator publication, or government source, the same standard applied across our published legal content, including flagging the handful of points that are genuinely unsettled rather than smoothing over them.