Tax Incentives & Credits in Kenya | Opportunities for Savings

TAX CREDITS AND INCENTIVES:

Last reviewed – 26 February 2025

1. Foreign Tax Credit

Kenya does not provide a tax credit for foreign tax paid on business income, except in cases where a Double Taxation Treaty (DTT) exists.
However, foreign tax paid can be deducted as an expense when computing taxable income.

2. Investment Deduction

The Finance Act, 2022 reintroduced an investment deduction allowance of 150% for specific projects that meet the following criteria:

Investment Threshold	Eligibility Condition
KES 2 billion	Cumulative investment value for the preceding four years or the succeeding three years from when the provision took effect.
Location-Based Condition	The investment must be outside Nairobi County or Mombasa County to qualify.

3. Export Processing Zones (EPZs)

Companies operating in an approved EPZ (mainly for export-oriented production) enjoy the following corporate income tax (CIT) incentives:

Period	CIT Rate
First 10 years	0% (Tax-exempt)
Next 10 years	25% CIT (reduced rate)

4. Special Economic Zones (SEZs)

SEZ enterprises benefit from favorable tax treatments to encourage investment:

Tax Type	SEZ Benefit
VAT	SEZ enterprises do not need to register for VAT. Supplies to SEZs are zero-rated (0%)
Corporate Income Tax (CIT)	Reduced rates apply (see Taxes on Corporate Income section for details).

I’m a Tax & Finance Writer at Quartet Solutions, simplifying tax regulations and financial concepts to help businesses stay compliant.