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Kenya has since independence adopted various economic policies with a view to achieving sustainable economic growth and development. Upon attainment of independence in 1963, the country’s economic policy was articulated in Sessional paper No.10 of 1965, titled “African socialism and its application to planning in Kenya”. The paper defined the strategy to promote rapid economic growth through public sector programmes, encouragement of both smallholder and large-scale farming, and the pursuit of accelerated growth of private sector investment.

The economic policies adopted thereafter have not only been influenced by domestic challenges but also external factors, particularly the realities of liberalisation and globalisation. These realities led to the drawing up of Sessional paper No.1 of 1986, on “Economic management for renewed growth”, which proposed several fiscal and monetary reforms aimed at realising economic recovery and growth through liberalisation.

Over the years, Kenya has made significant progress in eliminating exchange controls, including restrictions on inward portfolio investments, and has removed trade restrictions, except for certain sensitive products in health, security and environment. The government is currently implementing "Vision 2030", a development fine print that is aimed at transforming the country to a middle-income economy by the year 2030.  The vision is being implemented through five-year medium-term rolling plans, and the first one is covering the period 2008-2010.

Main Economic Indicators

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The government encourages both domestic and foreign investments, and provides a conducive environment and attractive incentives to investors. There are no restrictions on foreign investment, foreign ownership and repatriation of profits or capital. Investment in the Export Processing Zones (EPZs) and Manufacturing Under-Bond (MUB) enjoys a 10-year tax holiday, followed by a 25% tax rate for the next 10 years, and is exempt from import duties, VAT and sales tax. The Export Processing facility operates in 39 Zones (37 private, 2 public). Foreign ownership in listed Kenyan companies is generally restricted to 40% in the aggregate and 5% for each individual investor.

The major investment incentives include:

  • Investment allowance: new investment or expansions are granted allowance on plant machinery, building and equipment;
  • Depreciation: liberal rates are allowed for depreciation of assets, based on book value;
  • Loss carried forward: to be offset against future taxable profits.

In addition, the government provides guarantees to investors through the following:

The membership to the above international investment bodies and the Kenya constitution guarantee against expropriation of private property, except for purposes of public use or security, and also prompt and fair compensation in the event of such expropriation.

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Investment opportunities exist in nearly all sectors, and especially in agro-based industries, machinery and building materials, furniture and paper products, garments and textiles, jewellery and watch manufacture, food processing, cosmetics, pharmaceuticals, electronic goods, solar technology products, IT/data processing, tourism, banking and financial services, housing, roads, ports, railways and the energy sector.

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Corporate tax presently stands at 30%. Withholding tax on dividends is 5%. However, inter-corporate dividend payments between closely held companies are exempt from withholding tax. Dividends received by financial institutions as trading income are not subject to tax.

Value Added Tax (VAT) is levied on the supply of goods imported into or manufactured in Kenya, and taxable services imported or provided in Kenya. The standard VAT rate is 16%. Unprocessed agricultural products are exempt from VAT. Inputs into health care, education and agricultural sectors are zero-rated. All exports of goods and services are zero-rated.

Excise duties are levied on beer, tobacco products, matches, spirits, wines, mineral water and biscuits (confectioneries).

Personal tax is charged on the income earned in Kenya by any person resident in Kenya. Individual income tax is taxable at rates graduated to 30%. Tax allowances are provided for all individual taxpayers. Taxable income includes all business income, employment income, dividends, interest and property income.

More information can be obtained from:

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Over and above the domestic demand, Kenya's membership of several regional bodies provides an expanded market. Membership of the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) guarantees a market of approximately 300 million people, and provides free movement of goods and services.

Exports from Kenya enjoy preferential access to the European Union under the ACP-EU framework. In addition, Kenya is one of the initial beneficiaries of the African Growth and Opportunity Act (AGOA), which provides for preferential market access in textiles to the USA.