Kenyan President William Ruto has declared that Value Added Tax (VAT) on exported services will be removed starting July 1, 2023, as part of efforts to increase Kenya’s attractiveness as an investment destination.
The VAT on exported services was introduced through Finance Act 2022, which reclassified exported services (except Business Process Outsourcing) from exempt to taxable. The president acknowledged that the tax not only made businesses uncompetitive but also discouraged investors from making Kenya their regional or global services hub. Consequently, VAT on exported services will be removed by the end of June this year.
President Ruto also announced that the Special Economic and Export Processing Zones laws would be evaluated to remove any barriers that may discourage new local and foreign investments. Furthermore, the government will review the restriction on large corporations investing in Kenya, which requires 30% domestic equity.
The decision to remove VAT on exported services is expected to provide relief to Kenyan businesses and improve their competitiveness globally. The move will also help attract more foreign investment, particularly in the services sector, which accounts for a significant portion of Kenya’s GDP. By reducing the cost of doing business in Kenya, more companies will be able to expand their operations and generate employment opportunities for Kenyans.
The president’s announcement also indicates that the government is keen on attracting more foreign investment by eliminating hurdles that make it difficult for investors to do business in Kenya. This includes evaluating the Special Economic and Export Processing Zones laws to ensure they are conducive to investment and reviewing the domestic equity requirement, which has been a significant barrier for large corporations looking to invest in Kenya.
Overall, the government’s move to remove VAT on exported services and evaluate investment laws is a step in the right direction. It demonstrates the government’s commitment to creating a business-friendly environment that fosters economic growth and development. As a result, Kenya is likely to attract more foreign investment and position itself as a leading investment destination in the region.
