Speculators hoping to profit from assets held within special economic zones (SEZs) have been dealt a blow after the Finance Act 2025 restricted exemption from capital gains from the transfer of property within such locations.
SEZs are designated areas within a nation that operate under special economic regulations than the rest of the country, aiming to attract investment and boost economic activity.
“By deleting paragraph 72 and substituting therefor the following new paragraph….72. Gains on transfer of property within a special economic zone by a licensed special economic zone developer, enterprise or operator,” the Finance Act 2025 said.
With this amendment, the Finance Act 2025 has restricted the exemption from capital gains on the transfer of property within an SEZ, to only the gain realised by a licensed special economic zone developer, enterprise or operator.
Analysts said the restriction affects speculators who may attempt to profiteer from assets within the SEZs.
“The Act aims to discourage entities and individuals who have previously held property within SEZs solely for speculative purposes and who are not licensed SEZ developers, operators, or enterprises,” analysts at law firm Bowmans said in a note.
“As such, capital gains tax exemption will no longer apply upon the transfer of such property by unlicensed persons. Additionally, the Act excludes from the exemption those who operate within SEZs – particularly in non-customs-controlled areas – without the requirement or obligation to obtain an SEZ licence, thereby limiting the benefit strictly to licensed SEZ entities,” they added.
The government has so far licensed 39 SEZs, with 10 located within the coastal economic zone, in efforts to spur economic growth through job creation and exports of products.
Firms in SEZs enjoy a raft of incentives including a preferential 10 percent corporate tax and exemptions of import duties and value-added tax (VAT) to help lower operational costs and higher profit margins. The SEZ investors are also granted a 100 percent allowance on capital expenditure on building and machinery.
Presently the country has three gazetted public SEZs; Dongo Kundu, Konza and Naivasha, as well as private ones like Northlands, SBM, Mt Kipipiri Golf & Resort, East Africa Free Zone, Tatu City, Compact FTZ, Africa Economic Zone and Two Rivers International Finance and Innovation Centre.
SEZs and industrial parks are listed as a priority in President William Ruto’s Bottom-Up Economic Transformation Agenda.
The government expects these zones to uplift local economies by providing the infrastructure necessary to support small and medium enterprises, create new value chains, increase exports, and stimulate industrial growth, particularly in the manufacturing and agricultural sectors.
President Ruto’s government believes that connecting rural areas with industrial hubs, SEZs and industrial parks would also ensure that the benefits of these developments are widely distributed, promoting more inclusive economic development.
