The EAC legal framework is enabling EAC Partner States to cooperate in the areas of Investment and Industrial Development to harness the investment potential to promote economic growth and development in the region. This co-operation seeks to, among others, rationalize investments and the full use of established industries so as to promote efficiency in production, as well as harmonise and rationalise investment incentives with a view of promoting the Community as a single investment area. Currently, the National Investment Codes and other related laws of the EAC Partner States provide for varying fiscal and non-fiscal incentives to investors.

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Investment incentives, both fiscal and non-fiscal, are available in Kenya. The Kenya Revenue Authority implements the issuance of the fiscal (tax) incentives in collaboration with other Authorities e.g. Capital Market Authority, Export Processing Zones Authority (for issuance of the EPZ incentives) among others as provided under the Income Tax Act, Laws of Kenya. The tax incentives are mainly in form of capital deductions. These deductions are made at the point of computing the gains or profits of a person / company for any year of income. Capital deductions are divided into four deductions:

1. Industrial Building Deductions
   It applies to the capital expenditure incurred by a person on the construction of an industrial building to be used in a business carried out by them or their lessee. This allowance is claimed by the person who incurred the capital expenditure i.e. the owner of the building and the building must be used for the purpose of the business only so as to enjoy the industrial building deduction. It is granted on a straight-line basis on the balance of constructions. The applicable rates are as follows:
   • Industrial Building-2.5% capital deduction applicable within the first Forty (40) years of operation
   • Hotels - 10% capital deduction applicable within the first 10 years of operation
   • Hostels and Educational Buildings certified by the commissioner-50% capital deduction for the first 2 years of operation.
   • Buildings used for training of film producers, actors or crew - 100% capital deduction.
   • Rental residential building approved by the minister in a planned developed area - 25% capital deduction.
   • Commercial building- 25% capital deduction in a developed area.
2. Farm Works Deductions
   This refers to expenditure by the owner or tenant of agricultural land on construction of farm works. Applicable rates include
   • Farmhouse- Allow 1/3 of the expenditure on one house. Employee houses qualify.
   • Any other immovable buildings for the proper operation of the farm deduct 100% of the whole amount.
3. Wear and Tear Deductions
   This is an allowance that is granted to the investor to cater for wear and tear on machinery.

   Table 3.5: Categories & Applicable Rates for Wear and tear Deductions in Kenya

   Class
   Class I @ 37.5%	Heavy earth moving self-propelling equipment such as: Caterpillars, tippers, lorries of 3 tonnes and above, tractors (heed, Train, Engine head, buses and coaches, loaders, rollers and graders, transport trucks, combine harvesters, mobile cranes and forklifts etc.
   Class II @ 30%	Office electronic machinery and equipments e.g. computers and its peripherals, computer printers, scanners and processors, calculators, mobile phones, photocopiers, stamping and franking/fax machines, duplicating machines, photo printers, cash registers, tax registers.
   Class III @ 25%	Other self-propelling machines such as motor bikes, saloon cars and hatchbacks, tutuk, pick-ups and delivery vans, aircrafts, minibuses (Nissans included), lorries < 3 tonnes.
   Class IV @ 12.5%	Other non-self-propelling machine such as; Ship, Bicycles, Wheelbarrow, lifts & conveyor belts, carpets and curtains, partitions in a building, shelves, safes, sign boards and advertising stands, furniture and fittings, plant and machinery, security and alarm systems fixed in a car, tractor trailer, train coaches, milking machinery, beds in a hotel, a plough and lawn mowers, refrigerator, T.V, non-self-propelling forklifts and cranes, boats and petroleum pipeline.
   Class v@20%	Computer Software and for Telecommunication equipment its 20% for five years on a straight-line basis

4. Investment Deductions
   This is a deduction granted on the cost of a building and machinery installed therein as an incentive to encourage investments. Applicable rates include:
   • Investments situated within Nairobi, Mombasa and Kisumu - 100% investment allowance
   • Investments worth 200 Million Kenya shillings situated outside Nairobi, Mombasa, Kisumu attract a 150% investment allowance
   • Investment Deduction-Manufacturing Under Bond- 100% for production of export goods under bonded warehouses
   • Investment Deduction-Export Processing Zones- 100% investment deduction
   • Shipping Allowance-applies to the purchase of a new and unused power driven ship of more than 125 tons gross or the purchase and subsequent refitting for the purpose of that business of a used power-driven ship of more than 125 tons- 100% investment deduction
5. Export processing zones (EPZ) incentives
   Licensed EPZ projects (foreign, local or joint venture) are entitled to the following incentives:

Fiscal benefits

• 10-year corporate income tax holiday and a 25% tax rate for a further 10 years thereafter (except for EPZ commercial enterprises)
• 10-year withholding tax holiday on dividends and other remittances to non-resident parties (except for EPZ commercial licence enterprises)
• Perpetual exemption from VAT and customs import duty on inputs–raw materials, machinery, office equipment, certain petroleum fuel for boilers and generators, building materials, other supplies. VAT exemption also applies on local purchases of goods and services supplied by companies in the Kenyan customs territory or domestic market. Motor vehicles which do not remain within the zone are not eligible for tax exemption.
• Perpetual exemption from payment of stamp duty on legal instruments
• 100%investment deduction on new investment in EPZ buildings and machinery, applicable over 20years.

Other benefits of investing in EPZ include:

• Operation under essentially one licence issued by EPZA. EPZA seeks to minimize bureaucracy and administrative procedures and facilitates licensing, set up and operations of EPZ projects.
• Rapid Project approval and licensing (with exception of projects requiring environmental licence from National Environmental Management Agency (NEMA).
• Liberalised foreign exchange regime and easy repatriation of capital and profits, access to foreign currency accounts, domestic and offshore borrowing.
• Onsite customs documentation and inspection by Customs Staff. All zones have a resident Customs office for on-site customs documentation and clearance.
• Unrestricted investment by foreigners.
• EPZA provides One Stop Shop service for facilitation and aftercare.
• All zones are built to exacting international standards and provide facilities suited to export production
• Serviced land and ready factory buildings are available for sale or lease to licensed EPZ companies. Water, sewerage, electricity, all weather roads and an illuminated perimeter fence or wall are standard requirement for zones.
• Zone developers provide 24-hour security, street lighting, landscaping and street cleaning services in the zones. Private garbage collection firms are retained to dispose of normal office waste.
• Office premises and storage warehouses are available for lease in most zones.

Through the Tax Remission for Exports Office (TREO), the government of Kenya encourages local manufacturers to export their products by remitting duty and VAT (duty drawbacks) on raw materials used. Other forms of physical and tax incentives are availed under the Special Economic Zones (SEZ) scheme.

The following are the fiscal and non-fiscal incentives offered to investors in Burundi:

1. Exemption of charges on property transfer (mutation fee)
2. No duty on Raw material, Capital goods & Specialized vehicles
3. No customs duty is charged if investment goods are made within the EAC or COMESA
4. Corporate tax rate: 30%. It is reduced by 2% if 50-200 Burundians are employed; it is reduced by 5% if more than 200 Burundians nationals are employed.
5. Free repatriation of profit after payment of tax
6. Cheapest labour force in the region
7. Business registration in less than one working day
8. Moderate climate along the year

1. Preferential corporate income tax rate of zero percent (0%)
   An international company which has its headquarters or regional office in Rwanda is entitled to a preferential corporate income tax rate of zero per cent (0%) if it fulfils the following requirements:

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