The Special Economic Zones Act 2015 created the legal framework for Kenya’s SEZ regime — designated areas where qualifying businesses access tax and regulatory incentives. For outsourcing and IT-enabled services (ITES), the framework offers reduced corporate tax to operations that meet the conditions. This guide explains how the regime is structured, how it applies to outsourcing, and what to confirm before relying on it. For the BPO-specific angle, see SEZ Kenya BPO.
Key Facts
| Metric | Value |
|---|---|
| Governing law | SEZ Act 2015 |
| Earlier framework | EPZ tax incentives |
| Corporate tax in zones | Reduced for qualifying zones |
| Target activities | Outsourcing, ITES and others |
| National Policy on BPO | Introduced 2025 |
| Tax treaty with UK | UK-Kenya Double Taxation Agreement |
| Services share of GDP (2024) | 55.3% |
| GDP | KSh 16.2 trillion |
| UK time-zone overlap | 5-6 hours |
| Fully loaded saving vs UK | ~60-70% per role |
Key terms
- ITES
- IT-enabled services — outsourced functions delivered using IT systems, such as data processing, support and knowledge work, eligible for zone targeting.
- SEZ Act 2015
- The Special Economic Zones Act 2015, the statute establishing Kenya's SEZ regime and the incentives available to qualifying businesses.
What the SEZ Act 2015 established
Answer: The Act created designated zones where qualifying businesses access reduced corporate tax and streamlined regulation.
The SEZ Act 2015 introduced a broader, more flexible zone framework than Kenya’s earlier export-focused EPZ regime. It designates areas in which approved operators and enterprises can access incentives, the headline being reduced corporate tax for qualifying zones, alongside facilitation intended to ease setup and operation. The regime sits within Kenya’s wider legal system — common law, with the Employment Act 2007 and Data Protection Act 2019 applying regardless of zone status. The 2025 National Policy on BPO signals continued government support for services-sector growth.
How incentives apply to outsourcing and ITES
Answer: Outsourcing and IT-enabled services are among the targeted activities, so qualifying operations can access zone incentives.
| Activity | Zone eligibility |
|---|---|
| BPO / customer operations | Among targeted activities |
| IT-enabled services (ITES) | Among targeted activities |
| Software and data services | Within ITES scope |
Because outsourcing and ITES fall within the targeted categories, a qualifying owned operation can attract reduced corporate tax. However, exact rates, qualifying conditions and the approval process are set by current legislation and should be confirmed with advisers — they are a planning input rather than a guarantee. UK firms also have the UK-Kenya Double Taxation Agreement to consider, which affects how income is taxed across the two jurisdictions.
SEZ versus EPZ
Answer: EPZ is the older export-oriented regime; the SEZ Act 2015 added a broader, more flexible structure.
Kenya operates two overlapping frameworks. The EPZ regime predates the SEZ Act and is focused on export-oriented activity, while the SEZ regime is broader and designed to accommodate a wider range of businesses, including services. Both offer tax incentives, and the appropriate route depends on the activity, scale and current rules. For most outsourcing scenarios the distinction only becomes relevant when establishing a substantial owned entity; firms using a provider do not need to navigate it directly.
Who should consider zone status
Answer: Zone status is most relevant to firms building a substantial owned operation, not to those using a provider.
Most UK firms enter Kenya through a local provider or an Employer of Record, in which case they do not establish a zone entity and the incentives sit with the provider. Zone status becomes material when a company sets up its own significant operation and can meet the qualifying conditions — at which point the corporate-tax saving may justify the additional compliance. Such an operation also raises tax-presence questions, covered in our permanent establishment risk guide. For the overall economics, see our costs overview.
Key Takeaways
- The SEZ Act 2015 designates zones where qualifying outsourcing and ITES operations can access reduced corporate tax.
- Outsourcing and IT-enabled services are among the targeted activities, but eligibility and rates must be confirmed against current law.
- The SEZ regime is broader than the older EPZ framework; both offer incentives.
- Zone status suits firms building owned operations; most UK firms use a provider and do not need a zone entity.
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Frequently Asked Questions
What is the SEZ Act 2015?
The Special Economic Zones Act 2015 is the law establishing Kenya’s SEZ regime. It designates zones where qualifying businesses, including outsourcing and IT-enabled services, can access reduced corporate tax and other incentives.
How do SEZ incentives apply to outsourcing and ITES?
Outsourcing and IT-enabled services are among the activities Kenya targets for zone incentives. Qualifying operations in a designated zone can attract reduced corporate tax, though eligibility and rates are set by current law and should be confirmed.
How does the SEZ regime differ from EPZ?
The EPZ framework is Kenya’s earlier export-focused zone regime, while the SEZ Act 2015 introduced a broader, more flexible structure. Both offer tax incentives, and the right route depends on the activity and current rules.
Do I need an SEZ entity to outsource to Kenya?
No. Most UK firms outsource through a local provider or Employer of Record and do not establish a zone entity. SEZ incentives are most relevant when building a substantial owned operation.
Sources & References
- KenInvest, “BPO Sector Pack,” accessed 2026-06-13. https://www.investkenya.go.ke/
- Kenya National Bureau of Statistics (KNBS), “Economic Survey 2025,” accessed 2026-06-13. https://www.knbs.or.ke/
- Kenya Revenue Authority, “Types of Taxes,” accessed 2026-06-13. https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye
Published by Outsourcing.ke.
Further Reading
- SEZ Kenya BPO — incentives for BPO operations
- Permanent Establishment Risk — owned-entity tax considerations
- Costs Overview — the full cost picture
- Employer of Record Kenya — EOR services for UK companies expanding to Kenya