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Revoked by Legal Notice No. 92
11 June 2009
L.N.72/1996
1. These Rules may be cited as the Income Tax (Investment Duty Set Off) Rules, 1996 and shall come into operation on the 14th April, 1996.
2. In making application for consideration of approval by the Minister for duty set off under section 39A to the Act, the following particulars shall accompany the application:
(a) A detailed list of the proposed imports of the capital goods, plant and equipment (excluding passenger cars) that will qualify for deductions under Part II of the Second Schedule.
(b) Pro forma invoices from suppliers or other independent estimates of the value of the proposed imports (including clean reports of finding by the authorized preshipment inspection agency).
(c) A detailed feasibility study of the investment project showing-
(i) the value and expected timing of the investment expenditure that qualifies for deduction under Parts I and II of the Second Schedule and which is proposed for qualification of the project under the minimum investment limit of not less than 5 million United States dollars within a period of two (2) years; and
(ii) detailed cash flow statements which allow for the estimation of the net economic benefit of the project, including-
(a) cash flow relating to goods or services to be produced locally or for export, or purchased locally or imported for use in the production of goods and services;
(b) employment expected to be created;
(c) foreign and domestic financing obligations;
(d) other foreign obligations or commitments, e.g. management fees or royalties; and
(e) income tax, rates on property, licence fees or similar obligations.
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3. The application under paragraph 2 shall be completed before the clearance of the goods through customs and payment of duties under Section 117 of the Customs and Excise Act.
4. The duty set off on capital goods shall be permitted for investment projects that are new investment in productive capital goods, or replacement, expansion, extension or modification of existing productive capital goods.
5. No duty set off shall be allowed for subsequent replacement or addition to capital goods that have qualified for a duty set off without a new application under paragraph 2 of these Rules.
6. All applications for duty set off under Section 39A shall be made to the Minister for Finance, who, upon being satisfied that the applicant has fulfilled the requirements of Section 39A and these Rules, shall issue a letter of approval to the applicant with a copy to the Commissioner General of the Kenya Revenue Authority that specifies-
(a) sufficient details to identify the applicant, the nature of the investment project and its location;
(b) the detailed list of capital goods (including quantities and description) the duty paid on which will qualify for set off; and
(c) the validity period of the approval which shall not be less than two (2) years, but not more than four (4) years from the date of approval to the date of the capital goods being first put in use.
7. At the time of customs clearance of capital goods approved for duty set off, the applicant may apply to the Commissioner of Customs and Excise to send a certified copy of the import entry documents to the Commissioner of Income Tax for purposes of verifying any subsequent claim for duty set off.
8. An applicant who has imported approved capital goods shall claim the duty set off at the time of filling the self-assessment return for the year of income in which the goods are first put in use, subject to the validity period in paragraph 6.
9. A claim for duty set off shall be accompanied by a copy of the approval letter of the Minister of Finance and copies of the import entries for the approved capital goods imports
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