The Start-up Bill, which will be signed into law in April 2024, has provided tax relief for Kenyan businesses incorporated as start-ups.
For a business to be considered a start-up in Kenya, it has to be a technology-based innovative entity, legally recognised by the laws of Kenya, with strong growth potential and a disruptive economic model.
The business has to be registered as a private limited company, partnership firm, or non-governmental organisation (NGO) wholly owned by one or more citizens of Kenya.
It also must be newly registered or have existed for up to three years from the date of its incorporation or registration. However, an exception is offered for start-ups in the biotechnology sector; the period shall be up to five years from its incorporation.
Other conditions for businesses to receive government support and tax relief include producing or improving and commercialising innovative products, processes, or services as the scalable business model.
The Start-up should also have human resources, total assets, and an annual turnover number that does not exceed the amount prescribed by the Cabinet Secretary.
It must, as well, have its headquarters in Kenya and shouldn't distribute its profits. At least 15 per cent of the entity's expenses should be attributed to research and development activities.
However, the relief provided by the Act shall not apply to an established or formed entity due to the split, reconstruction, merger, or reconstitution of an existing business.
Additionally, the business shouldn't be a holding company or subsidiary of an existing entity not registered as a start-up.
The Act also provides that start-ups will enjoy subsidies on the formalisation costs, protection of their intellectual property, and support in research and development activities. The Cabinet Secretary may also make regulations to exempt start-ups from registration fees.
There is yet to be a regulatory framework for start-ups in Kenya. The start-up bill aims to boost the growth of the Kenyan technology sector by establishing the Kenya National Innovation Agency and a framework for Start-up Incubators.
