• CS Munya says it is a one-year exemption to allow them to produce all the currency notes that Kenya needs
• The government owns a 40 per cent stake in De La Rue Kenya EPZ Limited, the Kenyan subsidiary of the British multinational
Currency printing firm De La Rue has been given a one year tax break on its local business as the government moves to support increased production of the new generation coins and notes.
This is in the wake of a biting shortage of the new currency in the market which has hit banks and financial insitutions, affecting the currency regime change.
Central Bank Of Kenya (CBK) announced that it was withdrawing the Sh1,000 notes during the June 1, Madaraka Day celebrations, a move that saw the circulation of new bank notes kick-off.
However, a few notes were introduced into the market which have since failed to meet the demand by banks to enable a smooth transition and retension of the old currency, even as the 1,000 note are expected to cease being legal tender from October 1.
In a letter to the Export Processing Zones Authority dated July 11, Industry, Trade and Co-operatives Cabinet Secretary Peter Munya granted De La Rue Kenya EPZ Limited authority to sell up-to 100 per cent of their annual production into the customs territory for a period of one year.
Munya yesterday told the Star the decision came following a request from the firm and the Central Bank, a move which will ramp up production to meet the demand for the new currency.
“It is a one year exemption to allow them to produce all the currency notes that Kenya needs before they resume exports. They already had a 90 per cent exemption,” Munya said.
Though the CBK has remained tight-lipped on why there is a shortage of the new currency, banks have blamed it to a short supply.
“There is a short supply of the new currency which has forced us to re-inject the old currency back into the market,” a top bank manager who spoke on anonimity told the Star yesterday.
The lenders have been mopping the old generation notes from the market as expected with the introduction of the new currency. They have also configured their automated teller machines (ATMs) to dispense the new currency, some which are currently lying idle.
The Kenya Bankers Association (KBA) has since said the shortage should be fixed as soon as the CBK supplies lenders with the new currency.
De La Rue is now allowed to use its subsidiary registered under the Export Processing Zone that enjoys exemption from custom duties and value added taxes on all imports of raw material, capital equipment and other inputs that go into export-oriented business.
This adds up to the 10-year exemption from income taxes,from the date of first sale as an EPZ enterprise, enjoyed by EPZ firms.
They also enjoy a lower tax of 25 per cent applies for 10 years following end of tax holiday,exemption from payment of withholding tax on dividends and other payments made to non-resident investors for 10 years as well as exemption from stamp duty on the execution of any business transactions.
The entities further enjoy access to the onsite customs clearance within the export processing zone, for incoming and outgoing materials.
The tax break comes three months after DE La Rue entered into a joint venture with the government.
In a deal which became effective on April 18, the state acquired a 40 per cent stake in De La Rue Kenya EPZ Limited, the Kenyan subsidiary of the British multinational for Sh660 million.
This gives the government a share of the firm's earnings even as it executes the Sh11.2 billion three-year contract to design and manufacture the new generation currency.