Mining Regulation in Kenya

Those seeking to obtain a license for exploration & production of minerals in Kenya should keep in mind that it’s non-transferable & can only be granted to physical persons. It’s valid for 12 months & can be renewed for another 12 months. All minerals obtained under the license belong to the Kenyan government.

By obtaining an exclusive mineral exploration license in Kenya, its owners (who can be individuals/groups of individuals or companies) get an exclusive right to prospect for minerals in a specific area. It also provides them with an exclusive right to:

• reserve for themselves sites containing minerals specified in the license; 
• extract alluvial deposits;
• dispose of any minerals.

The right to obtain a permit for mining diamonds in Kenya isn't included in an exploration license. The license can be issued for 12 months & renewed for another 12 months for up to five years. Transfering a mineral exploration license in Kenya is done by obtaining a prior written consent of the Commissioner. Ally minerals obtained under an exclusive exploration license belong to the Government of Kenya.

By obtaining a subsoil lease license in Kenya, its owners get a right reserve for themselves a specific site or conduct mining operations in a particular area. The license can be provided for up to twenty one years.

Obtaining a special mining lease license in Kenya is possible if an applicant proves that the difficulties & costs associated with mining in a particular area (above or below its surface) require a special mining lease. Special leases may be granted & renewed for a duration & on terms that the issuing authority deems appropriate.

Kenya: Obtaining a License for Oil & Gas Production

Exploration & production of oil and gas in Kenya is only possible if the Secretary of the Cabinet of Ministers expressly permits it. Without it, no one can engage in any oil-extracting operations. Conducting petroleum operations in Kenya is done via oil companies set up by the government or private contractors licensed by the government.

Pursuant to the Petroleum Law, contractors must comply with certain requirements contained in their PSAs. PSAa are issued by the Department of Energy via competitive bidding or negotiations.

Under the Petroleum Law, the territory of Kenya is divided into the so-called ‘blocks’. Obtaining a non-exclusive exploration permit for geophysical or geological exploration in relation to any block requires submitting an application to the Secretary of the Cabinet of Ministers. Multiple exploration permits per a block can be granted.

Only Kenya-registered companies can conclude an oil production agreement with the government. Hence, registering a mining company in Kenya is a prerequisite for obtaining a permit for oil production in Kenya. It’s possible to prolong the initial exploration period for 2 more periods - the first one for 24 months & the second one for a period that’s negotiable.

Royalties & Taxes

There’s special rules applicable to the taxation of mining companies in Kenya. When purchasing mining equipment, mining companies get a capital deduction of forty percent for the first 12 months & ten percent for the second 12 months within a 7-year period.

VAT of sixteen percent is levied on the majority of services & products in Kenya. Some of them are exempt from VAT or taxed at a zero rate. Certain mining or exploration companies may be exempt from VAT on the recommendation of the Cabinet Secretary.

Selling property or stakes of mining companies in Kenya is subject to a ten percent income tax for residents & a twenty percent income tax for non-residents. Selling minerals requires paying royalties to the Government. Royalties are calculated as a percentage of the gross sales value of minerals, with the rates being set according to the provisions of the Mining Law.