Investors from both within and without Kenya are increasingly turning to gold trade and investment. As such, Kenya is fast becoming a strategic hub for gold trade. Accordingly, you need experienced gold transactional and/or litigation lawyers in Kenya to advise on due diligence, legal and regulatory framework, applying for and processing gold licences and permits, drafting contracts for dealing in gold, lodging and prosecuting claims in Court and offering any other related legal services.
Tips on How to Conduct Due Diligence in Gold Trade Transactions
In this segment, F.M Muteti & Co. Advocates highlights the key aspects of due diligence in gold transactions.
Permits and Licences
The Mining Act No. 12 of 2016 is the principal legislation governing among other things, the licensing of dealing in precious metals including gold.
The Act strictly proscribes either dealing in or exporting/importing precious metals without the requisite permits and/or licenses. To be issued with a Mineral Dealer’s licence, an application is made to the Cabinet Secretary and the same issued upon subsequent payment of requisite fees. However, the Act restricts the issuance of the mineral dealer’s license to either an individual Kenyan citizen or if the applicant is a company, it must have at least sixty (60%) share-holding held by citizens of Kenya
Exporting and Importing gold
To export or import gold in Kenya, one must first have a valid mineral dealer’s licence and then separately apply tothe Director of Mines for an export permit in the prescribed form. Additionally, the following documents are essential to successfully export gold from Kenya:-
- Export permit (obtained from the Director of Mining);
- Export Declaration Form (Downloaded and filled from the Kenya Revenue Authority portal);
- Certificate of Origin(obtained from the overseas supplier or local supplier);
- Packing List;
- Invoice;
- Assay Certificate (to confirm quality and value of the consignment); and
- Insurance Certificate for the consignment.
With regard to the import of minerals into Kenya, the Mining Act provides that where a person imports minerals, the person of shall make a declaration at the point of entry of the minerals in the prescribed form.
The mining cadastre/registry
As highlighted above, the Act requires a person wishing to engage in gold dealings to obtain either a mineral dealer’s licence or export permit. To this end, the Act provides for the establishment of a register of mineral rights under the custody of the State Department of Mining for maintaining a register of all the persons holding mineral rights in Kenya.
Essentially, therefore, every prospective mineral dealer and/or exporter/importer MUST before conducting any dealings in precious metals within the country, obtain registration as such under the mining cadastre.
The mining cadastre is also an important tool for due diligence because an investor or organization looking to trade in gold may inspect the mining cadastre to ascertain whether or not a prospective gold business partner is licenced to deal in gold.
Taxes related to gold consignments in Kenya
After obtaining the relevant documents highlighted above, a person exporting gold from Kenya is required to pay an export levy in accordance with the Miscellaneous Fees and Levies Act, 2016. The export levy for a gold consignment is paid at the rate of 20% of the value of the consignment. The export levy is payable before the consignment is cleared by customs for export.
For import of gold into Kenya, the 2022 harmonized East African Community Common External Tariff of the value of 25% of the weight in grams of the consignment applies and the same is paid at the point of entry into Kenya.
At F.M. Muteti & Co. we have a vibrant Commercial Law Department which advises our Clients on conducting due diligence, applying for mineral and gold dealer’s licences and permits, drafting contracts for dealing in gold, lodging and prosecuting claims in Court and advisory to investors on compliance with and local mining laws and regulations.
Disclaimer: The information provided in this article is provided for information purposes only and does not constitute a legal advisory. We advise prospective Clients to get in touch with us for more comprehensive and contextualized legal advice.
