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KRA to remove upfront payment of taxes for used car imports

The move is meant to facilitate the importation of used cars, which are popular among Kenyans

FILE PHOTO: Automobiles are shown for sale at a car dealership in Carlsbad, California

In a move aimed at promoting trade and easing the importation process of used cars, the government has directed the Kenya Revenue Authority (KRA) to allow the use of bonded warehouses for the importation of used vehicles.

Bonded warehouses are specialized facilities where goods can be stored without the payment of import duties or other taxes until they are released for domestic consumption or exported.

The decision was arrived at following a meeting chaired by Trade Cabinet Secretary Trade Moses Kuria and his Transport counterpart, Kipchumba Murkomen, on April 14 in Mombasa.

According to a statement, of some of the resolutions of the meeting included “Agreed to streamline and introduce bonded warehouses for imported used vehicle inspection”.

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According to the directive, importers of used cars will now be able to store their vehicles in bonded warehouses without immediately paying import duties and taxes.

The bonded warehouses, which are monitored by the KRA, will provide a secure and controlled environment for storing the vehicles until they are released for domestic consumption.

The move is meant to facilitate the importation of used cars, which are popular among Kenyans.

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Data from the Kenya National Bureau of Statistics (KNBS) in 2022 showed that imports for used cars in the nine months to September stood at 78,304 units, 21 percent jump from 64,551 units in similar period in 2020.

Dealers in Kenya are optimistic that the recent directive which will eliminate the requirement for an upfront payment of taxes, will have a positive impact on their cash flow and potentially ease the pressure on used car prices.

It means importers can leave the vehicles in the bonded warehouses and not pay taxes until they get buyers. This will boost cash flows for importers,” Kenya Auto Bazaar Association sec gen Charles Munyori told the Business Daily.

At present, used car importers in Kenya are required to settle all taxes, which can amount to nearly 55 percent of the total import cost, and remove their vehicles from container freight stations (CFS) within a 30-day period.

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Importing used cars into Kenya requires payment of various taxes and duties.

The specific taxes and duties applicable to used car importers in Kenya include:

  1. Import Duty: This is a tax levied on the value of the imported used car, and it varies depending on the make, model, and age of the vehicle. Import duty rates in Kenya range from 20% to 25% of the vehicle's value.
  2. Excise Duty: This is a tax levied on certain types of goods, including motor vehicles, and it is calculated based on the engine capacity and age of the vehicle. The excise duty rate for used cars in Kenya ranges from 20% to 35% of the vehicle's value.
  3. Value Added Tax (VAT): VAT is levied on the value of the imported used car, as well as on the sum of the import duty and excise duty. The standard VAT rate in Kenya is 16% of the vehicle's value, import duty, and excise duty combined.
  4. Railway Development Levy: This is a levy imposed on the value of the imported used car to support the development of Kenya's railway infrastructure. The railway development levy rate in Kenya is 2% of the vehicle's value.
  5. IDF (Import Declaration Fee): This is a fee charged by the Kenya Revenue Authority (KRA) for processing the import declaration documents. The IDF rate in Kenya is 3.5% of the Customs Value of the imported used car.
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