Second-hand car dealers and individuals will soon be able to ship in vehicles and defer paying taxes for up to one year, boosting their cash flow positions in reforms that are expected to lower automobile prices.
The William Ruto administration has directed the Kenya Revenue Authority (KRA) to allow the use of bonded warehouses for imported used vehicles, putting them on the same pedestal as new car imports.
This allows importers to store units in KRA Customs-controlled premises for up to six months without payment of taxes as they look for buyers, and they may seek for an additional six months extension.
At present, used car importers are required to pay all taxes estimated at nearly 55 percent of the import cost and remove their units from container freight stations (CFS) within 30 days.
Failure to evacuate prompts the KRA to give them a month’s notice to clear the cars or risk the vehicles being auctioned.
Vehicles shipped in from overseas markets like Japan, the UK, and South Africa are charged an import duty of 25 percent, excise duty of between 20 percent and 35 percent depending on engine type and VAT of 16 percent, payable cumulatively and in that order.
The policy shift is part of a resolution of a multi-agency meeting on ease of doing business in Mombasa co-chaired by Trade Cabinet Secretary Trade Moses Kuria and his Transport counterpart, Kipchumba Murkomen, on April 14 in Mombasa.
