|Secondhand car imports are expected to grow by 80 per cent within six months under the new tax regime, importers have said, signaling rebound of used car business in the country.
This follows the proposed amendment of the Excise Duty Act 2015 by Treasury Cabinet secretary Henry Rotich, which has introduced an ad valorem 20 per cent tax based on the value of the vehicle, repealing the specific duty rate he introduced in 2015-16 financial year.
Monthly imports are expected to rise to an average 9,000 units from between 3,000-5,000 units a month currently.
“We expect volumes to grow in the next six months. This will also be a plus for the government as it will get more revenue,” Car Importers Association of Kenya chairman Peter Otieno told the Star yesterday. “We expect the monthly imports to go as high as 12,000 units.”
The new tax regime is a reprieve for importers and car dealers who had decried the specific rate effected on December 1 last year where vehicles aged less than three years paid Sh150,000 excise duty.
Vehicles more than three years old were taxed Sh200,000 per unit, while motor cycles attracted an excise tax of Sh10,000 a unit exclusive of other clearance and registration fees.
“Last year I introduced excise duty on motor vehicles based on the age of the vehicles at a specific rate. This has been perceived to be unfair, inequitable and punitive to importers of vehicles commonly imported by low-income earners, but beneficial to importers of luxurious vehicles,” Rotich said in his 2016-17 budget statement on June 8.
Under the new regime, importers will also pay 25 per cent of the customs value of the vehicle (invoice value, insurance and freight charges). Imports are also charged 16 per cent VAT of (customs value, import duty and excise duty).
An import declaration fee of 2.25 per cent of the customs value is also charged subject to a minimum of Sh5,000 payable in advance on application, and a 1.5 per cent railway development levy. Cars are also charged a merchant shipping levy of $0.05 (Sh5) per cubic metres.
Otieno said though the ad valorem has been welcomed, duty on commercial vehicles has not been reviewed. “Commercial vehicles are bound to advance tax every year which is still a challenge,” he said.