Corporate News
By Victor Juma
In Summary
- Importers have in turn adjusted prices upwards by between Sh50,000 and Sh200,000, leading to a sharp jump in display yards after dealers factor in their markups.
- Used cars generally attract an import duty of 25 per cent, excise duty of 20 per cent and valued added tax of 16 per cent, payable cumulatively and in that order. Pick-up trucks, lorries, trailers and prime movers are exempt from excise tax.
- The second-hand car market is dominated by individuals and small dealerships who have benefited from increased demand from the middle class who buy the models in cash or through bank loans.
Buyers and importers of used cars will have to dig
deeper into their pockets to acquire some models after the taxman
released a new list of base prices used to calculate import duties,
raising their cost by double digits.
The reference prices for some Toyota Prado, Honda Accord and
Honda Civic, among other models, rose by between 10 and 20 per cent
effective June 1.
Importers have in turn adjusted prices upwards by
between Sh50,000 and Sh200,000, leading to a sharp jump in display yards
after dealers factor in their markups.
“The most affected are sports utility vehicles and
all Honda models,” said Charles Munyori, the secretary-general of Kenya
Auto Bazaar Association.
The Kenya Revenue Authority (KRA) publishes a list
of current retail selling prices for close to 2,100 cars to help
importers of second-hand cars compute taxes due.
The last such current retail selling price (CRSP)
list released in April last year has been updated this month, with
significant changes to some models’ base prices. Importers are, thus,
incurring higher absolute taxes to ship in these cars.
“KRA has factored in the prices of the latest
models in the market and this has had an impact on imports of similar or
related second-hand models,” Mr Munyori said.
Used cars generally attract an import duty of 25
per cent, excise duty of 20 per cent and valued added tax of 16 per
cent, payable cumulatively and in that order. Pick-up trucks, lorries,
trailers and prime movers are exempt from excise tax.
The value of a car is calculated based on the CRSP
for that specific model, adjusted for depreciation at a rate of 10 per
cent per year. Insurance and freight charges are added to the adjusted
CRSP to arrive at the customs value.
Because imports of used cars are capped at eight
years from the date of manufacture, most importers ship in
seven-year-old models as they attract the lowest taxes.
The latest CRSP changes will hit buyers of SUVs,
Honda vehicles and certain other models that have recently been updated
by pricier versions. Reference prices for some variants of the BMW X3,
for example, have been adjusted to reflect the current retail prices of
costlier models with similar specifications.
A 2.5 litre Honda Accord running on petrol and
manufactured in January 2007, for instance, will now attract taxes
amounting to Sh421,896. This will bring the total cost of the car to
Sh975,202 based on the effective customs value of Sh553,306 used to
compute the taxes.
This represents a 10 per cent jump in the total
cost from the Sh886,547 — including Sh383,542 in taxes — that one would
have paid before June 1.
Mr Munyori said the higher CRSP slapped on Hondas is linked to the return of the brand’s formal dealer in Kenya last year.
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