A Kenya Airways plane. FILE PHOTO | NATION MEDIA GROUP
Summary
- The Finance Bill amended the 2013 VAT law which only exempted aircraft operators from paying the 16 per cent levy on some of about 400 types of spare parts.
- Encompassing all spare parts under the exempt bracket will now give the airline more room to breathe even as it finalises restructuring its balance sheet.
- KQ had Sh116.7 billion in long-term borrowings and another Sh...29 billion in short-term debt.
The Treasury has removed value added tax
(VAT) on the importation of all aircraft spare parts, a waiver that
will see cash-strapped Kenya Airways free up hundreds of millions of
shillings normally locked up in duty refunds from the taxman.
The
Finance Bill, which was published a week ago, amended the 2013 VAT law
which only exempted aircraft operators from paying the 16 per cent levy
on some of about 400 types of spare parts.
This left aircraft operators such as the national carrier paying hefty taxes to ship in critical parts to maintain their fleet.
While
firms claim this tax from the Kenya Revenue Authority (KRA),
longstanding inefficiencies in the process have seen the taxman amass
billions of shillings owed to businesses like KQ, hurting their cash
flow position and operations.
“Any other aircraft spare
parts imported by aircraft operators or persons engaged in the business
of aircraft maintenance upon recommendation by the competent authority
responsible for civil aviation,” the new amendment states.
The
taxman, in an internal circular to its staff, explained that this
clause is “meant to cover all (aircraft) spare parts not specifically
covered in the VAT Act 2013, adding that the change came into effect on
April 3.”
KQ, which has posted losses for four
consecutive years, has been lobbying to have all spare parts declared
VAT exempt, noting that the tax and subsequent refunds were derailing
its turnaround bid.
In just seven months after the tax was introduced in
September 2013, the national carrier paid Sh700 million for imported
spare parts, highlighting the burden of the levy.
Encompassing
all spare parts under the exempt bracket will now give the airline more
room to breathe even as it finalises restructuring its balance sheet
ahead of a Sh60 billion recapitalisation of the company. As at September
2016, KQ had Sh116.7 billion in long-term borrowings and another Sh29
billion in short-term debt.
The airline is currently talking to its creditors to relax the repayment terms of these loans.
No comments :
Post a Comment