Buyers of imported luxury vehicles face a higher tax bill
following a proposal by the Treasury to increase excise tax to 30 per
cent of private cars with engine capacity beyond 2,500cc.
In
the new tax measure proposed yesterday by Treasury Cabinet Secretary
Henry Rotich, persons buying imported cars of engine capacity exceeding
2,500cc for diesel and 3,000cc for petrol-powered vehicles will pay 10
per cent more in excise tax.
Previously, all imported
vehicles were subject to import duty of 25 per cent, 20 per cent excise
tax and valued added tax (VAT) of 16 per cent payable cumulatively in
that order. The proposed tax increase is set to raise the cost of a
single unit.
This is another attempt by the Treasury
that follows 2016 move when it increased excise duty for locally
assembled and imported cars but later in September the same year
scrapped it after Kenyan based assemblers lobbied. The Treasury,
however, reverted to charging 20 per cent of a used imported vehicle’s
value instead of the flat fee of Sh200,000.
Calculation
of the taxes of imported cars is based on the current retail selling
price (CRSP) of specific models, an amount that is 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
custom value. Imports of used cars is capped at eight years from the
date of manufacture, a move that has seen most dealers ship in models
approaching that age to benefit from lower taxes.
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