We wanted to share recent changes which have been made that could create uncertainty around the level of import duty that will be payable for people importing cars into Kenya using the CRSP system.
How the import duty calculation for cars is performed.
Each car has a value based on the Current Retail Selling Price (CRSP) table issued by the KRA. The KRA then apply a specific formula to determine the customs value (which is then depreciated for each year of the car’s age). This customs value is then used to calculate the import duty, excise duty and VAT.
Court Stops KRA’s 2020 CRSP
On July 7th 2020, the KRA published the new CRSP. This was very controversial as it introduced a higher rate of 40% tax for used motor vehicle imports. The Car Importers Association of Kenya, who represent 80 used car dealers in Kenya, contested the implementation of the new CRSP. It was argued in court that the new CRSP didn’t make commercial sense as it was significantly above the rate of inflation (7%) and some taxes were higher than the actual purchase price of the car. The impact of this new higher tax bracket saw some car importers abandon their cars at Mombasa Port because the levies were so much higher than previously expected.
The 2020 CRSP was stopped by the court in August 2020 and the previous 2019 CRSP was reinstated.
The Valuation Template Formula Clarified
What many people are not aware of, is that on May 3rd 2021, the KRA sent an internal memo to their staff explaining that staff had been calculating the customs value in different ways using different formulas and therefore they needed to standardise this. The memo explained that the current 2019 CRSP in effect must be used as the basis for the valuation template. This 2019 CRSP was signed off as part of the 2018 finance act effective from 1st July 2018. This stated that in order to calculate the correct customs value vehicles under 2.5L diesel or under 3L petrol had an excise duty of 20% and any vehicle over 2.5L diesel or 3L petrol had an excise duty of 30%. The actual excise duties however, are calculated on today’s rate as detailed in the table below.
Current Excise Duty Rates for Cars Imported to Kenya
Online Duty Calculator Examples
This week, we have tested the KRA and DutyCalc.co.ke online duty calculators to check if these are now correct. Surprisingly we found that the current KRA calculator is yet to be updated and is not giving the accurate figures. We did find the DutyCalc.co.ke to be calculating duties correctly. The following examples below illustrate the variance between the two which is a maximum of 1.1M Kes.
The importance of understanding this pinpoints the uncertainty that people face when importing their car. This is the biggest concern for most people we speak to about importing their car to Kenya. Not knowing how much their car import could be, makes it difficult for them to prepare themselves financially before the car arrives in Mombasa. Many times over the past ten years we have heard stories of people’s expectations being very different from the duties charged. It is entirely possible that their clearing agent has made a mistake and used the wrong formula or incorrect duty line resulting in a sudden and steep increase in price for the owner. Such news is also time sensitive due to the potential costs of port charges and storage whilst the duties are disputed.
As with any change in formula, the people who will be most affected, will be those buying the more expensive cars. With these new changes that have been caused by this memo, never has it been more important to consult with professional importers who understand the most up to date information and are using the current duty calculators and correct CRSPs.