CRSP KRA: Why Kenya is Reforming Car Import Taxes

Starting in July 2025, Kenya will replace its long-standing CRSP (Current Retail Selling Price) system with a new invoice-based method for calculating import duties on second-hand cars. This change follows a significant court ruling that emphasized the need for public participation in determining car values. This reform is part of a broader move to create a more transparent, fair, and modern customs process. By shifting the basis of tax assessment from standardised KRA valuations to the actual purchase price documented in an importer’s invoice, the government aims to reduce disputes, prevent overvaluation, and align with international best practices in customs management.

What Is Changing and Why It Matters

End of CRSP Model: For years, Kenya has used the Current Retail Selling Price (CRSP) system to assign a fixed value to imported second-hand cars. The valuations sometimes failed to reflect the actual purchase price of vehicles, leading to inflated tax assessments. Importers frequently raised concerns about outdated pricing and discrepancies that made budgeting unpredictable.

New Invoice-Based Approach: Under the new system taking effect in July 2025, import duties will be calculated based on the vehicle’s actual invoice price. Importers will be required to present legitimate purchase invoices, along with supporting documents such as payment receipts and shipping records. This model brings tax calculations closer to real market values and is expected to improve fairness and accuracy. The implementation of this new system will require significant adjustments from both importers and the KRA to ensure a smooth transition.

Why This Change Matters: By shifting to invoice-based taxation, the Kenya Revenue Authority (KRA) aims to reduce valuation disputes and promote greater transparency in the importation process. This change is expected to ease compliance for honest importers while discouraging over-taxation and arbitrary assessments, ultimately making the market more predictable and equitable.

Factors Influencing Import Duty

Several factors come into play when determining the import duty payable on a vehicle in Kenya. One of the most significant factors is the age of the vehicle. Older vehicles tend to attract higher import duty rates, making it more expensive to import them. The fuel type of the vehicle also influences the duty, with diesel and petrol vehicles subject to different rates of excise duty. Additionally, the engine size of the vehicle is a crucial factor, as larger engines typically incur higher excise duty rates.

The invoice value of the vehicle is another critical element in the calculation. This value, along with the CRSP value, is used to determine the customs value of the vehicle. The KRA uses the higher of the two values to ensure that the customs value accurately reflects the vehicle’s market worth. Besides these factors, the import declaration fee (IDF) and other charges are also payable on imported vehicles. Car importers and individual buyers must consider all these elements when calculating the import duty to ensure they have an accurate estimate of the total cost.

Car Duty Calculation

Calculating car duty involves several detailed steps. First, the customs value of the vehicle is determined using both the invoice value and the CRSP value. The import duty is then calculated as a percentage of this customs value, with the current rate set at 35%. Following this, the excise duty is calculated, which is also a percentage of the customs value, currently at 20%. Additionally, the value-added tax (VAT) is applied at a rate of 16% of the customs value.

Apart from these primary duties, the import declaration fee (IDF) and other charges are also applicable to imported vehicles. To simplify this complex calculation, car importers and individual buyers can use a duty calculator to estimate the import duty payable on a vehicle. It’s important to note that the KRA may revise these duty rates and other charges periodically. Therefore, staying updated with the latest changes is crucial for accurate duty calculation and financial planning.

Take a look at how taxes are currently calculated using our KRA Car Import Duty Calculator

The Role of iCMS and How It Will Work

Automated Valuation with iCMS: The Integrated Customs Management System (iCMS) will be at the core of implementing the new invoice-based tax model. This digital platform will automate the customs process by allowing importers to upload their vehicle purchase invoices and supporting documentation directly. Users will be required to enter car details such as the model and manufacturing year into the iCMS to facilitate accurate duty calculations. The system will use these inputs to calculate import duties in real-time, streamlining the clearance process and minimizing manual intervention.

Verification Measures: To maintain the integrity of the invoice-based model, KRA will implement enhanced verification tools within the iCMS. These include cross-referencing declared values with global vehicle pricing databases, auditing payment receipts, and employing peer reviews for valuation consistency. These audits will help ensure only accurate and legitimate valuations are used for tax calculations, enhancing the reliability of the new system. Customs officials will assess the legitimacy of declared values using tools like online pricing databases and peer reviews.

What This Means for Car Importers

More Accurate Cost Planning: One of the biggest advantages for importers under the new system is the ability to forecast costs with greater accuracy. Since duties will be calculated based on the actual transaction value shown on the invoice, businesses can plan their pricing and margins with more confidence, reducing the guesswork that accompanied the CRSP model. So for example if you are planning to import a UK car to Kenya, this increased accuracy in cost planning will provide a more predictable pricing forecast and reducing unexpected costs.

Compliance Burden: With the emphasis on invoice-based taxation, importers must maintain thorough documentation. This includes legitimate purchase invoices, proof of payment, and shipping documents. Any inconsistency or missing detail may delay clearance or trigger an audit, making meticulous record-keeping a non-negotiable requirement.

Increased Scrutiny: The new system also means increased oversight from customs authorities. KRA is expected to scrutinize declared values more closely to detect under-invoicing and fraud. Importers may face additional scrutiny or delays if declared values seem inconsistent with prevailing market rates or if documents are incomplete. Customs may investigate undervalued invoices or inconsistencies more strictly.

For a greater understanding of the current costs to import cars from the UK see our page: How Much Does it Cost to Import a Car from the UK to Kenya.

Impact on Kenyan Car Buyers

Possible Price Drops: The move to invoice-based valuation may result in lower import tax obligations for many vehicles, particularly those that were previously overvalued under the CRSP system. As a result, end prices for imported cars could decrease, offering savings for consumers. The intended outcome of this reform is to make car prices more affordable and reflective of actual market values.

Improved Affordability: This reform is expected to benefit buyers looking for budget-friendly vehicles, especially in the low-to-mid range market. These vehicles were often taxed disproportionately under the old model, making them less accessible to average Kenyans.

Better Market Alignment: With taxation now reflecting actual purchase prices, car prices in Kenya are likely to become more aligned with global market trends. This reform is expected to improve vehicle variety and price competitiveness for Kenyan consumers, making car imports more accessible. Local car prices may better reflect international trends.

Concerns and Challenges Raised

Risk of Under-Invoicing: One of the major concerns surrounding the new system is the potential for abuse through under-invoicing. Some importers may be tempted to declare artificially low purchase prices to reduce their tax liability. This poses a significant risk to revenue collection and could undermine the fairness the reform aims to achieve.

Increased Customs Oversight: To counteract the risk of fraud, KRA is expected to ramp up enforcement efforts. This includes more stringent document checks, digital tracking tools, and post-clearance audits to validate the authenticity of declared values. Importers found to be in violation could face penalties or seizure of goods.

Readiness of Stakeholders: Not all stakeholders may be fully prepared for the transition. Importers, clearing agents, and customs officials alike will need to adapt quickly to the new system, which may require additional training, updated procedures, and system familiarity. There could be initial delays or errors as the sector adjusts to the changes. Some importers and clearing agents may face a steep learning curve during the transition. Adequate preparation and training will be essential for all stakeholders to adapt to the new system effectively.

Industry and Economic Implications

Impact on Used Car Dealers: Dealers in Kenya’s used car market will need to reassess their pricing strategies as the shift from CRSP to invoice-based valuation takes hold. Vehicles that were previously overtaxed may now become more competitively priced, potentially increasing sales volume. However, the increased scrutiny and documentation requirements could also result in longer turnaround times and operational adjustments for businesses.

Revenue Stability for KRA: While this reform is designed to align tax collection with actual market prices, it also raises the risk of under-invoicing. KRA will need to strengthen enforcement mechanisms to maintain stable revenue inflows. Over time, if properly implemented, the system could create a more consistent and sustainable revenue base by reducing disputes and encouraging voluntary compliance. While tax predictability may improve, the authority must counteract fraudulent practices to protect revenues.

Preparing for the Transition

Steps for Importers: Importers should begin by ensuring all procurement processes are backed by clear, verifiable documentation, including invoices, payment confirmations, and shipping records. Working with reputable suppliers and maintaining transparency will be essential for smooth customs clearance under the new system.

Consumer Awareness: Kenyan car buyers should be informed of the likely changes in vehicle pricing and availability after July 2025. Understanding how tax reforms influence costs will help buyers make informed decisions and avoid unnecessary delays or confusion.

Leverage Industry Bodies: Industry associations and customs brokers will play a key role in supporting businesses during the transition. Importers are encouraged to stay engaged with these networks and seek guidance from KRA and relevant authorities to ensure full compliance and readiness.

Leverage Industry Bodies: Importers should engage with associations and KRA to stay updated.

Conclusion: A Step Toward a Fairer Import System

Kenya’s transition to invoice-based car import taxation represents a significant step toward a more transparent, equitable, and efficient customs framework. By replacing the rigid CRSP model with real transaction-based valuations, the new system aims to reduce conflict, ensure fairer tax assessments, and bring the importation process in line with international standards. While the reform will require effort and adaptation from all stakeholders, it hopefully sets the stage for a more balanced and sustainable automotive import market in Kenya.