The Kenya Revenue Authority (KRA) has published a new pricing template upon which it will determine duty on imported used motor vehicles (current retail selling price (CRSP)) from next month.
The new CRSP has more than doubled duty for some models, notably the small engines and this is set to trigger massive price increments.
Duty for a number of fuel guzzlers will fall. Importers are opposed to the CRSP and are pushing KRA to delay it by between 60 days to 90 days.
This is a valuation benchmark that KRA uses to determine the value of imported second-hand cars. It reflects the local price of the new unit in the country where it is imported.
A depreciation rate of between 10 percent to 65 percent is then applied on the CRSP to determine the customs price upon which the taxes payable will be calculated.
Why are we changing CRSP?
The new CRSP is meant to capture new motor vehicle models that are not in the current CRSP that came into force in 2019.
Capturing the new models in the CRSP will provide a predictable and defined tax regime for second -hand cars and address protests by importers over what they see as flawed yet steep taxation for motor vehicle models that are not in the current CSRP.
A new CRSP will also ensure that KRA does not undervalue a motor vehicle and thus collect less taxes from the unit.
How many taxes does the KRA charge on imported second hand cars?
KRA charges five taxes on each imported motor vehicle. These are import duty at the rate of 35 percent, excise duty of between 25 percent and 35 percent, Value Added Tax (VAT) of 16 percent, Import Declaration Fee of 3.5 percent and Railway Development Levy of two percent.
However, the rate of excise duty depends on the engine size of the unit and is charged on the (Customs Value + Import Duty). VAT is charged on (Customs Value + Import Duty + Excise Duty).
All these taxes are based on the customs value, which is based on a depreciation rate of between 10 percent and 65 percent of the imported car. The older the motor vehicle, the higher the depreciation rate.
Why are some models missing in the CRSP?
KRA are yet to give an explanation on why some models are missing in the new CRSP. The industry is pushing for an explanation and solution for these missing models to avert questionable taxation.
Dealers say that at least 14 models are not captured in the new CRSP. These include the Subaru Impreza G4, Toyota Vitz, Toyota Prado TRJ150 (petrol engine) and Mazda Atenza Sedan GJEFP (petrol).
What happens to imports of the cars missing in the CRSP?
KRA will rely on the retail price of these models in the source markets as the price upon which to calculate the duty payable. This criterion drew uproar from dealers and partly led to the just-concluded review of the CRSP.
Will KRA use a dual system of CRSP and invoice price to determine the duties payable?
The taxman will solely rely on the CRSP to compute the taxes that will be paid for each imported motor vehicle. This means that models whose CRSP has significantly changed from the one for 2019, will attract steep taxes.
KRA had initially said it would rely on the actual prices of the units (invoiced prices) to set taxes and only use CRSP as a fallback. This was in response to industry complaints that the CRSP unfairly led to imposition of steep taxes for imported units.
What has happened to car prices?
Prices of second-hand cars have been high since the Covid-19 interruptions. This is because car owners in the reluctant market have been reluctant to sell their units for the used car market such as Kenya leading to a scenario where demand is higher than supply.
Additionally, shipment costs have also been high due to the disruptions on major shipment routes. The strengthening of the shilling to the dollar last year has not translated to a reduction of the prices.
Higher duty contained in the new CRSP will lead to skyrocketing of the prices and push them out of the reach of buyers.
Why are car importers opposed to the new CRSP?
Car importers have said that KRA ignored their input on how to value the cars, thus leading to the significant increases on duty payable effective July 1, 2025.
They have also voiced concerns that KRA has gazetted the new CRSP without first subjecting it to public scrutiny in line with the law where the public is allowed to give its views on draft policies and laws before they become effective.
The importers also hold that the steep duties will push imported cars out of the reach of small businesses and individuals, leading to depressed sales and job cuts as dealers seek to remain afloat.
