The Kenya Revenue Authority (KRA) is set to publish a new template for taxing imported second-hand cars by July this year, as it moves to quell disquiet from dealers over inflated duty and legal hitches in the current schedule.
A team of officials from KRA and the motor vehicle sector is reviewing the Current Retail Selling Price (CRSP) of 2019 in a bid to incorporate new models and global best practices on determining duty for imported cars.
“The review of the entire valuation database for used motor vehicles is ongoing. Subsequently, once the review process is completed, all the newer models will be incorporated into the CRSP database. This process is expected to be finalised by July 2025,” KRA said in a response to the Business Daily.
“The applicable values will be published once the technical team reviewing the valuation database for used motor vehicles concludes the work.”
The review comes amid industry disquiet as motor dealers decry the lack of an updated CRSP, which they say has led to questionable duty rates on newer car models.
The CRSP is used by the KRA to set taxes on imported used cars. The template focuses on the value of a brand new vehicle when sold in Kenya, less the amount of depreciation, profit margin and taxes paid in Kenya.
Under the new CRSP, the duty on imported second-hand vehicles will rise or fall depending on their market value, ultimately leading to higher or lower prices for the same.
Currently, KRA says that it relies on various sources of price data available for identical and similar vehicles or previously accepted customs values to determine the duty for newer models --a position that dealers say has led to inflated duties for the units.
KRA was also taken to court on the grounds that it did not conduct public participation in setting the duty rates contained in the CRSP of 2019. The court ruled that the CRSP of 2019 unconstitutional.
Apart from KRA officials, the technical team revising the CRSP also draws members from the Kenya International Freight and Warehousing Association, Car Importers Association of Kenya, Kenya Auto Bazaar Association and New Motor Vehicle Dealers.
Second-hand car dealers have cited models such as the Maxda CX3 with a 2,000cc petrol engine as one of the new models with inflated duty as it is not on the CRSP of 2019.
Dealers have also questioned the ‘flawed’ methodology used by KRA to determine duty for second-hand imports that are not on the CRSP of 2019, saying that some do not make sense.
For example, dealers cited KRA’s decision to impose a higher duty on Honda models compared to Mercedes Benz models.
Prices of second-hand cars are dependent on a raft of factors, including taxes, dealers’ margins and the age of the car. The majority of the vehicles in Kenya are imported second-hand units, underscoring the huge impact that a new CRSP is set to have on the economy.
