NO MORE TAXES FOR CAR IMPORTERS.

Second-hand car dealers and individuals will soon be able to ship in vehicles and defer paying taxes for up to one year, boosting their cash flow positions in reforms that are expected to lower automobile prices.

The William Ruto administration has directed the Kenya Revenue Authority (KRA) to allow the use of bonded warehouses for imported used vehicles, putting them on the same pedestal as new vehicle imports.

This allows importers to store units in KRA Customs-controlled premises for up to six months without payment of taxes as they look for buyers, and they may seek for an additional six months extension.

At present, used car importers are required to pay all taxes estimated at nearly 55 percent of the import cost and remove their units from container freight stations (CFS) within 30 days.

Failure to evacuate prompts the KRA to give them a month’s notice to clear the cars or risk the vehicles being auctioned.

Vehicles shipped in from overseas markets like Japan, the UK, and South Africa are charged an import duty of 25 percent, excise duty of between 20 percent and 35 percent depending on engine type and VAT of 16 percent, payable cumulatively and in that order.

The policy shift is part of a resolution of a multi-agency meeting on ease of doing business in Mombasa co-chaired by Trade Cabinet Secretary Trade Moses Kuria and his Transport counterpart, Kipchumba Murkomen, on April 14 in Mombasa.

The meeting, attended by heads of key State agencies such as the KRA and the Kenya Ports Authority, “agreed to streamline and introduce bonded warehouses for imported used vehicle inspection”.

Dealers reckon that the elimination of upfront payment of taxes will boost their cash flow, and ultimately ease pressure on used car prices.

Bonded warehouses are premises operated by private companies licensed annually by the KRA, where goods whose taxes have been deferred are kept.

The same benefits will also be available to individuals bringing in vehicles for their own use or for resale for profit.

“It means importers can leave the vehicles in the bonded warehouses and not pay taxes until they get buyers. This will boost cash flows for importers,” Charles Munyori, secretary general of the Kenya Auto Bazaar Association, told the Business Daily.

“It also has the potential to lower prices of vehicles by encouraging large volumes of imports by big players, which will reduce the need for everyone to buy from abroad and incur foreign exchange charges.”

Prices of used vehicles such as Subaru Impreza, Toyota Vitz and Volkswagen Golf have increased by hundreds of thousands of shillings on scarcity and weakening of the local currency.

Car dealers say the prices of cars assembled in 2016 –which is what they are largely importing now based on the eight-year age limit— have gone up by up to Sh400,000 for certain models compared to last year.

A used Subaru Impreza is now retailing at Sh1.7 million, rising from Sh1.35 million last year.

Over the same period, the price of a Toyota Vitz has increased to Sh1.3 million from Sh1.1 million.

By Business Daily