- The Kenya Kwanza government has already directed the Kenya Revenue Authority to allow the use of bonded warehouses for imported used vehicles.
- The importers will also have a chance to seek an additional six months extension in case they do not get buyers of their imported units.
Image: FILE
The government has announced a radical policy shift that will soon see second-hand car dealers and individuals ship in vehicles and defer paying taxes for up to one year.
This will offer a major reprieve for importers who have been struggling with cash-flow challenges amid expectations that the policy will also lower automobile prices in the country.
The Kenya Kwanza government has already directed the Kenya Revenue Authority to allow the use of bonded warehouses for imported used vehicles.
The new policy was part of the resolutions of a multi-agency meeting 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”.
The net effect of the policy change would be that importers will now have an opportunity to stock their units in KRA Customs-controlled premises for up to six months without payment of taxes as they shop for buyers.
The importers will also have a chance to seek an additional six months extension in case they do not get buyers of their imported units.
This means an importer can defer payment of taxes for up to one year.
Currently, second-hand car importers must pay all taxes estimated at nearly 55 per cent 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.
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 use or 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.”
The move is part of President William Ruto’s plan to ease the cost of doing business in the country, with the Port of Mombasa being a key node in trade for the seven-nation East African Community bloc.
“We also expect that with customs having lifted restrictions on warehousing of second-hand cars there will be improved cash flow and stock for importers in the market,” Car Imports Association of Kenya chairman Peter Otieno told Business Daily.