Car importers sound alarm over KRA's sharp valuation hikes

Importers of used cars are concerned about the possible rise of taxes on imported used cars effective July 1 this year, following the publication of a new Current Retail Selling Price (CRSP) list by the Kenya Revenue Authority (KRA).

The importers noted that if KRA went ahead to implement the new valuation rates, the volumes of imports of such vehicles that have become popular with low- and middle-income earners will decline, and hence reduce revenue collection from the sector.

According to the dealers, it was wrong for KRA and its Customs and Border Control department to claim that the rates on imported vehicles had not been reviewed since 2019 and that there was no public participation on the CRSP.

“We have been contesting the consistent rise of valuation rates since 2018, and we’ve been in and out of court with KRA over this matter. Still, the rates were raised, and this has frustrated us,” argued Peter Otieno, national chairman of the Car Importers Association of Kenya (CIAK).

He noted that since 2018, used vehicle imports have been on a sharp decline, partly due to the constant rise in CRSP amid their protest.

According to CIAK, they imported 235,000 units in 2018, but this declined to 70,000 units in 2023, and they had imported only 40,000 units by August last year.

“We hear the rates are from the Japanese yearbook. We cannot understand the methodology used to arrive at these rates,” he argued.

In the valuation rates on the new CRSP list, a Toyota Passo 990 cc attracts Sh2,632,444, up from Sh1,408,037, or an 87 per cent increase, and a Nissan Vanette is Sh4,669,000, up from the previous Sh2,329,000, or a 100 per cent rise.

A Toyota Probox will attract Sh3,356,786, which is an increase from Sh1,755,000, or 91 per cent.

A model like the Suzuki Swift with a 1.2-litre engine made in January 2018 will attract Sh623,503 from Sh253,574 on a similar model in 2019.

Commissioner of Customs and Border Control Dr Lilian Nyawanda has explained that KRA was implementing the CRSP list for new motor vehicles, marking the first update since 2019.

She said the CRSP, which is typically reviewed and updated periodically, played a key role in determining the applicable taxes on imported vehicles.

She said this year’s revision reflects notable market developments, including the introduction of new vehicle models, prevailing economic conditions, and changes in key variables such as exchange rates, import duty, and excise duty.

Dr Nyawanda explained that the new CRSP list has over 5,200 models compared to the 2019 list, which has some 3,000 models.

In a statement, Nyawanda stated that excise duty for some units has also risen to 35 per cent from 30 per cent in 2019.

“Customs valuation is based on the World Trade Organisation (WTO) Agreement on Customs Valuation, which has been domesticated under Section 122 and the Fourth Schedule of the East African Community Customs Management Act (EACCMA), 2004. "This legal framework outlines the methods used to determine the customs value of imported goods,” she had explained.

KRA said following the adoption of the WTO Agreement on Customs Valuation, KRA, in consultation with stakeholders, agreed to use the CRSP method to address challenges encountered in valuing used motor vehicle fluctuations, inflation, the introduction of newer vehicle models, and changes in tax rates, among other factors.

Meanwhile, CIAK complained that several popular models are missing from the proposed CRSP list.

The association cited Subaru Impreza G (chassis GK2, 1590 cc), Toyota Vitz (non-hybrid), Toyota Hilux Single Cabin 2.4L (GUN125), Mitsubishi Rosa BEG640/J/E, Toyota Hiace MMKST22P, Nissan Caravan JNIUC4E2YZ, Toyota Raize A200A, and Toyota Prado TRJI50 Petrol.

Others are the Toyota Harrier 2WD ZSU60, Toyota Fielder 1800 cc ZRE162, Toyota Fielder NRE160/161, Volvo Units, Mazda Atenza Sedan Petrol GJEFP 2000 cc, and Toyota Wish 1800 cc, among others.

“In view of the above, we are still going to put the industry in your usual mess that no importer knows that he/she is going to pay or the landing cost; hence the left/right/centre rulings that aren’t consistent,” CIAK protested.

Otieno noted that there was a need for a CRSP that is acceptable and owned by everyone. He said there was a need for constant engagement with KRA at the point of entry so that a committee can be set up to share information on the new units that are coming into the country.

“We need to come up with ways of increasing volumes of motor vehicle imports,” he added.

Before settling on the CRSP value, the state relied heavily on the pre-shipment companies overseas that came up with the Custom Clean Report Findings (CCRF) to determine transaction value and for purposes of taxation.