Motor-vehicle assembler companies in Kenya are expected to enhance a government plan to exempt the country’s assembled passenger cars from the Value Added Tax (VAT) and excises, and to lower automobiles’ costs.
The Finance and Planning Committee of the National Assembly has suggested exempting car assemblers, qualified for the tax incentives, from the need to domestically source at least 30% of spare parts.
Based on this measure, the cars will be exempted from main taxes that apply to fully built units, which are imported from markets abroad including the UK, Japan, and South Africa.
Ukur Yatani, Kenya’s Cabinet Secretary for the National Treasury, proposed the exemption from VAT inputs and raw materials applied in manufacturing passenger cars to attract more investment in the industry, particularly in manufacturing local passenger vehicles. He also suggested exemption of locally-manufactured passenger vehicles from VAT.
Cars manufactured abroad draw 25% import duty, 20% excise duty, and 16% VAT, which can be paid cumulatively.
Kenya’s assemblers of passenger vehicles, including Simba Corporation and DT Dobie Automotive Dealership, are exempted from 25% import duty.
Locally assembled vehicles grew to a record 70.6% of overall sales in 2021 (10,054 vehicles versus 4,195 units of fully-built imported units).
Principal assembly plants include Nairobi’s Isuzu, Mombasa’s Associated Vehicle Assemblers, and Thika’s Kenya Vehicle Manufacturers.
In April, Ghabbour Auto Company, in Egypt, announced its plan to create a joint venture to assemble and sell passenger vehicles in Kenya.