Kenya Govt plans to exempt locally assembled cars from VAT and excise taxes

The government plans to exclude locally produced passenger vehicles from VAT and excise taxes, lowering car prices by hundreds of thousands of shillings.

The automobiles will be free from all significant taxes that are levied on fully-assembled units imported from abroad markets such as Japan, the United Kingdom, and South Africa.
Cars made in other countries are subject to import duties of 25%, excise duties of 20%, and VAT of 16%, all of which must be paid in that order.
Passenger automobile assemblers such as Simba Corp (Proton car manufacturer) and DT Dobie (Volkswagen) are now exempt from the 25% import charge.
"I propose to exempt from VAT inputs and raw materials used in the manufacturing of passenger motor vehicles in order to promote additional investment, particularly in the manufacture of passenger motor cars domestically," Treasury Secretary Ukur Yatani stated in his budget address.
"In addition, I propose exempting locally built passenger automobiles from VAT."
Mr Yatani also advocated exempting passenger car assemblers from excise duty, adding that this would place them on a similar footing with makers of commercial vehicles, who are currently exempt.
The elimination of VAT on inputs and raw materials is expected to benefit suppliers of assemblers such as paint, steel, and upholstery manufacturers.
Industry participants applauded the move, saying it will promote investment in local assembly.
"This is a really beneficial development since it would lower the cost of automobiles for common people," said Adil Popat, executive chairman of Simba Corp.
Others who are not currently in the passenger assembly sector have stated that it will motivate them to begin local manufacture.
"This is a significant incentive for us to begin local assembly of our SUV (Isuzu mu-X) since it will be less expensive than importing," said Rita Kavashe, CEO of Isuzu East Africa.
Isuzu manufactures commercial vehicles such as buses and pick-up trucks, but it imports the sport utility vehicle, which is its lone product in the passenger car category.
Nairobi's Isuzu, Mombasa's Associated Vehicle Assemblers (owned by Simba Corp), and Thika's Kenya Vehicle Manufacturers are the primary assembly factories (owned by the government, DT Dobie and CMC Holdings).
In 2021, sales of locally manufactured automobiles reached a new high of 70.6 percent of overall sales, moving 10,054 units compared to 4,195 units of fully-built imported vehicles.

Posted on : 19 Apr,2024 | News Source :

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