KRA Proposes New Car Valuation Method.

 

The Kenya Revenue Authority (KRA) has proposed significant changes to the method of valuing used motor vehicles for customs purposes, which may have considerable implications for motorists and importers.

Proposed Changes
KRA plans to shift from the Current Retail Selling Price (CRSP) method to the Transaction Value method for valuing used vehicles. This change is intended to align with a court ruling and directives from the East African Community (EAC) to use Free On Board (FOB) values for vehicle imports.

The Transaction Value method considers the actual price paid for the vehicle, which could lead to higher duty charges if the declared transaction value exceeds the previous retail estimates.

Impact on Motorists and Importers
  1. Increased Costs: The new valuation method is expected to increase the import duties on used cars. For instance, the maximum depreciation rate has been reduced from 70% to 65%, meaning that the taxable value of vehicles will be higher, resulting in increased taxes by over 14% for certain models. This could lead to higher retail prices for consumers as importers may pass on these costs.
  2. Market Adjustments: The anticipated rise in vehicle costs may alter consumer behavior, potentially reducing the demand for secondhand vehicles. Some consumers might shift towards purchasing new vehicles or opting for alternative transport options like public transport.
  3. Government Revenue: While the changes may burden consumers, they could also enhance government revenue from import duties, as the new method aims to provide a more accurate valuation of imported vehicles.
  4. Public Feedback: KRA has opened a window for public comments on these proposed changes until August 31, 2024, indicating a willingness to engage with stakeholders in the automotive sector.
The KRA's proposed changes to vehicle valuation are poised to impact the automotive market significantly, leading to higher costs for used vehicles, potential shifts in consumer purchasing patterns, and increased revenue for the government. Stakeholders are encouraged to provide feedback as the KRA seeks to finalize these changes.





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