Local car assemblers get more concessions in bid to boost salesMonday June 06 2022
Local motor vehicle assemblers have been handed further concessions that are expected to improve a government plan to exempt locally assembled passenger cars from VAT and excise taxes and reduce prices of the automobiles.
The Finance and Planning Committee of the National Assembly proposes to further free up assemblers who qualify for the tax incentives from a requirement compelling them to source at least thirty percent of spare parts locally.
“That, clause 35 of the Bill be amended in the proposed new paragraph 17 by deleting the words “and whose total value comprises at least thirty per cent of parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya” and substitute therefor the words “ and whose ex-factory value comprises at least thirty percent of local content” and inserting the words “Where local content means “parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya”, the committee, chaired by Gladys Wanga wrote in its report on Finance Bill 2022 for debate.
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The government in April announced plans to exempt locally assembled passenger cars from VAT and excise taxes.
The move will see the cars exempted from major taxes that are applicable on fully-built units imported from overseas markets like Japan, the UK, and South Africa.
“In order to encourage more investment, especially in the manufacture of passenger motor vehicles locally, I propose to exempt from VAT inputs and raw materials used in the manufacture of passenger motor vehicles,” Treasury secretary Ukur Yatani said in his Budget speech.
“Additionally, I propose to exempt locally manufactured passenger motor vehicles from VAT.”
Cars manufactured abroad attract import duty of 25 percent, excise duty of 20 percent, and VAT of 16 percent, payable cumulatively and in that order.
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Assemblers of passenger cars such as Simba Corp and DT Dobie enjoy exemption from the 25 percent import duty.
Sales for locally assembled vehicles rose to a record 70.6 percent of the total sales in 2021, moving 10,054 units compared to 4,195 units of fully-built imported vehicles.
The major assembly plants are Nairobi’s Isuzu, Mombasa’s Associated Vehicle Assemblers, Thika’s Kenya Vehicle Manufacturers.
Egypt’s listed auto dealer Ghabbour Auto (GB Auto) said in April it plans to establish a joint venture to assemble and distribute passenger vehicles in Kenya.
The company made the announcement last week in a regulatory filing to the Egyptian Exchange (EGX).
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