State makes U-turn, removes Sh100,000 car tax cap

The National Treasury building in Nairobi.  

Photo credit: File | Nation Media Group

Owners of high-end vehicles will pay upwards of Sh400,000 for the annual motor car tax after the Treasury made a U-turn and removed the cap of Sh100,000 on the proposed tax.

Professor Njuguna Ndung'u while presenting the budget for the 2024/25 financial year did not mention the earlier proposal of an upper limit for the tax, setting up car owners whose units cost more than Sh4 million to pay higher tax.

The Treasury had earlier proposed the new tax at a rate of 2.5 percent subject to a minimum of Sh5,000 and a maximum of Sh100,000, in what stood to save owners of pricer vehicles from paying more.

Majority of Kenyans who rely on public transport are now set for tougher days ahead upon implementation of the new tax given that operators of buses and matatus will transfer the new tax burden to passengers.

This means owners of high-end units like the Landcruiser models that cost upwards of Sh15 million for the new ones will pay Sh420,000 for the tax with owners of public service vehicles equally hit by removal of the cap.

“To expand the tax base and make our country self-reliant, I propose to introduce an annual motor vehicle tax at the rate of 2.5 percent of the value of the vehicle subject to a minimum amount of Sh5,000 per annum,” Prof Ndung’u said on Thursday.

A 33-seater bus that is currently going for Sh6.6 million will attract Sh165,000 while owners of the 51-seater units that cost Sh8.5 million will pay Sh212,500. Owners of second-hand cars will only pay lower for the tax if the valuation of their units fall.

The tax to be known as motor vehicle tax will be paid on each vehicle at the time of issuing insurance cover.

The only vehicles to be exempted from the tax are ambulances, those owned by the National Intelligence Service, the military and police, national and county governments.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.