Vehicle assemblers get tax reprieve as law takes effect

Car assemblers will from Monday get a boost as a law that halved their corporate tax takes effect in a fresh drive to encourage investment in automobile plants and create employment.

This follows income tax reforms announced by Treasury secretary Henry Rotich in his last Budget that reduced the corporate tax rate for locally assembled motor vehicles from 30 per cent to 15 per cent for the first five years from the launch of operation.

The reforms contained in the Finance Act 2017 come into effect on January 1.

The reduced tax comes as the auto industry goes through lean times that have seen units of locally assembled cars drop 15 per cent to 4,337 cars in the nine months to September.

“The rate of 15 per cent shall be extended for a further period of five years if the company achieves a local content equivalent to 50 per cent of the ex-factory value of the motor vehicles,” reads the Act.

French automaker Peugeot through local dealer Urysia in September started assembly of its brands at Thika-based Kenya Vehicle Manufacturers.

German-based Volkswagen introduced the Polo Vivo into the Kenyan a market, in an attempt by new vehicle dealer to wrest market share from used car sellers who account for about 80 per cent of vehicle sales.

About two years ago, Simba Corporation started selling Renault Kwid, a small SUV, at Sh1.2 million inclusive of tax.

Kenyan vehicle maker Mobius is eyeing a possible lucrative State supply tender to boost production and sales of its new model.

Mobius said all the 50 first generation units of the vehicle, which prides itself in being Africa’s cheapest, had sold out forcing it to double production to at least 100 units for the Mobius II to meet increased demand.

President Uhuru Kenyatta directed State agencies to buy locally assembled cars as part of a plan to expand the new vehicles market and attract more global automakers to invest in Kenya.