The imposition of value-added tax (VAT) and an import declaration fee (IDF) on leasing or hiring some types of helicopters and other aircraft has divided opinion among auditors and accountants.
While some support the levies as a way to increase exchequer revenues, others see it as an ill-timed move that will only bring down the fortunes of an industry that is already on its knees due to the Covid-19 pandemic.
Those backing the proposal see the application of the 14 percent VAT and the IDF as part of the policy of bringing nonessential goods into the sales tax bracket to cut down on exemptions that deprive the Treasury of revenue.
“These amendments appear to merely streamline the current exemptions in line with the National Treasury’s recent policy of doing away with unnecessary tax exemptions in order to shore up revenues for the exchequer,” says Bowmans Kenya, a law firm that is also involved in tax advisory.
Audit and advisory firm KPMG Kenya said the levies would beat the purpose of moving towards making Kenya the aeronautical hub of the East African region.
“The proposal to subject helicopters and the aircraft parts to VAT at 14 percent will negatively impact the aviation industry, which is underperforming during this Covid-19 pandemic.
“Further, the taxation of aircraft parts, defeats the aspirations of establishing Kenya as an aeronautical hub in East Africa,” said KPMG.
KPMG said initially, all aircraft were exempted from IDF. However, now this exemption does not apply to certain types of helicopters and other aircraft.