Win for Car Owners as KRA Changes How It Calculates Tax on Imported Vehicles

Beginning July 1 this 2025, some second-hand vehicle importers will pay less duty after the Kenya Revenue Authority (KRA) launches the new Transaction Value System for calculating import duty.

The new system is a departure from the Current Retail Selling Price (CRSP) model currently being used, which has raised concerns in some quarters for imposing higher duties on certain vehicle dealers.

What is the CRSP Model?

CRSP is a model used by the tax authority to determine how much duty is payable on an imported used car. This is calculated using the value of a brand-new car of the same model when sold in Kenya, minus depreciation, profit margin, and local taxes.

Industry players, in a suit filed in 2018, lamented that the system was outdated (it has not been changed since 2019) and was not compliant with internationally accepted valuation principles under the WTO’s General Agreement on Tariffs and Trade (GATT) 1994.

In August 2024, the court found that the CRSP system lacked administrative fairness, as required by Article 47 of the Constitution.

What Is the Transaction Value System?

Under the new system, duty will be determined based on the actual invoice of imported cars. For proper calculation, an importer will be expected to provide documented proof, including purchase receipts and shipping records, which will be submitted through the Integrated Customs Management System (iCMS).

Win for Importers

When implemented, importers expect that import duty for the majority of imported vehicles will reduce, as many argued that the old system often inflated the value of cars. In the new system, import duties will vary from vehicle to vehicle based on the actual purchase price, logistics costs, and other supporting documents.

Consumer costs are also expected to drop, as vehicles previously overvalued under the CRSP system will now be priced lower. Importers of newer models and electric vehicles will reap the biggest benefits, as they were largely excluded from the old system.

Importers will, therefore, be required to present:

• Detailed purchase invoice
  
  
• Verifiable bank transfers
  
  
• Shipping documents
  
  
• Supporting auction or purchase records
  
  

How Importers Have Grappled With High Prices

In recent years, Kenyans have been grappling with the rising cost of car importation, driven by multiple economic and regulatory challenges. A major factor has been the depreciation of the Kenyan shilling, which has significantly increased the cost of purchasing and shipping vehicles from overseas. Importers now face higher expenses when converting foreign currency and covering logistics.

Another key challenge is the government’s eight-year age limit directive, which restricts the importation of vehicles older than eight years from the date of manufacture. As of now, only vehicles manufactured in 2018 or later are eligible for importation into Kenya. This rule has sharply reduced the pool of affordable vehicles available to ordinary buyers, particularly those seeking budget-friendly options.

Further compounding the issue are delays at sea and in global shipping schedules. In several instances, vehicles have arrived at Kenyan ports after the eight-year limit had already lapsed—rendering them ineligible for clearance. This has led to millions in losses for importers, as affected vehicles are either denied entry or auctioned off by the state.

Benefits of the New Model to Consumer

Price Changes – The new system promotes individual vehicle assessment, which may drive down import duties for some models, passing the savings on to consumers. However, some vehicle models may see an increase in price.

Fair Competition – The system is expected to reduce valuation manipulation, leveling the playing field for small importers and independent dealers.

Transparency – The new system offers improved pricing clarity, boosting buyer confidence and supporting informed purchasing decisions.

Benefits of the New Model to the Government

The new system allows KRA to easily verify valuations to curb under-declaration and enhance compliance. This, in turn, is expected to boost its revenue collection through accurate assessments.

To Note: Importers and dealers should familiarise themselves with the iCMS platform and ensure their systems and teams are prepared before the new system takes effect.