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Kenya Proposes Shift to ‘Transaction Value’ Method for Used Car Taxation. The Kenya Revenue Authority (KRA) is set to overhaul its method for valuing used cars for tax purposes by introducing the “Transaction Value” system, replacing the Current Retail Selling Price (CRSP).
This move, aligned with international and regional practices, aims to improve the accuracy of vehicle valuations.
The proposed change in Kenya, driven by legal compliance and alignment with global standards, could lead to varied economic impacts. Importers may experience shifts in tax liabilities, potentially lowering market prices for used cars if transaction values are generally lower than the CRSP.
This could benefit consumers while KRA’s revenue collection might fluctuate depending on these values. However, accurate valuations are expected to improve compliance, reduce fraud, and stabilize or even increase revenue collection over time.
KRA is actively seeking public input on this proposal, with comments due by August 31, 2024. Meetings with stakeholders are planned for September and October in Mombasa and Nairobi to discuss the details and address any concerns related to the transition.
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Kenya Proposes Shift to ‘Transaction Value’ Method for Used Car Taxation: Why the Change?
The shift from CRSP to Transaction Value is driven by several critical factors:
- Legal Compliance: The change is necessitated by a court ruling (Petition 190 of 2018) and Article 47 of the Kenyan Constitution, which emphasize the need for fair administrative action and accurate valuation methods in tax assessments.
- International Standards: The new method aligns with the World Trade Organization’s (WTO) General Agreement on Tariffs and Trade (GATT) 1994, which advocates for the use of actual transaction values in customs valuation.
- Regional Practices: It also follows the East African Community (EAC) customs regulations, which recommend using Free On Board (FOB) values for used cars, reflecting the price actually paid for the vehicle.
Benefits of Using Transaction Value
- Accurate Valuations: The Transaction Value method bases tax assessments on the actual price paid for the vehicle, leading to more precise and fair tax obligations.
- Reduced Disputes: By providing a clearer and more accurate valuation basis, this method is expected to reduce the number of disputes between importers and the KRA, improving overall compliance.
- Transparency and Consistency: This approach brings Kenya’s customs valuation practices in line with international standards, promoting greater transparency and consistency in trade.
Conclusion
The proposed shift from CRSP to Transaction Value for the valuation of used motor vehicles represents a significant development in Kenya’s customs valuation practices.
By aligning with legal requirements and international standards, KRA aims to enhance accuracy, transparency, and compliance in vehicle importation processes.
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