Car prices set to rise as KRA implements new tax schedule

Car prices are set to rise from next month as the Kenya Revenue Authority (KRA) updates its vehicle valuation schedule.

The new pricing, which takes effect on July 1, will impact how taxes are calculated on imported used cars. While the move is expected to drive up showroom prices, both KRA and some industry players say the change is long overdue.

The KRA will start using a new Current Retail Selling Price (CRSP) schedule for imported used vehicles beginning July 1, 2025.

The CRSP is the official reference price KRA uses to calculate taxes on second-hand imports. It reflects the value of a brand-new car when sold locally, minus factors like depreciation. This forms the foundation for computing import duty, VAT, and excise tax on the imported second hand vehicle.

Seraphine Anamanjia, Senior Manager at Ernst & Young, says: “Since 2019 we have not had a change in the CRSP, this is six years, so of course within a period of six years we expect a lot has changed including the prices. So Kenyans expect to have more efficient motor vehicles but this comes with a cost, and this is a cost that has now been added to the CRSP.”

In a notice dated May 30, KRA said the update follows engagements with stakeholders and a review of the outdated 2019 CRSP database, which had excluded most newer car models.

The updated CRSP is expected to significantly raise the tax burden on many vehicle models, with dealers warning of price hikes at the retail level.

Peter Otieno, Chairperson, of the Car Importers Association of Kenya, noted: “If you find a vehicle like a Toyota Probox, it’s going to almost over Ksh.500,000 duty, it was one hundred and something. If you go to Nissan Note, it is coming to around Ksh.500,000, it was Ksh.232,000. What does that tell you? It tells you that vehicles will not be affordable.”

Currently, used vehicles imported from markets like Japan and the UK, are subject to an import duty of 35%, an excise duty ranging from 25% to 35%, a 16% value-added tax, a railway development levy at 2 percent as well as the import declaration fee at 3.5 percent.

“Our industry is already dying, we used to import over 200,000 vehicles, last year but one, we imported only 70,000 units,” added Otieno.

Ayub Mwangi, a car dealer, on his part stated: “Saa hii watu ata wameshindwa kununua magari, juu ata wenye madeni wameshindwa na kulipa deni, inabidi ukikopa gari inakuja inachukuliwa na wenyewe.”

Despite concerns from traders and buyers, KRA argues that the change is necessary to reflect current market realities and ensure fair taxation across the board. Something that tax experts agree with.

Jossinter Syengo, Senior Manager at KPMG, says; ”The valuation could have been brought about by differences in exchange rates. In 2019, when the last CRSP, was issued the US dollar then was lower compared to today, so you would expect the exchange rate to have an impact on the same. Again, are there market trends that could be leading to these market prices.”

The revision adds yet another cost layer to car imports, already strained by high shipping charges, forex volatility, and tighter regulation, raising fresh concerns over vehicle affordability for the average Kenyan.