Tough times for Kenya’s transport sector as KRA introduces new advance tax rules, effective Jan 20.
The changes include:
- Commercial vehicles (vans, pick-ups, trucks, prime movers, trailers, lorries): Sh2,500 per ton of load capacity
- Minimum annual tax of Sh5,000 for all vehicle categories.
- Saloons, station wagons, minibuses, buses, coaches: Sh100 per passenger capacity, with a minimum annual tax of Sh5,000.
Advance tax payment is due by January 20th each year, and tax clearance is required before transferring vehicle ownership.
Kenya’s transport sector is indeed facing challenges with the introduction of new advance tax rules by the Kenya Revenue Authority (KRA), set to take effect from January 20, 2025.
Commercial vehicle owners are now required to pay an advance tax before their vehicles can be licensed annually. This tax is due by the 20th of January or before any transfer of vehicle ownership.
The rates are specified based on the type of vehicle, with vans, pickups, trucks, and lorries paying the higher of Kshs 2,400 or Kshs 1,500 per ton of load capacity per year. For saloons, station wagons, mini-buses, buses, and coaches, the tax is the higher of Kshs 60 per passenger capacity per month or Kshs 2,400 per year.
This tax is not a final tax; thus, vehicle owners are still required to file an annual income tax return and pay any additional tax due.
The introduction of these rules aims to increase revenue collection but could add financial strain to operators in the transport sector, particularly those operating on thin margins or those who have not planned for this additional tax burden.
This could potentially lead to increased transport costs, which might be passed onto consumers, affecting the overall cost of living.
The KRA has been enforcing compliance with its electronic tax systems, like the Tax Invoice Management System (TIMS) and e-TIMS, which might also impact how these new tax rules are administered and monitored.
Businesses, including those in the transport sector, must now ensure their transactions are supported by electronic tax invoices to claim deductions for corporate income tax purposes.
These changes are part of a larger effort by the Kenyan government to enhance revenue collection. The Finance Act, 2023, introduced several tax measures, including adjustments to withholding taxes and VAT registration thresholds, which are part of the broader economic strategy aimed at increasing government revenue to meet fiscal targets.
The transport sector, already grappling with operational costs like fuel, maintenance, and regulatory compliance, now faces the additional challenge of adapting to these new tax regulations.
This situation underscores the need for strategic financial planning and possibly a push for dialogue between the sector stakeholders and the government to mitigate adverse impacts