Treasury halves levy on electric vehicles to 10pc

Market News

Treasury halves levy on electric vehicles to 10pc

Electric buses in Geneva, Switzerland.
Electric buses in Geneva, Switzerland. The Kenya Government seeks to reduce duty on electric vehicles carrying more than 10 people. FILE PHOTO | NMG 

Kenya could start commercial use of electric vehicles in matatu business after taxes were halved in the Budget.

The Government has proposed changes to the tariff structure reducing duty for electric vehicles carrying more than 10 persons from 20 percent to 10 per cent.

According to the Finance Bill 2019, fully electric-propelled coaches, buses and mini-buses with a seating capacity exceeding 29 persons (8702.40.19) as well as coaches, buses and mini-buses with less than 21 persons (8702.40.22) will enjoy a 10 percent duty rate.

Investors have also been allowed to import electric golf and sightseeing bus with motor 72V/6.2 KW and designed to carry more than 10 persons (8702.40.91) as well as other vehicles of any capacity propelled by electric motor.

Audit and financial advisory services firm Grant Thornton said easing excise duty for electric vehicles could spur investments in the sub-sector, creating new jobs for auto-electrical engineers.“This move will encourage uptake of these vehicles as well as encourage investment and employment in this area of technology,” it said in the Budget 2019 review.

The Bill that becomes effective once approved by Parliament for implementation by Kenya Revenue Authority says anyone planning to import heavy commercial vehicles weighing above 24 tonnes will also enjoy similar rates thereby ushering use of electric vehicles across various sectors.

Buyers of hybrid vehicles will be charged a 25 percent rate up from 20 percent while importers of fuel-guzzlers with 2500cc engines and above will pay duty at 35 percent up from the earlier 30 percent.

This could be informed by the Government’s quest to brand Kenya a “green” zone that is taking practical steps toward reducing carbon emissions largely associated with use of fossil-based fuels.

This has also seen raw materials for making electric accumulators and separators zero-rated for local manufacturing of solar and motor batteries.

But audit firm, KPMG has warned that this proposal could deny battery manufacturers an opportunity to claim input VAT making their final products more expensive.

Kenya currently has about two million vehicles of which about 98 percent use petrol and diesel.