What happened

The Kenya Revenue Authority (KRA) has issued a fresh set of import regulations that specifically target motor vehicle dealers, according to a statement reported by Kenyans.co.ke. The announcement, made earlier this month, details new compliance obligations for businesses that bring fully built cars into Kenya for resale. KRA says the changes aim to improve revenue collection, curb under‑declaration of values, and ensure that all dealers adhere to a uniform import process. The authority has asked dealers to review the new guidelines immediately to avoid penalties or delays at the border.

Context and background

KRA, the government body responsible for tax collection and customs administration, periodically revises import procedures to align with fiscal policy and trade agreements. The latest rule follows a series of consultations with the automotive sector that began in late 2023, when the ministry of trade noted a rise in mismatched invoices and undervalued shipments of used and new cars. Historically, Kenya has imposed a 25 % import duty on fully built vehicles, plus 16 % VAT and an excise levy that varies by engine size. Those rates have remained stable for several years, but enforcement has been inconsistent.

The new regulation introduces a mandatory pre‑approval system for car dealers who wish to import vehicles for resale. Under the system, dealers must register their business with KRA’s Customs Department, submit detailed purchase invoices, and obtain a unique import reference number before the goods are loaded onto a vessel. Failure to secure the reference number can result in the shipment being held at the port of Mombasa or Nairobi, where additional storage fees may accrue. The rule also clarifies that only licensed dealers with a valid Motor Vehicle Dealer’s Certificate can benefit from the streamlined process.

Industry bodies such as the Kenya Motor Industry Association (KMIA) have welcomed the move, noting that a transparent framework could level the playing field between large franchise dealers and smaller independent traders. However, some smaller operators have expressed concern about the administrative burden, especially those who rely on ad‑hoc imports to meet fluctuating demand. The government has pledged a grace period of 60 days for existing dealers to align their records with the new requirements, after which full enforcement will commence.

Compared with what is normal

Under the previous regime, dealers could present a customs invoice at the port and, provided the paperwork matched the shipping manifest, the goods would be cleared after duty and VAT were paid. There was no mandatory pre‑approval number, and the process often depended on the discretion of customs officers. The new rule adds several layers:

• Mandatory registration of each dealer with a unique import reference number.
• Requirement to submit purchase invoices to KRA at least 48 hours before the vessel’s arrival.
• Clear distinction between licensed dealers and non‑licensed entities, with the latter barred from the streamlined channel.

These additions represent a shift from a largely reactive clearance system to a proactive, data‑driven approach. While the duty rates remain unchanged, the administrative steps have increased, meaning that the average clearance time could rise from one to three days if documentation is incomplete.

Why it matters

For Kenyan car dealers, the new rule has immediate financial and operational implications. Delays at the port translate into higher demurrage costs, which can erode profit margins on each vehicle. Moreover, the requirement to retain a valid import reference number means that dealers must invest in record‑keeping systems or outsource compliance to third‑party agents. On the revenue side, KRA expects the rule to close a gap that previously allowed under‑declared values, potentially increasing customs revenue by an estimated 5‑7 % annually, according to internal forecasts.

Beyond the direct cost impact, the regulation could reshape market dynamics. Larger franchise dealers, who typically have dedicated compliance teams, may gain a competitive edge, while smaller outfits might need to consolidate or partner with compliance service providers. Consumers could also feel the effect through slightly higher retail prices if dealers pass on the added compliance costs.

Practical steps

• Register your dealership with KRA’s Customs Department immediately and obtain the unique import reference number required for future shipments.
• Review all purchase invoices for completeness and accuracy; ensure they include the seller’s full details, vehicle specifications, and declared value before submitting them to KRA.
• Align your internal accounting system to track import reference numbers alongside each shipment, reducing the risk of mismatched records at the border.
• Consider a short‑term partnership with a customs broker or tax advisory firm to navigate the grace period and avoid penalties.

Our Tax Planning & Compliance team at Beavoren can help you interpret the new KRA guidelines, set up compliant processes, and ensure your imports move smoothly through customs.

Book a consultation with Beavoren Ventures today and let us handle your compliance, books, and advisory in one place.

Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.