Key Highlights

1. Find the KRA Sweet Spot: Ensure your shipment is valued correctly to avoid fines.
2. Leverage Trade Agreements: Source from preferential countries to reduce tax rates.
3. Opt for Local Assembly: Save taxes by importing parts and assembling locally.
4. Classify Goods Correctly: Accurate classification avoids unnecessary tax expenses.
5. Buy in Bulk: Save on taxes by purchasing larger quantities at discounted rates.
6. Bonus Tip: Manage Duties with Customs-Bonded Warehousing: Defer import duties until goods are sold or distributed, improving cash flow and reducing upfront costs.

How Can You Legally lower Import Tax in Kenya?

Import tariff are a common challenge for businesses—but what if you could reduce them legally and keep more of your hard-earned profits? Many importers miss out on significant savings because they aren't aware of the opportunities available to them. We’re here to help you navigate those opportunities and save big!

1. Find the KRA Sweet Spot

Many importers unknowingly risk fines by undervaluing goods. The Kenya Revenue Authority (KRA) sets a baseline value for imports, and falling below it can trigger a revaluation and hefty penalties. The key to saving on taxes is understanding this sweet spot—where your shipments are taxed accurately, without triggering extra costs. Simple enough, right? When KRA is happy, you enjoy lower import taxes and the peace of mind that comes with knowing they won’t come knocking later. Sleep easy, stay compliant!

Real-life example:

Let’s say you’re importing a container of Ex display fridges from UK. A fridge valued too low than the market value could raise a red flag at KRA, costing you more in fines and the additional taxes. By finding that sweet spot where your declared value is both accurate and safe from revaluation, you’ll save on unnecessary tax and penalties.

2. Take Advantage of Trade Agreements

Kenya benefits from several trade agreements that can drastically lower import taxes. Agreements like COMESA or EAC provide preferential rates for goods imported from member countries. By sourcing products from these regions, you can enjoy tax savings that give your business a competitive edge.

Real-life example:

Switching your ceramic, machinery or raw material supplier from China to Egypt, both COMESA members, can save you a substantial amount in import taxes. That’s because the goods imported from Egypt benefit from lower tariff rates compared to those from non-member countries. These duty exemption play crucial role that can not only reduce your expenses but also increase your competitiveness in the market.

3. Choose Local Assembly and Add Value

Opting for local assembly can be an excellent strategy to lower import taxes while benefiting the local economy. When you import parts and assemble them locally, you not only reduce your import duties and taxes, but you also contribute to job creation—something the Kenyan government actively supports through tax exemptions and incentives.

Real-life example:

Instead of importing fully assembled trailers, consider importing individual parts and assembling them locally. This approach qualifies you for local assembly incentives from the government, which are designed to encourage domestic manufacturing and create jobs. By assembling locally, you will benefit from lower import taxes, while also supporting job growth and the expansion of the manufacturing sector in Kenya.

Organizations like KAM (Kenya Association of Manufacturers) can assist you in navigating these incentives and exemptions. KAM helps manufacturers access government programs, provides guidance on adding value through local assembly, and ensures that you can take full advantage of the benefits available to your business.

Local assembly also gives your business a competitive edge. It encourages the development of local expertise and innovation, while allowing you to scale up operations and leverage government incentives, making it a win-win for both your business and the broader community.

4. Classify Your Goods Correctly

Now that you've learnt about local assembly and how to add value to your business, it's now important to understand the proper classification of your goods to lower import taxes. The difference between how you classify an item can save you thousands. For example the difference between SKD (Semi-Knocked-Down) and CKD (Completely Knocked-Down) can mean thousands of dollars in taxes.

But how do you classify your goods? This is where the HS code (Harmonized System Code) comes in. The HS code is an international system used for customs purposes to classify products. It’s a numeric code assigned to every product based on its nature, composition and intended use. Proper classification means you’re taxed at the right rate. The picture above is a great example. The last code 90: other vehicle is actually assembled while if it was 10, it would mean unassembled.

Misclassification of a CKD vehicle as fully assembled or SKD can mean higher taxes. Classifying correctly of any type unassemble product can mean lower duties because of the government tax incentives for locally assembled goods. that leads to job creation and innovation.

Here’s the funny-not-so-funny part: misclassify a car as something with higher taxes, and KRA? Oh, they’ll kindly look the other way (thank you for your generous contribution). But the moment the taxes drop? Suddenly, it’s like you’ve committed the crime of the century—cue the full guilty treatment! Be vigilant fellow readers. The law of land is said to be guilty until proven innocent haha!

Real-life example:

When importing parts for Tuk-tuks, one crucial factor that can significantly affect your bottom line is how you classify your goods. Classifying parts asSKD (Semi Knocked Down) instead of CKD (Completely Knocked Down) could save you up to $2,000 per shipment! While the difference between the two may seem subtle, it comes down to the level of assembly. This seemingly small distinction can prevent you from overpaying on duties and taxes.

The key difference is that SKD attracts Value Added Tax (VAT), whereas CKD does not. This difference can have a major impact on your costs, especially when importing large quantities. Getting the classification right is critical to ensure you're not unnecessarily tax burden.

At Weston Logistics, we’ve helped a client who had been unknowingly overpaying for years due to incorrect classification. They were paying a significant amount in VAT on SKD imports until they came to us. After reviewing their documents, we were able to help them correct the classification, resulting in immediate savings. While we’ve worked with other clients who also handle assembly, this particular case highlights the importance of paying attention to every detail in your import declaration.

It’s a small detail, but one that can make a big difference in your cost structure. By working with experts who understand the nuances of customs regulations, you can ensure you're not leaving money on the table.

5. Buy in Bulk to Save Big

Buying in bulk is a simple yet effective strategy to lower import taxes. When you purchase large quantities of goods, you often receive discounted rates from suppliers, which can reduce your overall tax burden. Customs authorities may also offer favorable duties or taxes for bulk shipments, further increasing your savings.

Additionally, Buying in bulk offers more than just supplier discounts—it also reduces handling and shipping costs, boosting your cost efficiency. This strategy is particularly effective for importing high-duty products, as larger volumes lower the per-unit cost, leading to significant savings over time.

Real-life example:

Let’s say you're importing construction materials. Purchasing in bulk allows you to negotiate a lower price per unit, which not only saves you on product costs but also reduces the taxable value of your imports. Wheat importers in Kenya also benefit from government exemptions giving quotas to millers due to wheat shortage in the country.

These exemptions allow large-scale importers to buy in bulk without facing the same tax rates as smaller importers, making it more affordable for them to bring in larger quantities. Smaller importers, however, miss out on these exemptions, which increases their import costs.

Bonus Tip: Managing Duties with Customs-Bonded Warehousing

While it might not directly lower import taxes, Customs-bonded warehousing, an often underutilized strategy, lets you defer paying import duties until the goods are sold or distributed. This approach not only helps reduce immediate costs but also provides more flexibility with cash flow, allowing you to reinvest funds back into your business or cover operational expenses.

With customs-bonded warehousing, you store goods without paying full duties upfront. The goods remain in the warehouse until you're ready to sell or distribute them, and only when the goods leave the warehouse do you pay the applicable import duties. This can be a huge advantage for businesses looking to balance tax payments with their financial needs.

Real-Life Example:

Suppose you anticipate high demand for a product that requires liquid sugar as a key ingredient, so you import a large shipment in drums. However, you don’t have sufficient cash flow to immediately begin manufacturing.

By storing the liquid sugar in a customs-bonded warehouse, you can defer paying duties until you're ready to use it for production. This approach helps you manage cash flow efficiently while remaining compliant with Kenya Revenue Authority (KRA) regulations

Conclusion:

Reducing import taxes in Kenya doesn’t have to be a complex challenge. By applying the right strategies—such as understanding the KRA Sweet Spot, taking advantage of trade agreements, classifying your goods correctly, and exploring options like local assembly and bulk buying—you can significantly reduce the taxes you pay.

These strategies not only save you money but also help support the growth of your business by freeing up cash flow for reinvestment. Proper planning and knowledge are key to ensuring you’re paying the minimum possible taxes while staying compliant with regulations.

Partner with Weston Logistics

Want to make the most of these tax-saving strategies? You don’t have to navigate this alone. Let Weston Logistics guide you through the process and help you optimize your imports. Contact us today and let’s start saving together!

By implementing these strategies, you can significantly lower import taxes and keep more of your profits. Let us help you stay ahead of the game and make the most of every shipment. Happy importing!

Frequently Asked Questions

How is import duty calculated in Kenya?

Import duty in Kenya is calculated based on the customs value of the goods, which includes the cost of the goods, shipping charges, and insurance. The applicable duty rate is then applied according to the HS code classification of the goods. An easier way to navigate this complex process is to contact Weston Logistics for assistance. We can help ensure that your goods are classified correctly and provide guidance on reducing duties where possible.

How to reduce import duties?

You can lower import taxes by ensuring proper classification of your goods, utilizing trade agreements like COMESA, opting for local assembly, understanding KRA's tax baseline and purchasing in bulk. Additionally, consider using customs-bonded warehousing to defer payments until goods are sold. Lastly, whenever possible, avoid middlemen and buy from the source. The mark-up by middlemen increases

How can goods be classified?

Goods are classified based on their characteristics and intended use, which determines the applicable HS code. To ensure accurate classification and avoid overpaying duties, it’s advisable to consult a customs clearing agent who can assist in this process. contact Weston Logistics

Which trade agreements can Kenya importers benefit from?

Kenya importers can benefit from several key trade agreements:

1. EAC Common Market: Lower tariffs for goods within East African Community countries.
2. AfCFTA: Preferential trade and reduced tariffs for goods between African countries.
3. EU-EPA: Duty-free access for Kenyan exports to the EU and reduced tariffs for imports from the EU.
4. WTO: Lower tariffs under the most-favored-nation principle among 164 countries.
5. AGOA: Duty-free access for over 6,000 products from Kenya to the US.
6. Japan CEPA: Reduced tariffs on imports from Japan.
7. COMESA: Reduced tariffs for goods from member states in Eastern and Southern Africa.