Excise Duty &Miscellaneous Fees and Levies

Mbiki Kamanjiri

1972Customs and Excise

Act, Cap 472.

EACCMA

Repeals CEA in 2004

Excise Duty Act 2015

Assented to on 16 Nov

Finance Act 2016

30 Mar 2017 EGMS Regulations

30 Mar 2017Remission Regulations

History of Excise

Excise Regulations

2013

WHO?

What to get at the end of this session

WHAT?

WHEN?

Introduction

Excise Duty is a tax on tax on the importation or local manufacture of certain products and supply of excisable servicesReasoning for Excise TaxIncrease Revenue - Items targeted have a low price elasticity “Sin Tax” - To influence consumer behaviour and discourage

consumption Common and widespread belief among countries that the

financial sector should contribute its fair share in remedying the damage arising from the financial crisis

The manufacturer/ supplier of excisable supplies usually shift the tax by raising the price paid by the buyer

Introduction

Who should collect and account for Excise duty?

All manufacturers, providers and importers of excisable goods andservices should collect and account for excise duty

“manufacture” includes –(a) the production of excisable goods;(b) any intermediate or uncompleted process in the production of excisable goods; or(c) the distilling, rectifying, compounding, or denaturing of spirits;

A license (renewable annually) required for manufacture ofexcisable goods and importers of excisable goods (requiringexcise stamps)

Manufacturing

Rates of Duty

specific (per quantity) rates prevalent in the Excise Act 2015) or

ad-valorem (percentage based on value) e.g Food supplements & cosmetics 10%, motor vehicle 20%, excisable services 10%.

Excisable Value (for ad-valorem base)

Imported goods = Customs value + Import DutyLocally manufactured = Ex-factory selling price (Excluding VAT andcost of Excise stamp and returnable containers)

The CS by order in the gazette may vary the duty rates by 10% or adjust the specific duty rates for inflation

Tax Point

Imported goods Point of entry

Locally manufactured At removal from factory

Services Payment or provision

ReturnsOn or before 20th of the following month

Application for licensing and/or registration must be done on iTax for activation of online filing

Exemptions

Exports Denatured spirit , gasohol or heating

Destroyed approved by the Commissioner

Lost or destroyed unavoidably

Disabled person’s MVBeer or wine*

As provided by Second Schedule of the Act*

Refunds

Damaged goods, stolen goods, returned goods

Spirits or illuminating kerosene that have subsequently been used to manufacture unexcisable goods

Within 12 months

Bad debts

The application for refund within 12 months from the earlier of:

3 years from sale of goods or services; or

purchaser becoming legally insolvent

Excise Duty (Remission of Excise Duty) Regulations 2017

Repeal the 2013 regulations

Remission of excise duty at 80% with respect to beer made from agricultural produce grown in Kenya except barley.

Monthly return filing obligation indicating quantity and type of raw material used, manufactured and sold beer.

Agriculture

tax compliance valid excise licence fully installed EGMS pressurized container packing selling price under Shs. 100 per

litre regulatory compliance At least 75% local produce apart

from sugar

Excise Duty (Excisable Goods Management System) Regulations, 2017

Excisable goods to be affixed with excise stamps ((sec 28)Cabinet Secretary may in the regulations specify— the excisable goods to which excise stamps shall be affixed; the systems for management of excise stamps and excisable goods: the place and time of affixing excise stamps.

Introduction of new generation excise stampsNew generation stamps currently used on alcoholic drinks andcigarettesImplementation of extended programme to other excisable goods asrequired in the law underway ( e.g bottled water, soft drinks andcosmetics )

Excise Duty (Excisable Goods Management System) Regulations, 2017

New digital stamps can be printed on the goods

Application 60 days before manufacture or importation

CG may require 6 month forecast 60 days before the month in which the stamps are required

Place stamps to be affixed: in case manufacture: at production vs importation: at least 5 days after clearance

Maximum fine for offences under EGMS regulations revised from KES1.5M to KES 5M.

Commissioner shall seize excise stamps, equipment, vehicles or goods where the vehicle is used in storage, concealment or transportation of excisable goods in contravention with regulations.

General offence minimum fine of KES. 100,000 removed.

Excise Duty (Excisable Goods Management System) Regulations, 2017

Excise Stamp Fees

Category Fees (KES)

Cigars, cheroots, cigarillos, containing tobacco or tobacco substitutes 2.8 per stampCigarettes containing tobacco or tobacco substitutes

Other manufactured tobacco and manufactured tobacco substitutes;“homogenous” and “reconstituted tobacco”; tobacco extracts and essencesWines including fortified wines, and other alcoholic beverages obtained by fermentation of fruitsCompounded spirits of alcoholic strength exceeding 10%Spirituous beverages of alcoholic strength not exceeding 10% 1.5 per

stampBeer, cider, perry, mead, opaque beer and mixtures of fermented beverageswith non-alcoholic beverages

Excise Stamp Fees

Category Fees (KES)

Fruit juices (including grape must), and vegetable juices, unfermented and notcontaining added spirit, whether or not containing added sugar or othersweeting matter

0.6 per stamp

Sweetened or flavoured water and non-alcoholic beveragesCosmetics and beauty products of tariff heading 3303, 3304. 3305 and 330Mineral water and aerated water of tariff 2201.10.00 1.5 per

stamp

EGMS Developments

Feasibility study going on the roll out of excise stamps

Digital and adhesive excise stamps currently available

EGMS identifies brand, packaging size/volume and packaging type and other product specific information

EGMS automated reporting (compliance, econometrics, interactive monitoring and controls (risks and key indicators)

plan to introduce excisable goods market surveillance application to enable consumers authenticate excised goods via phones

Excise Duty rates

Goods Rate (KES)

Beer 100 per litre

Wines 150 per litre

Spirits 175 per litre

Cigarettes 2,500 per mille

Cigars, cheerots, cigarillos 10,000 per kg

Cosmetics and beauty products

10%

Electronic cigarettes 3,000 per unit

Electronic cigarettes cartridge 2,000 per unit

Juices 10 per litre

Mineral and aerated water 5 per litre

Food supplements 10%

Excise Duty rates

Goods Rate (KES)

Premium petrol per 1,000 litre at 20degC 19,895

Motor vehicles excluding school buses for use by public schools and locally assembled motor vehicles excluding locally assembled vehicles

20%

Mobile cellular phone services, money transfer services and other fees charged by financialinstitutions

10%

Excise Duty rates

Goods Excise Duty Act 2015 Finance Bill 2017

Cigarettes withoutfilters

2,500 per mille 1,800 per mille

Spirits liqueurs and other spirituous beverages of alcoholic strength exceeding10%

175 per litre 200 per litre

Illuminating Kerosene 7.205 Registration/licensing requirement andrefund provided

Plastic paper bags 120 per kg Banned

Licensing

The license issued to a manufacturer of excisable goodsspecifies the following: The class/classes of excisable goods The factory/factories at which manufacturing will take place

The factory shall only be used for manufacture ofclass/classes of excisable goods specified in the license.

What happens to manufacturers of both excisable andnon excisable goods in same factory?

Convicted of a tax

offenceConvicted for fraud

Declared bankrupt,

insolvent or in process

of liquidation

Licensing rejections

Cease to manufacture excisable goodsPay all excise duty due on handDispose of all excisable goods and materials in the factory

The Commissioner prior to cancellation of a license shall give 21 daysnotice to the licensee and indicate grounds upon which such intendedaction shall be taken. Within 14 days the Commissioner shallacknowledge action taken by licensee

Commissioner may remove the excisable goods in the factory to another designated place or take control of the factory and excisable goods to protectrevenue.

Cancellation of a license

Deemed removal

A manufacturer who cannot account for any quantity of excisable goods manufactured shall be deemed to have removed those goods from excise control in the month in which the discrepancy arose

In case of any discrepancies, the manufacturer should notify the Commissioner of the cause of these discrepancies

Annual inflation adjustments

The rate of excise duty will be replaced every year by the rate calculated as: A (1+B) Where:A – is the rate excise duty on the day immediately before the adjustment day (1 July of every year); andB – is the adjustment factor for the adjustment day calculated as the average rate of monthly inflation of the preceding financial year

*Annual inflation adjustments not yet gazetted for the fiscal year starting 1 July 2017

Excisable services (Other fees)

Prior to enactment of the Excise Duty Act, 2015include any fees, charges or commissions charged by financial institutions, but does not include interest on loan or return on loan or an insurance premium.Later amendmentsincludes any fees, charges or commissions charged by financial institutions relating to their licensed financial institutions, but does not include interest on loan or return on loan or an insurance premium or premium based or related commissions”

Fines and Penalties

Offense Penalty ProvisionLate submission of tax return on account of employment income

The higher of 25% of the tax due or KES 10,000

TPA

Late payment Simple interest 1% pm TPAUndertaking excisable activity without registration

Double the amount of tax S 38

Licensing, excise Stamps and excise control offences

Imprisonment not exceeding 3 years/ fine not exceeding Kes5,000,000 (or 3 times the excisable value of related goods if higher) or both.

S 41

27

Miscellaneous

Levies

Export Levy

A levy imposed by a country to make exportation unfavorable and promote local consumption

Shall also be subject to inflation adjustment

Hides and skins, furs,

80%, or $0.52 per kg

Scrap metal

20%

Import Declaration Fee

On all goods for home use imported into the country

Rate of 2% of customs value

Or KES 10,000 East African Community Duty RemissionScheme

10% of the collections goes to the AU or any other international organisation to which Kenya has a financial obligation.

Railway Development Levy

On all goods for home use imported into the country

At the rate of 1.5% at the point of entry

To fund the SGR

Shall be paid into the Railway Development Fund

Exemptions

Sales to the SEZ and EPZ

Official aid funded projects.

Gifts or donations to registered charities

Samples which have been ascertained by Commissioner have no commercial value

House hold and personal effects provided qualify for exemption from duty under EACCMA

5th Floor,

Avocado Towers,

Muthithi Road, Westlands,

Nairobi

Kenya

T +254 20 3752830 | 3747681 | 2402975

F +254 20 3749839

www.grantthornton.co.ke

Mbiki KamanjiriManager – Tax Consulting Services

Cell +254 721 449 468E ; mbiki.kamanjiri@ke.gt.com