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The Excise Duty Act, 2015

The Preamble of the Excise Duty Act states that it is an Act of Parliament to provide for the charge and collection of excise duty, to make administrative provisions relating thereto and for connected purposes.

 Section 3

The Open Market Value of excisable goods /services. This is a reasonable price the goods/services the goods fetch at a wholesale level; and if the same cannot be done then an objective approximation is done.

Section 5

A tax charged under this Act is known as Excise Duty, which is charged on excisable goods/ services whether manufactured or imported in Kenya.

Excisable GOODS according to the Act are those specified in Part I of the First Schedule and Non Excisable Goods are provided in Part A of Second Schedule. Excisable SERVICES are specified in Part II of the First Schedule while Non Excisable Services are in Part B of the Second Schedule . The rates charged are as specified in the schedules.( the Schedules may change from time to time)

2709.00.10

Condensates per 1000l @ 20degC

Shs. 6225.00

2710.12.10

Motor Spirit (gasoline) regular per 1000l @

20degC

 

Shs. 19505.00

2710.12.20

Motor Spirit (gasoline) premium per 1000l @

20degC

 

Shs. 19895.00

2710.12.30

Aviation Spirit per 1000l @ 20degC

Shs. 19895.00

2710.12.40

Spirit type Jet Fuel per 1000l @ 20degC

Shs. 19895.00

2710.12.50

Special boiling point spirit and white spirit per

1000l @ 20degC

 

Shs. 8500.00

2710.12.90

Other  light  oils  and preparations  Per  1000l  @

20degC

 

Shs. 8500.00

2710.19.10

Partly refined (including topped crude) per 1000l

@ 20degC

 

Shs. 1450.00

2710.19.21

Kerosene type Jet Fuel Per 1000l @ 20degC

Shs. 5755.00

2710.19.29

Other medium oils and preparations per 1000l @

20degC

 

Shs. 5,300.00

2710.19.31

Gas oil (automotive, light, amber for high speed engines) per 1000l @ 20degC

 

Shs. 10305.00

2710.19.32

Diesel oil (industrial heavy, black, for low speed marine  and  stationery  engines)  per  1000l  @

20degC

 

 

 

Shs. 3700.00

2710.19.39

Other gas oils per 1000l @ 20degC

Shs. 6300.00

2710.19.41

Residual  fuel  oils(marine,  furnace  and  similar fuel   oils)   of   a   Kinematic   viscosity   of   125 centistokes per 1000l @ 20degC

 

 

 

Shs. 300.00

2710.19.42

Residual  fuel oils (marine, furnace  and similar fuel   oils)   of   a   Kinematic   viscosity   of   180 centistokes Per 1000l @ 20degC

 

 

 

Shs. 600.00

2710.19.43

Residual  fuel oils (marine, furnace and similar fuel   oils)   of   a   Kinematic   viscosity   of   280 centistokes per 1000l @ 20degC

 

 

 

Shs. 600.00

2710.19.49

Other residual fuels oils per 1000l @ 20degC

Shs. 600.00

 

 

 

Description

Rate of Excise Duty

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

Shs. 10 per liter

Food supplements

10%

Waters and other non-alcoholic beverages not including fruit or vegetable juices.

Shs. 5 per litre

Beer,  Cider,  Perry,  Mead,  Opaque  beer  and mixtures  of  fermented  beverages  with  non-

alcoholic beverages and spirituous beverages of alcoholic strength not exceeding 10%

Shs. 100 per litre

Powdered beer

Shs. 100 per kg

Wines  including  fortified  wines,  and  other

alcoholic beverages obtained by fermentation of fruits

Shs. 150 per litre

Spirits  of  undenatured  ethyl  alcohol;  spirits

Shs. 175 per litre

liqueurs  and  other  spirituous  beverages  of alcoholic strength exceeding 10%

Cigars, cheroots, cigarillos, containing tobacco

Shs. 10000 per kg

or tobacco substitutes

Electronic cigarettes

Shs. 3000 per unit

Cartridge for use in electronic cigarettes

Shs. 2000 per unit

Cigarettes   containing    tobacco    or    tobacco substitutes

Shs. 2500 per mille

Other manufactured tobacco and manufactured tobacco substitutes; “homogenous” and “reconstituted  tobacco”; tobacco extracts and essences

Shs. 7000 per kg

Motor vehicles of tariff heading 87.02, 87.03 and 87.04

Less than three years old from the date of first registration Kshs

150,000 per unit

Over three years old from

the date of first registration Shs. 200,000 per unit

Motor cycles of tariff 87.11 other than motor cycle ambulances

Shs. 10,000 per unit

Plastic shopping bags

Shs. 120 per kg

 

 

 

NON EXCISABLE GOODS- Part A of Second Schedule

The following excisable goods shall be exempt from excise duty w h e n purchased before clearance through Customs or removal from excise control –

  • (1) Excisable goods that are bona fide stores for a ship or aircraft, being goods for use or consumption by passengers or crew of the ship or aircraft while on board and while the ship is in international traffic, and in such quantities as approved by the KRA Commissioner General.
  • (2) Excisable goods imported into Kenya or purchased in Kenya by a diplomatic or consular mission, or by a diplomat or consul, or a member of the diplomat or consul’s family forming part of the diplomat or consul’s household in Kenya to the extent provided for under the Privileges and Immunities Act, (Cap. 179).
  • (3) Excisable goods imported into Kenya or purchased in Kenya by a foreign government, international organisation, or aid agency to the extent provided for under an international agreement or the Privileges and Immunities Act, 1970.
  • (4) One motor vehicle for use by persons with disability: Provided that exemption under this paragraph shall only apply once in every four years and upon payment of taxes on the previous vehicle.
  • (5) Excisable Goods imported or Purchased locally by the Kenya Red Cross for official use in the provision of relief services in Kenya.
  • (6) Excisable goods imported by a person changing residence or a returning resident subject to limitations provided for under the fifth schedule to the East African Community Management Act: Provided that where the returning resident has owned and used a left hand drive vehicle for at least twelve months the person may sell the vehicle and import a right hand drive vehicle equivalent value subject to the following –
    • (a) proof of ownership and use of the previously owned left hand drive vehicle in the country of former residence for a period of at least one year prior to the return;
    • (b) proof of disposal (transfer of ownership) of the previously owned left hand drive vehicle before changing residence.
    • (c) the replacement vehicle is of similar category with the previously owned left hand drive with regard to make, engine rating and year of manufacture.
    • (d) This proviso shall only apply to residents returning from countries that operate left hand drive motor vehicles.
  • (7) Excisable goods imported by, and in the possession of a passenger subject to limitations provided for under the fifth schedule to the East African Community Management Act.
  • (8) One motor vehicle previously owned and used by a deceased person outside Kenya subject to the conditions as the KRA Commissioner General may specify.

In this Part, “international agreement” means an agreement between the Government of Kenya and a foreign government, international organization, or aid agency for the provision of financial, technical, humanitarian, or administrative assistance to the Government of Kenya.

  1. Mobile cellular phone services shall be charged excise duty at the rate of ten percent of their excisable value.
  2. Other wireless telephone services shall be charged excise duty at the rate of ten percent of their excisable value.
  3. Excise duty on fees charged for money transfer services by cellular phone service providers, banks, money transfers agencies and other financial service providers shall be ten percent of their excisable value.
  4. Excise duty on other fees charged by financial institutions shall be ten percent of their excisable value.

EXCEMPT SERVICES- Part B of  Second Schedule

(a)    Excisable services supplied in Kenya to a diplomatic or consular mission or to a diplomat or consul, or a member of the diplomat or  consul’s  family  forming  part  of  the  diplomat  or  consul’s household  in  Kenya  to  the   extent  provided  for  under  the Privileges and Immunities Act (Cap. 179).

 

(b)   Excisable services supplied in Kenya to a foreign government, international organisation, or aid agency to the extent provided for  under  an  international  agreement  or  the  Privileges  and Immunities Act (Cap. 179).

 

  1. In this  Part,  “international  agreement”  means  an  agreement between          the                Government             of    Kenya    and   a    foreign    government, international organization, or aid agency for the provision of financial, technical, humanitarian, or administrative assistance to the Government of Kenya.

 

Who Pays Excise Tax? (Section 5(2))

  1. licensed manufacturer,
  2. a licensed individual making a supply and
  3. an importer of goods.

When Does Liability to Pay Tax Arise? (Section 6)

The liability to pay taxes arises;

  1. if it is a licensed manufacturer, at the time of removal of the goods from the factory;
  2. b) if they are services, at the time of supply of service; and
  3. if importing, at the time of importation or as may be prescribed by the Cabinet Secretary in the Kenya Gazette .

Goods and Services not liable to Excise Duty (Section 7)

(a) exempt goods which meet the conditions  set out in the Second Schedule;

 (b) excisable goods exported under customs control, including as stores;

 (c) excisable services exported from Kenya;

(d) excisable goods that the manufacturer has destroyed, with the prior written permission of the KRA Commissioner General, under the supervision of an authorised officer prior to their removal from the factory in which they were manufactured;

 (e) denatured spirits for use in the manufacture of gasohol or as a  heating fuel;

(f) excisable goods that have been lost or destroyed by accident or other unavoidable cause––

 (i) in the course of removal of the goods by the manufacturer from the manufacturer’s factory  including when loading or unloading the goods;

(ii) in the factory of the manufacturer in which the goods were manufactured before removal from the factory; or

(iii) on board an aircraft or vessel prior to importation into Kenya.

Section 7( 2) The Cabinet Secretary may by notice in the Gazette, grant remission of excise duty, wholly or partially, in respect of beer or wine made from sorghum, millet or cassava or any other agricultural products, (excluding barley), grown in Kenya.

 Section 7(3) The Gazette notice issued under subsection (2), shall specify the products and conditions to be met for the remissions to be granted.

Section 7 (4) Excisable services shall be considered to be exported from Kenya if the services are supplied from a place of business in Kenya for use or consumption outside Kenya only if the KRA Commissioner General is satisfied that the goods have not been, and shall not be consumed in Kenya.

Section 7(6) Subsection (1)(f)(i) and (ii)  shall not apply if the licensed manufacturer has been compensated for the loss of the excisable goods and the compensation includes the excise duty payable on the goods, as a consequence of any of the following—

(a) an insurance policy, indemnity, or other agreement;

(b) a settlement; or

(c) a judicial decision.

 

Power to vary Rates (Section 8)

The Cabinet Secretary has the power to vary excise Duty rates provided the same rates are shall be less than ten percent of the rates set out for goods/services in the First Schedule ( Excisable Goods) .

The power to vary rates is necessary for adjustment for inflation (Section.10).

 

Place of supply of excisable services (Section 13)

The place of supply of excisable services is presumed to be in Kenya if the place of business of the supplier of the services is in Kenya for purposes of tax liability .

Relief of Duty on Raw Materials (Section 14)

There is relief on the duty paid on raw materials. The duty is offset on excise duty payable which on earlier duty had been paid on the raw materials imported or manufactured in Kenya by a licensed manufacturer for purposes of manufacturing other excisable goods.

Activities to be Licensed Section 15 (1)

Persons are only allowed to carry out the following activities under the Act with a license or be registered by the KRA Commissioner General

 (a) the manufacture of excisable goods in Kenya;

(b) the importation into Kenya of excisable goods specified by the Cabinet Secretary under section 27 as requiring an excise stamp;

(c) the supply of excisable services;

(d) the use of spirit to manufacture goods in Kenya that are not excisable goods; or

 (e) the carrying out of any other activity in Kenya for which the KRA Commissioner General, by notice in the Gazette, may impose a requirement for a license.

Penalty for not Having a License (Section 15)

A person who breaches the licensing provision and carries on business, without a license is liable for the excise duty payable on demand by the KRA Commissioner General  and are liable to any penalty or a sanction under this Act or Tax Procedures Act 2015 .

Who Issues a License  Section 16

An application for a license is made to the KRA Commissioner General (Section.16).

Power of KRA Commissioner General to Issue Licenses (Section 17)

The KRA Commissioner General has power to grant or refuse a license to an applicant .

An application for a license may be refused on grounds that:

  1. The applicant has been convicted of an offence under the Act, or
  2. The applicant has been convicted of offence on grounds of fraud or dishonesty under any law, or
  • The applicant is declared bankrupt /insolvent or is in the process of liquidation, or
  1. For a manufacturer’s application; the factory does not have adequate equipment to manufacture excisable goods.
  2. The applicant has not kept proper records or has violated its tax obligations under tax laws.

The KRA Commissioner General has powers also to issue license under specific conditions /restrictions.

Duties of Licensed Persons (Section 19)

A licensed person shall:

  1. Display the license at the Principal place of business
  2. Notify:
  3. The KRA Commissioner General in case the persons ceases to carry on business licensed for
  4. In case of change of name, address, ownership, Constitution, or nature of principal activity
  5. In case of temporary closure
  6. There is change of plant /equipment used to manufacture excisable goods.

A notification under this section shall be made to KRA Commissioner General at least seven (7)  days before the event.

Suspension of Licenses (Section 20)

The KRA Commissioner General may suspend a license of a licensed person under the following circumstances:

  1. If there is a breach under section 19(2)
  2. Licensed person fails to keep proper records required under the Act/ under the tax Procedures Act/obligations under this Act
  • Breaches a condition of the license
  1. Makes false /misleading statement to the KRA Commissioner General
  2. If a factory; the factory/plant is no longer adequate to manufacture excisable goods .

A person whose license has been suspended may appeal to the KRA Commissioner General (Section.20 (4)).

The KRA Commissioner General on receiving an appeal may within 14 days may:

  1. Accept/revoke suspension of a license
  2. State conditions necessary to rectify deficiencies that led to suspension or revoke the suspension if action is taken in time prescribed
  • May reject appeal/cancel the appeal (20(5))

 

Cancellation of a license ( Section 21)

The KRA Commissioner General may cancel a license if:

  1. Receives a notification for closure of business
  2. A person fails to appeal a suspension
  • A person fails to remedy deficiencies  leading to suspension of license
  1. When KRA Commissioner General rejects an appeal for suspension(Section 21(1))

A cancellation of a license is effective from the date stated in the cancellation notice (Section. 21(2)).

Any obligation/liability that a person had still persists even after cancellation of license (Section .21 (3).

Consequences of Suspension/Cancellation ( Section 22)

When a license is cancelled/ suspended, the manufacturer is required to:

  1. Cease to manufacture excisable goods
  2. Immediately pay all unpaid duty excisable duty on goods
  • Dispose all excisable goods and materials under directions of the KRA Commissioner General.

The KRA Commissioner General may require the manufacturer to take goods to an approved place or may take control over the goods for purposes of protecting the revenue (Section.22 (b)).

Notification and Appeals Section 20 and 21

The KRA Commissioner General is required to issue a 21-day notice to the licensee before suspension, revocation, cancellation or refusal to renew. The KRA Commissioner General shall also state the grounds for such action.

Where a licensee is dissatisfied, he may appeal to Tax Appeals Tribunal within 14 days of notification.

A licensee dissatisfied by Tax Appeals Tribunal may appeal to High Court .

Excisable good under excise Control (Section 24)

The KRA Commissioner General shall have control (referred as ‘excise control’) over excisable goods stored in a factory of a licensed manufacturer (s.24 (1)). The control shall be excised until:

  1. removal of the from the factory for consumption in Kenya,
  2. exported from Kenya or
  3. Destroyed or destroyed as under the Act (s.24 (2)).

Goods under excise control may be examined by an Officer Authorized and no person shall deal with such goods without Authority of the KRA Commissioner General (s.24 (3)).

Excise stamps and other Markings

( Section 28) (1) The Cabinet Secretary has powers with regards to excise stamps and in relation to excisable goods generally and shall make regulations in relation to;

(a) the excisable goods to which excise stamps shall be affixed;

(b) the systems for management of excise stamps and excisable goods, and

(c) the place and time of affixing excise stamps.

Section 28  (2) The Commissioner shall, by notice in at least two newspapers of national circulation, specify the types and descriptions of excise stamps to be affixed on goods specified as requiring excise stamps

Section 28 (3) If excisable goods are manufactured for export, or for delivery to persons listed in subparagraph (2) or (3) of the Second Schedule, the goods shall be marked with such inscriptions as the Commissioner may specify to facilitate the tracking and tracing of the goods. 

Section 28 (4) A person shall not remove excisable goods from the place designated for affixing stamps unless the goods have been affixed with stamps in accordance with the regulation. 

Section 28 (5) the KRA Commissioner General may in exceptional circumstances, and with prior approval of the Cabinet Secretary, allow removal of excisable goods from excise control without affixing excise stamps on the goods.

Refunds (Section 29)

A person who has paid excisable duty may claim a refund if:

  1. With regards to good consumed in Kenya; they have been stolen/ damaged during transportation or while subject to excise control or where the buyer has returned the goods.
  2. Or where duty has been paid with regards to spirits used to manufacture un-excisable goods.

Record Keeping (Section 34)

A person liable to pay taxes under the Act is required to keep all records in the duration and manner specified in Tax Procedures Act, 2015 .

Excise Duty Returns (Section 35)

Excise duty return is filed monthly before the 20th day of following month whether or not excise duty is payable.

When Payment of Excise Duty is Due (Section 36)

Exercise duty for a manufacturer/supplier of goods/services is paid during a calendar month but not later than the 20th day of the following month.

As for an importer, the duty is paid at the time of importation.

Penalties  (Section 38)

  1. A person who manufactures excisable goods or imports into Kenya excisable goods as under 15 (a) and (b) without a license is liable to a penalty equal to:
  2. Double excise duty paid by a licensed person
  3. Double amount of excise duty liable in regard to goods requiring an excise stamp (s.38 (1)).
  1. For a manufacturer who does who operate in premises without license is liable to double excise duty payable on the goods (s.38 (2)).
  1. If a licensed manufacturer removes goods from premises under excise control (under section 27(1)), manufacturer shall be liable to double excise duty on those goods (s.38 (3)).
  1. Any other penalties provided in The Tax Procedures Act, 2015.

 

 Offences relating to licensing and excise control ( Section 39, 40)

  1. It is an offence for a person to contravene the provisions on licensing and excise control. (namely sections; 17(3), 18(4), 25(1), 26(1) or 28(4). (s.39 (1))
  1. It is an offence for a manufacturer to manufacture excisable goods without a license (s.39 (2)).
  1. It is an offence for a licensed person to: fail to display the license at the principal place of work or fails to notify the KRA Commissioner General about cessation of business, change of name, ownership etcetera, temporary closure of business, change of plant/equipment (under section 19(1)(2))(s.40(3)).
  1. It is an offence to remove excisable goods from excise control (s.24) (3) (b); to enter a place with excisable goods without authorization and involvement of alteration, interference of excisable goods under control (s.40 (4)).
  1. It is an offence to buy goods without proper authority which ought to have been charged duty before duty is charged (s.40 (5)).

 

Offences relating to excise stamps ( Section 40)

It is an offence to breach section 28 provision of the Act (s.40).

Sanctions for Offences ( Section 41)

A person found guilty of an offence is liable to a fine not exceeding five million or imprisonment for three years or both(s.41(1)).

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