What happened

The Kenya Revenue Authority (KRA) has announced a significant increase in the customs benchmark to Sh3.2 million. This move is aimed at sealing valuation loopholes and increasing revenue collection. The new benchmark is expected to have a significant impact on importers and exporters in Kenya.

Context and background

The KRA has been working to improve revenue collection and reduce tax evasion. The authority has identified valuation loopholes as a major challenge in customs revenue collection. The new benchmark is expected to help address this issue by providing a more accurate reflection of the value of goods being imported or exported. The KRA has also been working to improve its systems and processes to enhance efficiency and reduce the risk of errors or manipulation.

The KRA's decision to raise the customs benchmark is also informed by the need to align Kenya's customs practices with international best practices. The World Customs Organization (WCO) has been working with the KRA to implement reforms aimed at improving customs revenue collection and reducing the risk of tax evasion. The new benchmark is expected to help Kenya comply with international customs standards and reduce the risk of penalties or other sanctions.

The KRA has also been working to improve its engagement with stakeholders, including importers and exporters. The authority has established a number of initiatives aimed at enhancing awareness and understanding of customs procedures and requirements. The new benchmark is expected to be communicated to stakeholders through a range of channels, including the KRA website and social media platforms.

Compared with what is normal

The new customs benchmark of Sh3.2 million is significantly higher than the previous benchmark. This increase is expected to have a significant impact on importers and exporters, particularly small and medium-sized enterprises (SMEs). The KRA has indicated that it will work with stakeholders to ensure a smooth transition to the new benchmark. However, some stakeholders have expressed concerns about the potential impact of the new benchmark on their businesses.

  • The previous customs benchmark was significantly lower than the new benchmark, at around Sh1.5 million.
  • The new benchmark is expected to result in increased revenue collection for the KRA, with estimates suggesting an additional Sh10 billion in revenue per annum.
  • The KRA has indicated that it will work with stakeholders to ensure that the new benchmark is implemented in a way that minimizes disruption to businesses.
Why it matters

The increase in the customs benchmark has significant implications for businesses in Kenya, particularly those involved in import and export activities. The new benchmark is expected to result in increased costs for importers and exporters, which could impact on their profitability and competitiveness. However, the KRA has indicated that the new benchmark is necessary to ensure that customs revenue collection is accurate and efficient.

The new benchmark is also expected to have an impact on the broader economy, with potential implications for economic growth and development. The KRA has indicated that it will work with stakeholders to ensure that the new benchmark is implemented in a way that supports economic growth and development.

Practical steps
  • Importers and exporters should review their customs procedures and requirements to ensure compliance with the new benchmark.
  • Businesses should engage with the KRA and other stakeholders to understand the implications of the new benchmark and to provide feedback on its implementation.
  • Stakeholders should monitor the implementation of the new benchmark and provide feedback to the KRA on any challenges or concerns.

The Tax Planning & Compliance service can help businesses navigate the implications of the new customs benchmark and ensure compliance with all relevant regulations and requirements.

Talk to our team at Beavoren Ventures — info@beavorenventures.co.ke — to set up your systems correctly.

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.