Kenya’s Tax Laws (Amendment) Act of 2024 has brought significant changes to the country’s excise duty framework, affecting a broad range of excisable goods and services. These adjustments, which took effect on December 27, 2024, will impact manufacturers, importers, and suppliers of services who must now account for new excise duty rates.
Excise duties are an essential revenue stream for the Kenyan government, levied on certain goods and services, particularly those deemed non-essential or luxury items, as well as those considered harmful, such as alcohol, tobacco, and gambling services. This article will delve into the new excise duty rates, the goods and services impacted, and the compliance measures that businesses must undertake to remain in good standing with the Kenya Revenue Authority (KRA).
Key Changes to Excise Duty Rates:
The amendments in the Tax Laws (Amendment) Act, 2024, introduce changes to both the rates of excise duty and the scope of goods and services affected. The revised excise duty rates are significant for businesses across several sectors, particularly in the tobacco, alcohol, confectionery, and plastics industries. The following is an overview of the new excise duty rates, starting with the most notable goods and services.
1. Imported Sugar (Excluding Pharmaceutical Sugar and Raw Sugar for Refineries)
- Excise Duty Rate Prior to 27th December 2024: KSh 5 per kg
- Excise Duty Rate from 27th December 2024: KSh 7.50 per kg
The excise duty rate on imported sugar has been adjusted, increasing by KSh 2.50 per kilogram. This change will primarily affect the food and beverage industry, especially manufacturers of processed foods and beverages that use sugar as a key ingredient.
2. Cigarettes with Filters (Hinge Lid and Soft Cap)
- Excise Duty Rate Prior to 27th December 2024: KSh 4,067.03 per mille
- Excise Duty Rate from 27th December 2024: KSh 4,100 per mille
For tobacco products, the excise duty rate on filtered cigarettes has increased marginally by KSh 32.97 per mille. This rise aligns with the government’s ongoing effort to curb smoking-related harm and generate more tax revenue from the tobacco sector.
3. Cigarettes Without Filters (Plain Cigarettes)
- Excise Duty Rate Prior to 27th December 2024: KSh 2,926.41 per mille
- Excise Duty Rate from 27th December 2024: KSh 4,100 per mille
Plain or unfiltered cigarettes have seen a significant hike in excise duty, rising by over KSh 1,000 per mille. This drastic increase reflects the government’s intention to deter smoking, particularly for less expensive cigarette options.
4. Nicotine Products (Excluding Medicinal Products)
- Excise Duty Rate Prior to 27th December 2024: KSh 1,594.50 per kg
- Excise Duty Rate from 27th December 2024: KSh 2,000 per kg
Products containing nicotine or nicotine substitutes intended for inhalation, excluding medicinal products, now attract a higher excise duty rate of KSh 2,000 per kilogram. This includes items such as e-cigarettes and nicotine pouches, which have become increasingly popular in Kenya.
5. Liquid Nicotine for Electronic Cigarettes
- Excise Duty Rate Prior to 27th December 2024: KSh 70 per millilitre
- Excise Duty Rate from 27th December 2024: KSh 100 per millilitre
With the rise of vaping, the government has increased the excise duty on liquid nicotine used for electronic cigarettes, making these products even more expensive. The tax increase seeks to regulate the use of these products and raise additional revenue.
6. Imported Sugar Confectionery (Tariff Heading 17.04)
- Excise Duty Rate Prior to 27th December 2024: KSh 42.91 per kg
- Excise Duty Rate from 27th December 2024: KSh 85.82 per kg
Sugar confectionery products such as sweets, chocolates, and gums now face a steep increase in excise duty, nearly doubling the previous rate. This will impact manufacturers and importers in the confectionery industry.
7. Wines and Other Alcoholic Beverages (Fermented Fruits)
- Excise Duty Rate Prior to 27th December 2024: KSh 243.43 per litre
- Excise Duty Rate from 27th December 2024: KSh 22.50 per centilitre of pure alcohol
Wines, including fortified wines, now face a shift in the excise duty structure, with taxes based on the alcohol content rather than the volume of the beverage. This change could lead to higher taxes for certain types of wine depending on their alcohol content.
8. Beer, Cider, Perry, and Other Fermented Beverages (Alcohol Strength Not Exceeding 6%)
- Excise Duty Rate Prior to 27th December 2024: KSh 142.44 per litre
- Excise Duty Rate from 27th December 2024: KSh 22.50 per centilitre of pure alcohol
Similar to wine, beer and other fermented beverages now face an excise duty based on the alcohol content rather than the volume. This could lead to price increases for consumers, depending on the alcohol strength of the beverages.
9. Small Independent Brewers of Beer, Cider, and Perry
- Excise Duty Rate Prior to 27th December 2024: KSh 142.44 per litre
- Excise Duty Rate from 27th December 2024: KSh 10 per centilitre of pure alcohol
Small brewers are now subject to a significantly lower excise duty rate of KSh 10 per centilitre of pure alcohol. This adjustment is aimed at promoting the growth of small-scale brewers in the country, offering them some relief from the higher rates applicable to larger manufacturers.
10. Spirits and Other High-Alcohol Beverages (Alcohol Strength Above 6%)
- Excise Duty Rate Prior to 27th December 2024: KSh 356.42 per litre
- Excise Duty Rate from 27th December 2024: KSh 10 per centilitre of pure alcohol
Spirits, including liqueurs and other high-alcohol beverages, now face the same excise duty rate based on alcohol content, offering a clearer and more consistent tax structure for these products.
Excise Duty on Imported Plastics and Betting Services:
11. Imported Self-Adhesive Plates, Sheets, and Other Plastic Products
- Excise Duty Rate Prior to 27th December 2024: 25%
- Excise Duty Rate from 27th December 2024: 25% or KSh 200 per kg, whichever is higher
Importers of plastic products, such as adhesive sheets and films, will face an increase in excise duty, especially for products not originating from East African Community (EAC) partner states that meet the EAC Rules of Origin.
12. Imported Plastic Plates
- Excise Duty Rate Prior to 27th December 2024: 25%
- Excise Duty Rate from 27th December 2024: 25% or KSh 200 per kg, whichever is higher
The same tax structure applies to imported plastic plates, which will now be taxed more heavily if they do not meet the EAC Rules of Origin.
13-16. Betting, Gaming, and Prize Competitions
- Excise Duty Rate Prior to 27th December 2024: 12.5%
- Excise Duty Rate from 27th December 2024: 15%
The excise duty rate on betting, gaming, and prize competitions has increased from 12.5% to 15%. This adjustment reflects the government’s efforts to curb excessive gambling and boost tax revenue from this rapidly growing sector.
Compliance Requirements for Manufacturers, Importers, and Service Providers:
The new excise duty rates necessitate changes in how businesses handle taxation on excisable goods and services. Manufacturers and importers are required to apply the updated excise duty rates immediately, with strict compliance deadlines for tax remittance:
- Betting and Gaming Services: Excise duty must be remitted within 24 hours from the closure of daily transactions.
- Licensed Manufacturers of Alcoholic Beverages: Duty must be remitted on or before the fifth day of the month following the month in which the tax was collected.
- Other Licensed Businesses: Duty must be remitted on or before the 20th day of the month following the month in which the tax was collected.
Failure to comply with these remittance deadlines could lead to penalties, including fines and interest on late payments.
The changes introduced under the Tax Laws (Amendment) Act, 2024 represent a significant shift in Kenya’s excise duty landscape, with several key industries facing increased taxes on goods and services. Manufacturers, importers, and service providers will need to quickly adjust to these changes to avoid penalties and ensure compliance with the new regulations.
As businesses navigate this complex landscape, it is essential to stay informed about the adjustments to ensure smooth operations and continued growth in the Kenyan market. The KRA’s guidance and clear tax remittance deadlines provide a roadmap for compliance, ensuring that businesses can meet their obligations and continue contributing to the country’s economic development.
