An assembly plant at General Motors headquarters along Mombasa road in Nairobi. [ photo / Nation Media group. ]
The local car assemblers will as from Monday next week get a major boost as the new law dubbed income tax reforms takes effect in a fresh drive by government to attract more global automakers to invest in Kenya.
The Income tax reforms is contained in the Finance act 2017 and it will see the corporate tax for locally assembled cars cut by half from 30 per cent to 15 per cent for first five years after the the launch of the car assembly operation.
The law, which was first announced by the cabinet secretary for Treasury Mr Henry Rotich during the reading of the last budget, was to be implemented on January 1 2018.
“The rate of 15 per cent shall be extended for a further period of five years if the company achieves a local content equivalent to 50 per cent of the ex-factory value of the motor vehicles,” reads part of the Act.
The car industries in Kenya have been facing hard times this year as the production of the locally assembled car units dropped by 15 per cent from 5,102.4 units to 4,337 units.
The reduced tax comes months after the top international car manufacturers including French automaker Peugeot and German-based Volkswagen stepped into Kenyan market in attempt to wrest the market share from used car dealers.
President Uhuru Kenyatta had earlier directed all the state agencies to buy the locally assembled cars as a plan to improve and encourage the market grow big and create numerous job opportunities.