excise duty & miscellaneous fees and levies mbiki kamanjiri · fruit juices (including grape...
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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
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Kenya
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www.grantthornton.co.ke
Mbiki KamanjiriManager – Tax Consulting Services
Cell +254 721 449 468E ; [email protected]