I recently wanted to import a small electronic device from China that costs $10 and would pay $44 to have it delivered in 7 -15 days to Kenya. I thought the shipping cost was too high, and the alternative was to wait for up to 50 days and only pay $6 for the delivery. Although the shipping cost was high, it was not the main challenge.
The one thing I was not certain about is the amount of taxes I would pay for importing the gadget.
Importing goods into Kenya has a myriad of challenges. One of these is about import taxes that are high, and seem to be random. One cannot conclusively tell how much import taxes they are going to pay in advance. This is because the value of the goods is determined by the revenue authority and not dependent on the actual cost of the goods.
Once you import goods, you will have to wait with your fingers crossed as the taxman decides the amount that you owe. It is hard to know the actual figures in advance unless you are specialized in importing such types of goods and you have done it for some time. This was the case one time when we imported refurbished servers into Kenya, and no one could conclusively determine in advance the amount of tax we would pay.
Import taxes on donations
Even donated goods must be subjected to tax, and sometimes the tax is higher than the cost of those goods. Someone once joked that there are thousands of gifts that are sent to Kenyans every year but are abandoned due to taxes that KRA demands.
An example of this is an ongoing case between Kenya Revenue Authority (KRA) and USAID, where the latter brought in ARVs to Kenya for HIV/AIDS program. KRA demanded that USAID must pay taxes for the drugs, yet USAID was simply donating the drugs to Kenya, and they distribute them for free, at their own cost. Even when the country was dangerously running low on ARVs, KRA still insisted that they cannot release the drugs until the appropriate taxes are paid.
Exceptions to Kenya's import taxes
Some industries in Kenya have a very well-defined import process.
In the motor vehicle industry, it is possible to know all the applicable charges and taxes that one will pay even before buying a car, thanks to established players in that industry.
Importing goods from the USA is also easy. There are several companies that give you the option to send the goods to their address in the US, then ship it to you in Kenya. They charge based on weight, and one is exempted from the tax problems. I do not know how they manage that.
If one is shipping small, one-time imports from places like China, I think the most convenient way to get your product is if you know somebody flying to Kenya and ask them to buy it for you. They are most likely to go through customs unquestioned.
This works well with small products.
"Importing goods into Kenya has a myriad of challenges. One of these is about import taxes that are high, and seem to be random. One cannot conclusively tell how much import taxes they are going to pay in advance." - Jacob Mugendi (Tweet this | Share this via WhatsApp)
The business opportunity
I’ve always wondered why not many people are solving these problems and the ones who attempt to. We can have startups like Sendy helping Kenyans import goods and deliver locally.
However, the inventory business in Kenya is an extreme sport. Losses, cartels, taxman, and other unknown factors can make it really hard for new entrants.
I remember a recent case where Mitsumi Distributors lost over 1000 laptops at the Inland Container Depot in Nairobi.
A solution is needed.
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