Motor Vehicle Tax Provisions 

Introduction of Motor Vehicle Tax:

• The Bill proposes a motor vehicle tax payable to the Commissioner at the time of issuing an insurance cover.

• The tax is based on the value of the motor vehicle, with rates specified in the Third Schedule of the Finance Bill.

• The amount payable must be at least KSh. 5,000 and not exceed KSh. 100,000​​ .

• The value is determined based on the make, model, engine capacity, and year of manufacture. 

Who is exempted? 

• Motor vehicles owned by the national government, county governments, Kenya Defence Forces, National Police Service, and National Intelligence Service, as well as ambulances, are exempt from this tax. 

• Such a system is punitive as those who can afford said tax will not be forced to pay. Bridging for inequality. 

Committee recommendations/comments

Concerns About Equity and Progressiveness:

• The Committee noted that capping the levy at KSh. 100,000 makes the tax discriminatory and non-progressive. Low-value vehicles would pay proportionately higher amounts compared to high-value vehicles

Impact on Insurance Sector:

• There are concerns that the proposed tax would adversely affect insurance uptake, as vehicle owners might opt for cheaper third-party insurance covers instead of comprehensive insurance.

Economic and Legal Justifications

• Stakeholders pointed out that vehicle owners already face multiple taxes and levies, including import duty, excise duty, VAT, fuel taxes, and more. The additional tax is seen as burdensome and could lead to reduced compliance with insurance requirements

Amendments And Repercussions

• The proposal in the Finance Bill to introduce a new motor vehicle tax at 2.5% of the value of the motor vehicle has been dropped. 

• HOWEVER, the Committee has recommended that the road maintenance levy be increased from KES 18 per litre to KES 25 per litre. This will increase the cost of transport & owners of motor vehicles will end up paying more in taxes with increased usage.