Tax cuts on aircraft engines get MPs’ nod
National Assembly Finance and National Planning Committee chairperson Kuria Kimani during a joint sitting with the Committee on Communication, Information and Innovation at the County Hall in Nairobi on April 20. The committee has accepted proposals to add aircraft spare parts, including engines, to a list of tax-exempt items, marking a fresh boost for the aviation sector.
The Finance and National Planning Committee has accepted proposals to add aircraft spare parts, including engines, to a list of tax-exempt items, marking a fresh boost for the aviation sector.
In changes to the Finance Bill 2023, more aircraft spare parts imported by plane operators and maintenance firms stand to be imported duty-free upon approval by the Kenya Civil Aviation Authority. This adds to proposals in the Finance Bill that targeted to scrap three taxes on aircraft imports and select parts.
Currently, only imported aircraft parts such as propellers, balloons, gliders, hang gliders and other non-powered aircraft are exempt from paying the 16 per cent value-added tax (VAT).
In the Bill, the government proposed to exempt importers of aircraft, especially helicopters, from paying the 16 per cent VAT while scrapping the 3.5 per cent import declaration fee (IDF) and the two per cent Railway Development Levy (RDL).
The exemption also applied to individuals seeking to lease or hire helicopters. However, in the Finance Act 2020, persons seeking to hire or buy aircraft of an unladen weight, not exceeding or exceeding 2,000kg, started paying VAT on imports to collect an additional Sh38.9 billion from wealthy individuals and industries.
The unladen weight of any aircraft is the weight when it is not carrying passengers or goods.
Imported aircraft weighing less than two tonnes and all types of helicopters are subjected to IDL and RDL, which targets wealthy individuals who might import aircraft for comfort.
In the Finance Act 2020, Uhuru Kenyatta’s administration also introduced a 25 per cent import duty on helicopter imports, pushing up the cost of buying these aircraft.
In 2022, Kenya imported aircraft and related equipment valued at Sh15.1 billion, down from Sh17.9 billion in 2021, as importers grappled with the high costs compounded by the semiconductors shortage.
