The State has announced plans to exempt locally assembled passenger cars from VAT and excise duty, looking to reduce the prices of the automobiles as well as encourage local assembly.
If implemented, it will see the cars exempt from the entire major taxes applicable on fully-built units imported from South Africa, the UK, and Japan.
Cars manufactured abroad are usually charged an import duty of 25%, excise duty of 20%, and VAT of 16%, payable cumulatively.
“In order to encourage more investment in the local manufacture of passenger cars, I propose to exempt from VAT inputs and raw materials used in the local manufacture of passenger motor vehicles,” Treasury CS Ukur Yatani said in his recent budget speech.
Removal of VAT on inputs and raw materials will benefit suppliers of assemblers including manufacturers of paint, steel, and upholstery.
Assemblers of passenger cars such as Simba Corp and DT Dobie currently enjoy exemption from the 25% import duty.
Business Daily reports that sales for locally assembled vehicles rose to a record 70.6% of the total sales in 2021, moving 10,054 units compared to 4,195 units of fully-built imported vehicles.
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