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08 February 2023

Kenya proposes amendments to Excise Duty Regulations

  • Kenya’s Government has issued the draft Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 (the Regulations).

  • The Regulations, if implemented, will principally increase the cost of excise stamps. In many cases, the increase is almost double the current rate.

Executive summary

Kenya’s Cabinet Secretary for the National Treasury and Economic Planning Ministry issued the draft Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 (the Regulations). The Regulations propose amendments to the Excise Duty (Excisable Goods Management System) Regulations, 2017.

The Regulations are principally aimed at increasing the cost of excise stamps. This action is geared towards increasing revenue collection in addition to streamlining the drafting of certain provisions of the 2017 Regulations. The increase in cost is almost double the current cost of a stamp and will thus impact the cost of excisable goods which is expected to be passed on to the consumer.

Stakeholders and members of the public were invited to submit their input and concerns to the National Treasury and Economic Planning Ministry on or before 3 February 2023 to ensure there is public participation in the process of implementing the amendments.  

Detailed discussion

Proposals for Amendment

Revision of excise stamp fees

Excise stamps are paper stamps or digital stamps which the Commissioner of Domestic Taxes may approve for affixation or printing on excisable goods. Excise stamps are meant to provide visibility on the number of excisable goods produced/imported, to ensure proper accountability for excise duty and to provide authenticity by eliminating counterfeits of excisable goods. The Regulations propose an increment in excise stamp fees as outlined below. The anticipated effective date for the revised rates is 1 March 2023.

Category of excisable goods      

                             

Excise stamp fee per stamp (KES)              

Percentage increase

Current rate

Proposed rate              

Cigars, cheroots, cigarillos, containing tobacco or tobacco substitutes        

2.8

5

79%

Cigarettes containing tobacco or tobacco substitutes        

2.8

5

79%

Other manufactured tobacco and manufactured tobacco substitutes; "homogenous" and "reconstituted tobacco"; tobacco extracts and essences.           

2.8

5

79%

Electronic cigarettes and other nicotine delivery devices

N/A

5

79%

 Liquid nicotine for electronic cigarettes               

N/A

5

0%

Products containing nicotine or nicotine substitutes intended for inhalation without combustion or oral application but excluding medicinal products approved by the Cabinet Secretary responsible for matters relating to health.

N/A

5

0%

Wines including fortified wines, and other alcoholic beverages obtained by fermentation of fruits    

2.8

5

79%

Compounded spirits of alcoholic strength exceeding 6% (was 10%)              

2.8

5

79%

Spirituous beverages of alcoholic strength not exceeding 6% (was 10%)              

1.5

3

7%

 Beer, Cider, Perry, Mead, Opaque beer, and mixtures of fermented beverages with non-alcoholic beverages       

1.5

3

100%

Bottled or similarly packaged waters (was Mineral water and aerated water of tariff 2201.10.00)       

0.5

0.5

0%

Other non-alcoholic beverages, not including fruit and vegetable juices (was Sweetened or flavored water and non-alcoholic beverages not including fruit or vegetable juices of tariff heading 2202)   

0.6

2.2

267%

Fruit juices (including grape must), and vegetable juices, unfermented and not containing added spirit, whether containing added sugar or other sweetening matter         

0.6

2.2

267%

Cosmetics and Beauty products of tariff heading Nos. 3303, 3304, 3305 and 3307              

0.6

2.5

317%

In a span of less than one year, excisable goods have thrice been the target of the Government’s revenue drive. From adjustments in the Finance Act, 2022 to inflationary adjustments and now to the proposed review of excise stamp costs. While the Government asserts that the cost of excise stamps has not been adjusted for a considerable period to cater for inflation, taxpayers contend that the beneficiary of excise stamps affixation is the Government and therefore, such cost should not be borne by the consumer.

Expansion of the scope of excisable goods requiring affixing of stamps

Excisable goods are listed in the First Schedule, Part I of the Excise Duty Act, 2015. However, not all excisable goods require affixation of excise stamps. The categories of excisable goods that require affixation of excise stamps have been revised to broaden the tax base. Further, exemption of certain goods from the requirement to affix excise stamps under the 2017 Regulations has been lifted in addition to the introduction of new categories of excisable goods in the Schedule to the Regulations. Other categories of excisable goods have been revised to bring more goods under the category of excisable goods. These changes are highlighted in the below table. 

Current position on affixing of excise stamps

Proposed position on affixing of excise stamps

Anticipated effect

Not applicable

Electronic cigarettes and other nicotine delivery devices

Increasing number of excisable goods requiring affixing of excise stamps. This will lead to an increase in the price of these items which are used by smokers of tobacco who intend to quit smoking.

Not applicable

Liquid nicotine for electronic cigarettes

Increasing number of excisable goods requiring affixing of excise stamps

Not applicable

Products containing nicotine or nicotine substitutes intended for inhalation without combustion or oral application but excluding medicinal products approved by the Cabinet Secretary responsible for matters relating to health.

Increasing number of excisable goods requiring affixing of excise stamps

Compounded spirits of alcoholic strength exceeding 10%

Compounded spirits of alcoholic strength exceeding 6%

Reduction of the percentage of alcohol strength in this category brings into the bracket more beverages from the spirituous beverages category requiring affixing of excise stamps

Spirituous beverages of alcoholic strength not exceeding 10%

Spirituous beverages of alcoholic strength not exceeding 6%

Reduction of the cap of percentage of alcohol strength in this category pushes some alcoholic beverages into the above bracket of compounded spirits thus requiring higher costing stamps.

Mineral water and aerated water of tariff 2201.10.00

Bottled or similarly packaged waters. This general description may include water falling under tariff code 2201.90.00 including ordinary water.

Adoption of a more general goods description brings more items within the ambit of the requirement to affix excise stamps.

Sweetened or flavored water and non-alcoholic beverages not including fruit or vegetable juices of tariff heading 2202

Other non-alcoholic beverages, not including fruit and vegetable juices

Adoption of a broader goods description brings more items within the ambit of the requirement to affix excise stamps

Next Steps

It is expected that there will be an increase in consumer prices of the affected goods if the Regulations are implemented. This could have a ripple effect on the economy by diminishing the consumer purchasing power and consequently lowering demand for the affected goods. The process for the purchase of excise stamps is outlined below.

Application for excise stamps

Local manufacturers or importers of excisable goods which are now required to be affixed with excise stamps will need to follow the procedure below to obtain excise stamps:

Applicants are required to apply to the Commissioner of Domestic Taxes for excise stamps at least 60 days before the manufacture or importation of excisable goods.

  • New users should obtain the Excise Goods Management System (EGMS) portal login credentials by filling a prescribed application form, obtainable at any Kenya Revenue Authority (KRA) office or downloaded via the EGMS link: Application For User Right Creation/Withdrawal - Excise Goods Management System.

  • The completed application form is submitted to KRA for processing.

  • The user will be issued with their personal User Credential (Username & Password) and be trained on how to use EGMS.

  • Once logged in to the EGMS portal, an applicant will proceed with the application for Excise Stamps.

  • The application is made through a completed form and uploading the supporting documentation including Kenya Bureau of Standards’ certificate of compliance with standards, product sample and national identity card.

  • Once the form is completed, it should be submitted after which the application will be reviewed.

  • After a successful application evaluation process, an applicant is notified of the approval and the EGMS will generate a payment slip to enable the applicant pay for the stamps.

  • An applicant will print the payment slip from their EGMS portal and proceed to pay.

  • Once payment is confirmed the applicant will obtain the Excise Stamps, Delivery Note, and Security Pass.

    _________________________________________

    For additional information with respect to this Alert, please contact the following:

    Ernst & Young (Kenya), Nairobi

    Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

    Bruno Messerschmitt | bruno.messerschmitt@ey-avocats.com

    Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

    Kwasi Owiredu | kwasi.owiredu@uk.ey.com

    Ernst & Young LLP (United States), Pan African Tax Desk, New York

    Document ID: 2023-5161

     
     

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