Blow to traders as KRA raises cargo consolidation value to Sh3.2mn

KNA, Kenya - From August 20, the Kenya Revenue Authority (KRA) has increased the minimum reference value for cargo consolidation shipments by 28 percent, raising the threshold to Sh3.2 million from Sh2.5 million. This adjustment is set to impact small traders who import goods through consolidated container shipments, as it could potentially raise the tax base applied to assess these imports.

Cargo consolidation enables multiple importers to share a single container, helping those with limited cargo space to reduce shipping costs. However, the KRA's decision aims to address issues like undervaluation and create a fairer competitive playing field among businesses. The new benchmark does not represent a flat rate applied to all consolidated containers; importers must declare their actual goods value if it exceeds Sh3.2 million, paying the associated customs duties and taxes.

The KRA consulted with relevant stakeholders, including the Kenya International Freight and Warehousing Association (KIFWA), small traders, cargo consolidators, and other private-sector parties before implementing the change. The increased threshold follows six years of inactivity despite shifts in economic conditions, import values, and the types of goods entering Kenya. Undervaluation, under-declaration, misclassification, misdescription, and concealment of high-value goods were among the practices the KRA aimed to curb.

Specifically, high-value electronics, such as smartphones, can be declared at lower values to decrease customs liabilities, a concern raised by the KRA. Additionally, there are worries that larger importers could exploit consolidation arrangements to minimize their tax obligations.