Treasury CS Ukur Yattani imposed a value-added tax (VAT) and an import declaration fee (IDF) on leasing or hiring some types of helicopters and other aircraft. This means that any individuals seeking to hire helicopters or buy planes will part with more cash.
14% VAT was added to purchase or hiring of aeroplanes of an unladen weight not exceeding or exceeding 2,000 kilogrammes as the government seeks to collect over Ksh 38.9 billion.
In the past, purchase of a number of aeroplanes or their gears were exempted from tax.
Those hiring the cited planes were also exempted from incurring extra costs.Mombasa Governor Ali Hassan Joho poses for a photo alongside a helicopter in 2019
In Kenya, it reportedly costs between Ksh 150,000 to Ksh 400,000 to hire a helicopter per hour.
The move has elicited mixed reaction among relevant stakeholders. Those backing the proposal supported Treasury's move to raise revenue.
“These amendments appear to merely streamline the current exemptions in line with the National Treasury’s recent policy of doing away with unnecessary tax exemptions in order to shore up revenues for the exchequer," Bowmans Kenya, a law firm that is also involved in tax advisory stated as quoted by the Business Daily.
With flights suspended due to Covid-19 outbreak, those against the measure argued that it was out to clip their business and affect them more coupled up with the effects of the pandemic.
"The proposal to subject helicopters and the aircraft parts to VAT at 14% will negatively impact the aviation industry, which is underperforming during this Covid-19 pandemic. Further, the taxation of aircraft parts defeats the aspirations of establishing Kenya as an aeronautical hub in East Africa," KPMG Kenya, multinational professional services firm differed.
Kenya Association of Air Operators (KAAO), the umbrella body of air operators had also lamented on the tax measures before the bill was assented to.
"We don’t support the reintroduction of taxes and duties that were previously waived or exempted for the aviation sector. We have been fighting that the sector be exempted from extra taxations as this will impact heavily on our operations," KAAO Executive-Secretary Eutychus Waithaka stated in a response to the Business Daily.
The new tax measure comes five months after the Kenya Civil Aviation Authority (KCAA) registered 87 new aircraft in 2019.A helicopter at a hanger at Wilson Airport, NairobiFile
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