Duty and VAT on imports are percentages, but a percentage of what? The answer is the customs value, and getting it wrong is the commonest reason that importers face unexpected bills. This guide explains how it is set.

The main rule: transaction value

For most imports, the customs value is the transaction value: the price actually paid or payable for the goods, adjusted for certain costs. The method follows an international agreement, so the same principles apply in most countries.

What is added to the price

The value is normally the CIF value, meaning cost, insurance and freight to the point of entry into Kenya. So you add to the invoice price:

  • Freight from the country of export to Kenya
  • Insurance during the journey
  • Commissions and brokerage paid by the buyer, except buying commissions
  • Packing costs and containers
  • Royalties and licence fees that are a condition of the sale
  • Assists, such as materials or designs you supplied to the maker

Costs after arrival, such as local transport and clearing fees, are not part of the customs value.

When KRA questions the price

If an invoice price looks too low compared with similar goods, KRA may doubt it. Customs may ask for further evidence, such as the contract, proof of payment and the supplier's price list, and may use other methods, such as the value of identical or similar goods, a computed value or a database of reference prices. Keep documents that show how the price was agreed and paid.

Foreign currency

Convert foreign currency using the exchange rate set for customs, which is published periodically, not the rate your bank gave you. The difference can matter on large shipments.

Vehicles

Used vehicles are valued differently. KRA uses a Current Retail Selling Price (CRSP) list for each make and model, and applies a depreciation allowance for the car's age. Customs compares the invoice with the CRSP and uses the higher figure. See how much it costs to import a car and use the car import duty calculator.

An example

You buy goods for USD 10,000 and freight and insurance cost USD 1,500, so the CIF value is USD 11,500. At a customs rate of KES 130 to the dollar, the customs value is KES 1,495,000. Duty, fees and VAT are calculated on that figure; see how to calculate import duty on goods for the steps.

Why undervaluing is a bad idea

Declaring a lower value to pay less duty is an offence, and the risks include penalties, seizure of the goods and prosecution. It also leaves you with invoices that do not support your input VAT claim, and with a purchase price on your books that does not match. The honest route is to lower the cost legally; see how to lower your landed cost legally.

Keep the paperwork

Keep the commercial invoice, proof of payment, freight and insurance documents, the customs entry and the release. They support the value you declared, your VAT claim and your accounts. The import duty and landed cost workbook records each item and its value, and the import documents checklist lists what to gather.

To see what valuation does to the final bill, run an example through the import duty calculator, then add shipping and clearing in the landed cost calculator. The terms of sale also change the value, so read Incoterms explained for importers, and see the EAC common external tariff explained for how the rate is chosen. Importers of vehicles should also read importing a used car: inspection and registration.

Valuation rules are set by the East African Community Customs Management Act and KRA practice. Confirm them with KRA or a licensed agent.

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