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Sylvia Duruson
Tax ruling has reshaped the landscape for electric bicycle manufacturers in Kenya. The Kenya Revenue Authority emerged victorious in its dispute with Ebee Mobility Kenya over the classification of imported electric bicycles, establishing a crucial precedent for the country’s emerging mobility sector.
The controversy centered on Ebee’s importation practices. The company imported what they classified as bicycle parts intended for local assembly, claiming eligibility for a preferential 10% tax rate under Kenya’s manufacturing incentive program. Their strategy involved sourcing batteries separately from Ugandan suppliers, presenting their imports as incomplete assemblies.
KRA’s audit findings contradicted this classification. The authority discovered that the imported components essentially constituted complete e-bikes lacking only batteries. The critical element in their determination was the presence of motors integrated into rear wheel assemblies. This configuration, according to KRA, qualified the imports as fully assembled units, subjecting them to higher taxation – 25% import duty, 16% VAT, and an $81 per unit excise duty.
The tax tribunal’s decision turned on a technical distinction that could reshape industry standards. Their ruling emphasized that a motor, not a battery, fundamentally defines an electric bicycle. They articulated this principle clearly: the absence of a motor, regardless of battery presence, prevents classification as an electric bicycle.
This ruling carries significant weight for Kenya’s expanding e-mobility sector. Ebee’s electric bicycles serve various commercial purposes, supporting delivery services for e-commerce platforms, restaurants, and supermarkets. The decision affects not only Ebee but potentially impacts other industry players like BasiGo, Ampersand, and Spiro.
The financial implications for Ebee proved substantial but manageable. KRA’s initial tax demand of $53,302 was later reduced to $20,857 following review. The ruling’s broader significance lies in its redefinition of local assembly qualifications, potentially affecting companies’ ability to benefit from manufacturing incentives.
Kenya’s aspirations to establish itself as an e-mobility hub now face new considerations. The ruling creates clearer guidelines for distinguishing between assembly and importation, though these standards may challenge existing business models. This decision marks a pivotal moment in balancing tax policy with industrial development goals in Kenya’s growing electric mobility sector.
