Rich Kenyans To Save Millions In Ruto's Tax Cuts On Helicopters, Planes

The bill proposes that importers of these aircraft and parts be exempt from paying the 16 per cent Value Added Tax (VAT)

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May 12, 2023 - 15:33 Updated: Sep 3, 2023 - 00:05
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Rich Kenyans To Save Millions In Ruto's Tax Cuts On Helicopters, Planes
President William Ruto alights from a chopper in Nyamira on October 15, 2020. /FACEBOOK

The Finance Bill 2023 is proposing tax exemptions on helicopters and aircraft as well as their parts, meaning wealthy Kenyans would be able to import them at cheaper prices.

The bill proposes that importers of these aircraft and parts be exempt from paying the 16 per cent Value Added Tax (VAT), which could affect the cost of importing such aircraft.

It also proposes that aircraft be exempted from the 3.5 per cent Import Declaration Fee (IDF) and the two per cent Railway Development Levy (RDL), making it easier for businesses and individuals to invest in the aviation sector.

“The major beneficiaries are buyers of aircraft not exceeding 2,000 kilogrammes and helicopters of less than two tonnes and aircraft of more than 2,000 kilogrammes,” said Robert Waruiru, a partner in charge of tax and regulatory at Ichiban Tax & Business Advisory.

A fleet of helicopters in Kenya. /FILE

Wealthy Kenyans, including politicians during elections, hire helicopters and spend between Ksh150,000 to Ksh400,000 per hour. The tax cuts would mean that buyers would save a lot of money in purchasing helicopters worth hundreds of millions of shillings and offer chopper services to interested parties at cheaper prices.

The tax incentives will benefit wealthy Kenyans who own choppers and the aviation industry stakeholders. In Kenya, the ownership of choppers and aircraft is a symbol of prestige and wealth.

Some of the country's political and business elite frequently use private jets and helicopters to travel within the country and beyond its borders. Other beneficiaries of air travel include the Kenya Police, Kenya Power and Kenya Wildlife Service as well as local airlines in Kenya.

The tax cuts will come as a major boost to the aviation industry, which decried the re-introduction of these levies by the former administration of President Uhuru Kenyatta. However, the rest of the proposals could hurt the middle class with higher fuel and salary taxes to fund the Ksh3.59 trillion budget.

Before July 2021, the purchase of certain types of helicopters, aeroplanes and aircraft gear as well as parts such as tyres did not attract any tax.

The exemption also applied to individuals seeking to lease or hire helicopters. However, in the Finance Act 2020, persons seeking to hire or buy aeroplanes of an unladen weight (weight without passengers or goods) not exceeding or exceeding 2,000 kilogrammes started paying VAT on their imports in what was aimed at collecting an additional Ksh38.9 billion from wealthy individuals and industries.

Currently, only aircraft parts such as propellers, balloons, gliders, hang gliders and other non-powered aircraft are exempt from paying the 16 per cent VAT when brought into the country.

Industry players welcomed the tax cuts as a major boost to tourism, with some terming the reduction of the cost of importing spare parts and light aircraft as a huge benefit to Kenya because the cost of training pilots would go down.

“It would promote tourism and sports aviation, growing the general aviation sector through recreational aviation, hence creating jobs,” Captain Mercy Makau, founder and president of the Young Aviators Club of Africa, said.

The process of acquiring an aircraft in Kenya can be a daunting task, involving several legal and regulatory requirements. The Kenya Civil Aviation Authority (KCAA) is the regulatory body responsible for licensing aircraft and ensuring compliance with safety and security standards.

Data from the Kenya National Bureau of Statistics (KNBS) Economic Survey Report 2023 indicated a slight decline in aircraft imports and registration numbers in 2022, with Kenyans importing aircraft and related equipment valued at Ksh15.1 billion, down from Ksh17.9 billion in 2021.

The decrease was attributed to the high cost of imports, which has been compounded by the ongoing global semiconductor shortage.

Planes and a helicopter at Wilson Airport. /FILE