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Tribunal backs KRA decision in tax row with e-bike firm
The Tribunal ruled that Ebee Mobility Kenya imported electric bikes that were largely complete and required minimal assembly and hence would not qualify for classification as CKD.
The Tax Appeal Tribunal has backed a decision by the Kenya Revenue Authority (KRA) to tax a consignment of electric bikes (e-bikes) as finished products, dealing a blow to Ebee Mobility Kenya, which had shipped in the cargo as completely knocked-down (CKD) kits for assembly locally.
A CKD is a collection of parts required to assemble a product. The parts are manufactured in one country or region and then exported to another country for final assembly.
Kenya grants a preferential 10 percent tax on such kits to attract investment in assemblies locally and boost jobs and other line services. Imports of completed products however attract higher taxes as a deterrent to manufacturing abroad.
The Tribunal ruled that Ebee Mobility Kenya, which has a sizeable market share in Kenya, imported electric bikes that were largely complete and required minimal assembly and hence would not qualify for classification as CKD.
“The tribunal holds that the most appropriate tariff code for the classification of the Appellant’s imported electric bicycles in CKD form would be HS Code 8711.60.00. Consequently, the tribunal finds that the Respondent was justified in reclassifying the Appellant’s imported products from HS Code 8714.91.00 to HS Code 8711.60.00” the Tribunal ruled.
Ebee Mobility Kenya’s e-bike brands are popularly used for deliveries by e-commerce platforms, restaurants, and supermarkets.
The decision followed a dispute in which Ebee Mobility Kenya Limited declared its shipments under tariff code 8714.91.00, which applies to bicycle parts and carries a lower tax rate of 10 percent.
However, following a post-clearance audit of entries from August 2021 to February 2023, KRA determined that the shipments consisted of complete bicycle kits, save for the battery, and should be taxed as fully assembled electric bicycles.
This reclassification led to a demand for Sh6,987,161 in additional taxes, which the tax man later revised to Sh2,780,081.
Ebee Mobility told the tribunal that its imports did not constitute complete electric bicycles, as the batteries, a crucial component, were sourced separately from Uganda. The company argued that, without the batteries, the imported parts could not function as electric bicycles and should have remained classified under 8714.91.00.
The company also accused KRA of violating its right to legitimate expectation, citing past importations where the same tariff classification had been accepted without dispute. It further argued that KRA failed to conduct a proper analysis to determine whether the imported components exceeded the number required for complete bicycles.
KRA maintained that the bicycles were complete at the time of importation, given that they included motors in the rear wheel assemblies.
The absence of batteries, KRA argued, did not change the essential character of the goods, as the key defining feature of an electric bicycle is the presence of a motor, not the battery.
