New Valuation Rules for Used Car Imports and Their Impact on Motor Insurance Underwriting in Kenya (Effective July 1, 2025)
Starting July 1, 2025, Kenya’s automotive and insurance sectors are bracing for a significant shake-up. The Kenya Revenue Authority (KRA) has introduced new valuation rules for used car imports, updating the Current Retail Selling Price (CRSP) schedule for the first time since 2019. This update not only recalibrates how customs duties are calculated but also has far-reaching implications for motor insurance underwriting.
Whether you’re a car buyer, importer, insurer, or industry observer, understanding these changes is essential. This blog dives deep into the new valuation framework, its rationale, the expected impact on vehicle prices, and how motor insurance companies will adjust their underwriting models to reflect the new reality.
Key Takeaways
- KRA has updated vehicle valuation rules for the first time since 2019
- Taxes on imported used vehicles will increase significantly
- Small cars and commercial vehicles face the steepest price hikes
- Motor insurance premiums will rise due to higher vehicle values
- Insurers are adjusting risk models and claims reserves
- Industry reactions are mixed with potential legal challenges
Table of Contents
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Join WhatsApp GroupWhat Are the New Valuation Rules?
The CRSP is the official price list KRA uses to determine the customs value of imported used vehicles. This valuation forms the basis for calculating multiple taxes, including:
| Tax Type | Previous Rate | New Rate | Impact |
|---|---|---|---|
| Import Duty | 25% | 35% | Significant increase |
| Excise Duty | 20-35% | 20-35% | Varies by vehicle type |
| Value Added Tax (VAT) | 16% | 16% | No change |
| Import Declaration Fee | 2.5% | 2.5% | No change |
| Railway Development Levy | 1.5% | 1.5% | No change |
The July 2025 update is the most comprehensive revision of the CRSP since 2019. It expands the vehicle database from about 3,000 to over 5,200 models, incorporating detailed trim levels, drivetrain options, and performance specifications. The update also factors in currency depreciation and inflation to reflect current market realities more accurately.
Why the Change? Understanding the Rationale
The last CRSP update was six years ago, and a lot has changed since then. Kenya’s currency has depreciated from roughly KES 100 to KES 130 per US dollar, global vehicle prices have shifted, and the local market has evolved with new models and variants.
KRA’s Objectives with the New CRSP
KRA’s goals with this update are clear:
- Enhance transparency and reduce tax evasion by basing valuations on up-to-date, realistic prices
- Align import duties with current economic conditions to protect government revenue
- Ensure fairer taxation by covering a broader spectrum of vehicle models and specifications
The update followed extensive consultations with industry stakeholders, including car importers, freight forwarders, and dealer associations, ensuring that the new CRSP reflects real-world market trends.
How Will Used Car Prices Change?
The immediate effect of the new CRSP is an increase in the taxable value of many imported used vehicles, leading to higher overall costs for buyers.
| Vehicle Category | Example Models | Estimated Price Increase | Primary Reason |
|---|---|---|---|
| Small Cars | Toyota Vitz, Honda Fit | Up to 145% | Higher import duties |
| Commercial Vehicles | Toyota Probox, Nissan Vanette | 30-60% | Increased excise duty |
| Luxury Sedans | BMW 5 Series, Mercedes E-Class | 20-40% | Higher valuation + duties |
| Performance Vehicles | Porsche 911, BMW M Series | 25-45% | Increased excise duty |
| Luxury SUVs | Range Rover, Mercedes GLE | 5-15% decrease | Reclassification benefits |
Small cars face the steepest tax hikes, with some models seeing import duty increases of up to 145%. Popular models like the Toyota Probox, a staple for commercial use, will become more expensive due to higher duties. Luxury and high-performance vehicles such as the Porsche 911 Turbo S and BMW M5 will also attract higher taxes because of increased excise duty rates. Interestingly, some luxury SUVs may see marginal tax reductions due to reclassification and updated pricing.
Overall, buyers should expect used car prices to rise by approximately 15-25% in the coming months, reflecting the cumulative effect of higher import duties, excise taxes, and VAT.
Impact on Motor Insurance Underwriting
The ripple effects of the new valuation rules extend beyond the car market into the insurance industry, particularly motor insurance underwriting.
1. Higher Insured Values
Motor insurance premiums are typically calculated based on the insured declared value (IDV) of the vehicle, which closely aligns with the vehicle’s market value. As import duties push up car prices, the IDV will rise accordingly.
2. Adjusted Risk Assessment
Insurers use vehicle value as a key factor in underwriting risk. Higher-valued cars often carry higher risks due to:
- Increased repair costs
- Greater likelihood of theft or targeting by criminals
- Higher costs for spare parts and specialized labor
3. Claims Settlement and Reserves
With increased vehicle valuations, insurers must also adjust their claims reserves to ensure sufficient funds are available to cover potential payouts. This could impact the overall financial health and capital requirements of insurance companies.
Insurance Resources
Industry and Consumer Reactions
The announcement of the new CRSP and associated tax hikes has elicited mixed reactions:
Concerns from Industry Players
Car importers and dealers warn that the increased costs may dampen demand, especially for small commercial vehicles vital to many Kenyans’ livelihoods. Consumers express concern over affordability, fearing that vehicle ownership will become out of reach for many.
Potential Legal Challenges
Some industry players have threatened legal challenges, arguing that the tax increases are excessive and could hurt the economy. Insurers are preparing to update their pricing models and educate customers about the reasons behind premium increases.
Positive Responses
Despite these concerns, many acknowledge that the update was overdue and necessary to curb undervaluation and tax evasion, which have long distorted the market.
Regulatory and Market Outlook
The new valuation rules are part of a broader regulatory push to modernize Kenya’s automotive and insurance sectors:
Alignment with Global Standards
KRA’s move aligns with global customs valuation standards, improving transparency and compliance. Insurance regulators are expected to issue updated guidelines on motor insurance underwriting to reflect the new vehicle valuation landscape.
Market Shifts and Innovations
The market may see a shift in import patterns, with buyers favoring models with lower tax burdens or newer vehicles that offer better value. Insurers might innovate with new products, such as usage-based insurance or microinsurance, to cater to changing consumer affordability.
External Reference
For more information on insurance claims in Kenya, see this recent report:
Conclusion
The July 1, 2025 implementation of new valuation rules for used car imports marks a pivotal moment for Kenya’s automotive and insurance industries. While buyers will face higher vehicle prices, insurers will need to adapt underwriting practices to a new reality of increased insured values and claims costs.
For consumers, understanding these changes helps set realistic expectations about vehicle ownership costs and insurance premiums. For insurers and industry stakeholders, the update presents both challenges and opportunities to innovate and build a more transparent, sustainable market.
Staying informed and proactive will be key as Kenya navigates this significant transition. If you’re involved in buying, importing, or insuring vehicles in Kenya, now is the time to review your plans and prepare for these changes.
