Excise Duty Act

This Act may be cited as the Excise Duty Act.

Section 2 lists defined terms used in the Act and indicates that certain terms have meanings assigned under other Acts or the Regulations.

Defines "open market value" for excisable goods or services as the wholesale price they would reasonably fetch in an arm's length transaction at a particular time; if that value cannot be determined, it is the objective approximation according to the Fourth Schedule of the East African Community Customs Management Act.

Section 4 defines the time of supply or importation: for services it is when services are performed, when the invoice is issued, or when payment is received; for betting it is when a wager is placed on a bookmaker's platform; for excisable goods it depends on customs or warehouse clearance or the time goods are brought into Kenya.

Section 10 is repealed.

When the excisable goods are sold by the manufacturer in an arm's length transaction, the ex-factory selling price is the price payable by the purchaser.

Section 12 sets rules for computing excise duty when rates are by volume or weight and establishes that the Commissioner may determine tare or wastage allowances and their conditions.

A supply of excisable services is treated as made in Kenya when the services are supplied from the supplier's place of business in Kenya.

Excise duty already paid on raw materials or on bulk-purchased internet data services must be offset against the excise duty payable on the finished goods or on internet data services supplied to the final consumer, respectively.

Section 5 imposes excise duty on goods or services in Kenya and assigns who must pay depending on whether the good/service is manufactured, supplied, imported, or offered by a non-resident via a digital platform.

Specifies when excise duty liability arises: for licensed manufacturers when goods are removed from the factory; consumed factory goods are treated as removed at consumption; for excisable services at supply; for petroleum products on importation or another time the Cabinet Secretary specifies; other imported excisable goods on importation. Licensed persons and importers must pay or discharge liabilities in accordance with section 36.

Lists classes of goods and services that are not liable to excise duty and gives the Cabinet Secretary the power to grant remission of excise duty (wholly or partially) for certain locally grown products by Gazette notice.

The Cabinet Secretary can, by order in the Gazette, amend the First Schedule to raise or lower excise duty rates by up to ten per cent; must lay such an order before the National Assembly within seven days of Gazette publication; may not impose excise duty on non-excisable goods or services; the National Assembly may disapprove within twenty days and, if it does, the order ceases to have effect.

When the First Schedule sets an excise duty rate by reference to the excisable value, the excisable value for goods includes the customs value and any customs duty payable, and may include VAT, excise stamp costs or returnable container costs; for services it is either the fee/commission in an arm’s length supply by a registered person or otherwise the open market value, and excludes VAT.

Certain activities in Kenya (including manufacture or importation of specified excisable goods, supply of excisable services, use of spirit or illuminating kerosene for non-excisable manufacture, and other activities the Commissioner may specify) require a licence; the Commissioner may, by Gazette notice, impose a licence requirement; a person who manufactures excisable goods or supplies excisable services in contravention of the licence requirement is liable for excise duty at the rate in the First Schedule, payable on demand and in addition to any penalty under this Act or the Tax Procedures Act.

A person who intends to undertake any of the activities specified in section 15(1) must apply to the Commissioner for a licence for those activities.

The Commissioner shall consider an application under section 16 and may grant or refuse to issue a licence; the Commissioner must give written notice of the decision and, if refused, include reasons; the Commissioner may impose terms, conditions or restrictions on a licence.

Only the person named as the licensed manufacturer in the licence must manufacture excisable goods in the factory specified in that licence.

Licensed persons must keep the original licence at their principal place of business (and, for excisable services, a certified copy at every other place) and must notify the authority of specified changes including cessation, changes of particulars, temporary closures, and for manufacturers changes to factory or equipment; different notification timing applies to unplanned and other closures.

The Commissioner must serve a licensed person with written notice when a licence is suspended; the person may appeal within 14 days (or further time the Commissioner allows); the Commissioner may accept and revoke, require corrective action with at least 14 days to remedy, or reject and cancel the licence.

Section 21 lists the specific grounds on which the Commissioner may cancel a licence and states that cancellation takes effect from the date specified in the notice; it also preserves any obligation or liability of a licensed person in respect of acts while licensed.

When a licence is suspended or cancelled the licensed person must stop the licensed activity immediately; licensed manufacturers must stop manufacturing, pay unpaid excise duty, and follow Commissioner directions for disposal or removal of excisable goods; the Commissioner may take control of factories and require payment of costs by notice.

Before suspending a licence, the Commissioner must give the licensee 21 days' notice stating the grounds; the notice may require the licensee to remedy circumstances, and if the licensee fails to comply the Commissioner may suspend the licence.

Excisable goods stored in the factory of a licensed manufacturer are under the control of the Commissioner; authorised officers may examine them; no person may remove or interfere with them except with the Commissioner's authority; the Commissioner may permit abandonment and direct destruction or disposal at the owner's expense.

Licensed manufacturers must maintain measuring equipment, store and account for excisable materials and goods, keep monthly materials and finished-goods accounts in approved forms, ensure excise duty is paid on goods consumed at the factory, and comply with Regulations.

Except for licensed distillers or rectifiers, no person may keep or use a still, subject to subsection (2) exceptions.

Licensed manufacturers who cannot account for excisable goods are treated as having removed them from excise control; licensed manufacturers must notify the Commissioner of inventory discrepancies as soon as they become aware.

If a determination under subsection (1) is made, the Commissioner must issue an assessment giving effect to that determination; determinations under subsection (1) must be made within five years from the last day of the month in which the excise duty liability arose.

Licensed persons may add increased excise duty to agreed prices after paying the duty; purchasers may deduct reduced or abolished duty from agreed prices if the licensed person has not paid or paid less; refunds or increased duty payments not finally adopted must be adjusted between the parties; where price-control law exists, prices may still be varied in strict accordance with excise duty changes when the licensed person is affected.

The East African Community Customs Management Act, 2004 (and its rules) applies, with prescribed exceptions and adaptations, to imported excisable goods as if they were liable to customs duties and those duties included excise duty.

Regulations under this Act may prescribe fees or charges on excisable goods imported into or manufactured in Kenya, may prescribe matters required by the Act, and may provide that contravening the Regulations is an offence punishable on conviction by a fine specified in the Regulations.

The section repeals the Customs and Excise Act and sets transitional arrangements including continued application of certain provisions and treatment of registrations and licences under the repealed Act (treated as under this Act unless the Commissioner notifies otherwise).

Requires the Commissioner to specify excise stamp types by national notice; prohibits removal of goods before stamps are affixed and several acts (possession, counterfeiting, printing, dealing in unstamped or counterfeit-stamped goods); allows the Commissioner, with Cabinet Secretary approval in exceptional circumstances, to permit removal without stamps; and prescribes penalties up to a fine of five million shillings or three years imprisonment, or both.

Licensed persons may apply to the Commissioner for refunds of excise duty; the Commissioner may refund if payment was not received; if a licensed person later recovers refunded duty from a purchaser they must repay it within 30 days.

If excisable goods that received an excise duty refund are later disposed of or used inconsistently with the refund purpose, the holder must notify the Commissioner with particulars and pay the excise duty.

An importer must pay excise duty when goods exported or shipped for use as stores in international traffic are later unloaded in Kenya for home use, at the rate in force at unloading.

If a person imports or purchases excisable goods that were exempt but later disposes of or uses them inconsistently with the exemption, that person must pay excise duty; however, excise duty is not payable for a motor vehicle transferred by inheritance or bequest when the owner (a natural person) dies.

The Tax Procedures Act (Cap. 469B) shall, subject to this Part, apply for administering this Act.

Persons liable to pay excise duty must keep records specified in this Act or the Regulations and must retain those records for the time period and in the manner specified in the Tax Procedures Act (Cap. 469B).

Licensed manufacturers and suppliers of excisable services must submit a monthly excise duty return in the approved form and prescribed manner by the twentieth day of the following month, even if no excise duty is payable.

Specifies when excise duty must be paid by licensed manufacturers, suppliers of excisable services, importers, and requires the Commissioner to remit 16% of mobile money excise duty into a social development fund.

Bookmakers must remit excise duty on betting and gaming offered through a platform to the Commissioner within twenty-four hours from the closure of transactions of the day; the Commissioner may require taxpayers in any sector by Gazette notice to do the same.

Licensed manufacturers must provide security for excise duty as specified by the Commissioner; the Commissioner may require security and may refuse removal, exportation, processing of declarations or licensing pending security; persons required must provide security in accordance with the Tax Procedures Act (Cap. 469B).

Section 38 prescribes penalties: (a) for persons under section 15(1)(a) a penalty equal to double the excise duty that would have been payable if licensed or five million shillings, whichever is higher; (b) for persons under section 15(1)(b) a penalty equal to double the excise duty payable or five million shillings, whichever is higher for importation of excisable goods requiring an excise stamp; licensed manufacturers using premises not specified on the licence are liable to a penalty equal to double the excise duty payable on those goods; similar double-duty penalty applies where section 27(1) deems removal from excise control; the Tax Procedures Act (Cap. 469B) applies to these penalties.

Section 39 lists offences including contravention of specified sections, manufacturing excisable goods outside licensed premises, failing to comply with section 19, unauthorised removal or interference with excisable goods, buying or possessing unlawfully manufactured or removed excisable goods, and forfeiture of goods/plant to the Commissioner where offences under listed sections are established.

Section 40 is repealed.

A person convicted of an offence under sections 39 and 40 is liable to a fine up to five million shillings or imprisonment up to three years, or both; subsection (2) provides alternative maxima including the maximum fine specified for the offence or three times the value of the excisable goods, whose value is determined under section 9.

A person who contravenes any provision of the Act or its regulations (where no specific penalty is provided) commits an offence and, on conviction, is liable to a fine not exceeding two million shillings or to imprisonment for a term not exceeding two years, or to both.