Excise Licensing in Kenya: KRA Requirements for Manufacturers and Importers

Manufacturing or importing excisable goods, or supplying excisable services, without the right licence is an offence in Kenya, and the unlicensed operator is also liable for the excise duty itself. Excise licensing in Kenya is administered by the Kenya Revenue Authority (KRA) under the Excise Duty Act, 2015. This guide explains who needs a licence, how the Commissioner decides applications, what a licensed person must do, and how a licence is suspended or cancelled.

What Is Excise Duty

Excise duty is a tax on goods and services listed in the Schedules to the Excise Duty Act. Unlike value added tax, which applies broadly, it targets specified products and services. The Act also taxes services such as gaming, prize competitions and lotteries, each at five per cent of the relevant amount in the Schedule. The rates and the list of items change frequently through Finance Acts, so always check the current Schedule for your product.

Who Needs an Excise Licence

Section 15(1) provides that a person shall not undertake any of the following activities unless licensed or registered by the Commissioner:

• manufacturing excisable goods in Kenya;
• importing excisable goods that the Cabinet Secretary has specified as requiring an excise stamp;
• supplying excisable services;
• using spirit or illuminating kerosene to manufacture goods that are not excisable goods;
• importing, distributing or handling methanol or ethanol; and
• any other activity for which the Commissioner, by Gazette notice, imposes a licence requirement.

The consequence of operating unlicensed is financial as well as criminal. Under section 15(2) and (3), a person who manufactures excisable goods or supplies excisable services in contravention of the section is liable for the excise duty payable at the First Schedule rate. That duty is payable on demand and is in addition to any penalty under the Act or the Tax Procedures Act.

How the Application Works

Under section 16, you apply to the Commissioner in the prescribed form, with the prescribed fees, lodged in the prescribed manner. Under section 17(1), the Commissioner must consider the application within fourteen days of receiving the required documents and may grant or refuse the licence.

Section 17(2) lists the grounds on which the Commissioner may refuse an application:

• the applicant has been convicted of an offence under the Excise Duty Act or the Tax Procedures Act;
• the applicant has been convicted of an offence involving dishonesty or fraud under any law;
• the applicant is or has been declared bankrupt or insolvent, or is in liquidation or receivership;
• for a manufacturer, the factory, plant or equipment specified is not adequate to manufacture or secure excisable goods;
• the applicant has not kept proper records as required under any tax law, or has otherwise failed to comply with tax obligations; or
• the convictions, insolvency or record-keeping grounds apply to a related person who is reasonably expected to be involved in the activity.

The Commissioner must give written notice of the decision, with reasons if the application is refused (section 17(4)), and may impose terms, conditions or restrictions on a licence (section 17(3)). A licence remains in force until cancelled under section 21, unless earlier suspended (section 17(5)), so there is no annual renewal under the Act.

What the Licence Covers

A manufacturer’s licence specifies the class or classes of excisable goods and the factory or factories where manufacture is permitted (section 18(2)). The factory may be used only for the specified classes, and only the licensed manufacturer may manufacture there (section 18(3) and (4)). Manufacturing in premises not specified on the licence is an offence under section 39(2).

Duties of a Licensed Person

Section 19 requires a licensed person to display the original licence at the principal place of business and, for excisable services, a certified copy at every other place of business. The licensed person must also notify the Commissioner in writing if:

• the activity ceases;
• there is a change in name, address, place of business, ownership, constitution or the nature of the principal activity;
• operations are closed temporarily; or
• a manufacturer changes the factory, plant or equipment specified in the licence.

Failure to comply with section 19(1) or (2) is an offence under section 39(3).

Excise Stamps

Section 28 allows the Cabinet Secretary to specify by regulations which excisable goods must carry excise stamps, the systems for managing stamps and excisable goods, and the place and time of affixing stamps. Goods that require a stamp may not be removed from the place designated for affixing stamps unless stamped as the regulations provide (section 28(4)). Plant, goods or materials involved in an offence relating to sections 15, 18, 19 or 28 are forfeited to the Commissioner in addition to any other penalty (section 39(6)).

Returns and Payment of Duty

A licensed manufacturer or supplier of excisable services must file an excise return for each calendar month by the twentieth day of the following month, whether or not duty is payable (section 35). Payment deadlines differ by activity:

• licensed manufacturers pay duty on goods removed from the factory during a month by the twentieth day of the next month (section 36(1));
• manufacturers of alcoholic beverages pay by the fifth day of the following month (section 36(1A));
• suppliers of excisable services pay by the twentieth day of the following month (section 36(2)); and
• importers pay at the time of importation (section 36(3)), with the East African Community Customs Management Act, 2004 applied as if excise duty were customs duty (section 36(4)).

Section 83(1)(c) of the Tax Procedures Act (Cap. 469B) imposes a penalty for late or missing excise returns of five per cent of the tax payable under the return or KES 10,000, whichever is higher.

Suspension and Cancellation

Under section 20, the Commissioner may suspend a licence if the licensed person has not kept proper records, has breached a licence condition, has made a false or misleading statement, or has failed to comply with obligations under the Act. For a manufacturer, suspension is also available where the factory or equipment is no longer adequate. The licensed person may appeal a suspension in writing within fourteen days of service of the notice (section 20(4)). The Commissioner must then, within fourteen days, accept the appeal, give at least fourteen days to remedy the deficiencies, or reject the appeal and cancel the licence (section 20(5)). Section 21 requires cancellation where the licensed person fails to appeal in time or fails to comply with a remedial notice.

Offences and Penalties

A person convicted of an offence under section 39 is liable to a fine of up to KES 5,000,000, imprisonment for up to three years, or both (section 41(1)). Where the offence relates to excisable goods, the court may impose a fine of up to the higher of the maximum fine and three times the value of the goods (section 41(2)).

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.