Importing goods into Kenya can be a daunting task, especially when faced with high import duties and the complexity of customs regulations.
At Discount Capital, we understand the challenges that importers face, and we are here to offer a solution: Import Duty Financing. This innovative financial service allows businesses and individuals to bring in products without the burden of upfront costs, enabling them to manage cash flow more effectively and seize new opportunities.
In this comprehensive guide, we’ll explore what import duty financing is, how it works, and the numerous benefits it offers.
We’ll also delve into the specifics of import duties in Kenya, the application process, and frequently asked questions to help you navigate this financing option with confidence.
What is Import Duty?
Import duty is a tax imposed by a country’s customs authorities on imports and, occasionally, on exports to raise revenue for the government. This duty may also be referred to as customs duty, tariff, import tax, or import tariff.
What is Import Duty Financing in Kenya?
Import duty financing in Kenya is a financial service that allows you to bring your products into the country without having to pay for them upfront. This can be a significant advantage when importing from overseas, providing you with extra time to secure buyers before settling the costs.
Unlike traditional loans, import duty financing doesn’t require credit checks, allowing you to import more goods than you could with just cash savings.
Who Can Use Import Duty Financing?
Import duty financing in Kenya is available to both businesses and individuals importing goods into their country. It is particularly useful for import companies, startups, and those looking to bring in expensive items they couldn’t otherwise afford.
Whether you’re dealing with high import duties or need to spread payments over time, this financing method can help you import more products than paying with cash savings alone.
Import duty financing is perfect for businesses of all sizes, especially those starting out with limited capital. This type of financing typically has lower interest rates than traditional loans, and unlike cash down payments, there’s no risk if your business fails, as there is with other forms of import duty factoring or finance.
How Does Import Duty Financing Work?
Import duty financing primarily uses invoice factoring. This involves selling import documents to the financing company. The business can then use the funds for various purposes, such as importing more goods or making other investments. Many import duty financing institutions, like Discount Capital in Kenya, leverage this technology to offer quick and effective credit decisions to individuals and SMEs.
How Much Can Be Financed?
The amount financed can cover all or part of the import duties paid to customs, typically based on a percentage of the invoice value or calculated as a flat fee.
Required Documents
To apply for import duty financing, you’ll need:
- An official copy from your supplier showing the total amount owed.
- Proof of payment, such as bank statements.
- Additional documents might be required based on our assessment.
Is Import Duty Financing Expensive?
Import duty financing often has lower interest rates than regular loans. For instance, it’s usually cheaper than using a high-interest credit card for imports. The quick application process, often completed in about an hour, makes it a convenient and valuable option.
Potential Business Risks in Import Duty Financing
While using any type of loan carries some risk, import duty financing specifically has short repayment periods. Missing a payment can affect your credit rating and result in higher interest rates or fees for future financing.
Import Duty in Kenya Explained
In Kenya, import duties conform to international assessment standards (HS) and the East African Community (EAC) Common External Tariff. Duties range from 0% to 25%, with sensitive items attracting higher rates. Additional taxes include:
- Excise Tax: As per the Excise Duty Act 2015.
- VAT: Standard rate of 16% unless exempt.
- Import Declaration Fee (IDF): 2% of the import value.
- Railway Development Levy (RDL): 1.5% of the import value.
Clearing Imported Goods in Kenya
Clearing goods requires working with a licensed customs clearing agency. Necessary documents include:
- Certificate of Compliance (CoC)
- Import Standard Mark (ISM)
- Pro Forma and Trade Invoices
- Bill of Lading or Airway Bill
- Certificate of Origin
- Translated Logbook (if applicable)
- Valid driving and ownership licenses
- PIN or TIN Certificate
- Exemption Declaration (if applicable)
- Contracts/Purchase Orders
- Payment Correspondence
Benefits of Import Duty Financing In Kenya
There are many benefits of import duty financing in Kenya, especially when dealing with a trusted lender like Discount Capital.
- No down payment required
- Lower interest rates than traditional loans
- Quick and easy application process
- Avoids high storage and demurrage charges
- Prevents auction of goods due to non-payment of duty
- Enables importers to purchase more expensive items without large upfront costs
Disadvantages of Import Duty Financing
Sometimes, you may not like import duty financing services in Kenya because:
- You don’t own the goods until fully paid
- Higher risk than other loans
- Interest rates can fluctuate with currency exchange rates
- Short repayment periods require timely payments to avoid penalties
Eligibility Criteria for Import Duty Financing With Discount Capital
To qualify for import duty financing with Discount Capital, applicants generally need to:
- Be a registered business or individual with import credentials.
- Have a clear import plan and relevant documentation.
- Maintain a good credit history (although this is not always a strict requirement).
- Demonstrate the ability to repay the financed amount within the agreed period.
Steps to Apply for Import Duty Financing
Applying for import duty financing with Discount Capital involves the following steps:
- Initial Consultation: Contact us to discuss your import needs and financial situation or use out tool to assess your pre-qualification here
- Document Submission: Provide the necessary documents, including supplier invoices and proof of payment.
- Assessment and Approval: Our team will review your application and determine the financing amount.
- Funding: Once approved, the funds will be disbursed to cover your import duties.
- Repayment: Repay the financed amount according to the agreed terms.
Common Challenges and Solutions
Importers may face several challenges, such as fluctuating exchange rates, delays in shipment, and changing customs regulations. At Discount Capital, we offer tailored solutions to mitigate these risks, including:
- Flexible repayment plans to accommodate cash flow variations.
- Expert advice on navigating customs regulations.
- Currency exchange services to lock in favorable rates.
FAQs about Import Duty Financing
Below are basic information regarding import duty in Kenya that might be of interest.
How is Import Duty Calculated?
- Import duty is 25% of the CRSP.
- Excise duty is 20% of the CRSP plus import duty.
- VAT is 16% of the CRSP plus import and excise duties.
- IDF Fee is 2.25% of the CRSP.
Can Import Duty Be Deferred?
- Some financing options may allow deferral; check with your lender for specifics.
Who Can Apply for Import Duty Financing?
- Businesses and individuals who meet the lender’s criteria, often including owning or renting business premises.
What is Customs Duty?
- Charges applied on goods transported internationally, varying by country and goods.
What Does It Cost to Ship a Car from Japan to Kenya?
- Importing a car costs 30-60% of its value, plus additional taxes and fees.
What is Excise Duty in Kenya?
- An additional tax on specific goods and services, collected by the KRA.
Let Discount Capital Help You Bring Your Goods Home With Our Friendly Import Duty Financing In Kenya
Import duty financing in Kenya is a flexible and beneficial option for businesses and individuals looking to import goods into Kenya.
With lower interest rates, no down payments, and a quick application process, it allows importers to expand their operations and manage cash flow more effectively. However, it’s essential to understand the risks and repayment terms to ensure this financing method aligns with your business needs.
For more information or to apply for import duty financing, contact us at Discount Capital. We’re here to support your business growth and help you navigate the complexities of importation with ease.
