The Kenyan Treasury has proposed to exempt importers of rotor-wing and certain fixed-wing aircraft, aircraft engines, spare parts and simulators from paying 16% Valued Added Tax (VAT) to spur growth in the local aviation sector.

Delivering his first Financial Year 2023/2024 Budget Statement to the National Assembly on June 15, Cabinet Secretary for the National Treasury and Economic Planning, Njuguna Ndung’u, said the move would also reduce the administrative burden on operators of accessing VAT exemptions.

Kenya currently charges 16% VAT on all taxable goods, services, and imports.

Currently, helicopters and other aircraft of unladen weight not exceeding 2,000 kilogrammes are subject to VAT. Some spare parts are expressly exempt from VAT, but VAT exemption on any other imported aircraft spare parts must be applied for through the Kenya Civil Aviation Authority (KCAA).

Ndung’u said Treasury had noted that “the cost of aircraft maintenance and training activities has been high, prompting airlines to prefer undertaking these activities in other jurisdictions”.

“In order to ease the process of VAT exemption of aircraft spare parts and encourage investment in this area, I propose to the National Assembly to remove VAT on all aircraft, simulators for training our pilots and aircraft spare parts. This proposal to expressly exempt from VAT all aircraft and spare parts […] will spur the growth in the aviation sector and reduce [the] administrative burden of accessing its VAT exemption,” he said.