Ebee Mobility has lost a big tax case with KRA over classification of imported electric bicycles. The case raises a big question for Kenyas e-mobility sector: When is a bicycle just a collection of parts?

The Nitty Gritty

Ebee Mobility was importing what they claimed were bicycle parts for local assembly and were benefiting from 10% tax rate under the manufacturing incentive program. They also sourced their batteries from Ugandan suppliers, arguing that since they didn’t have batteries in their imports, they were incomplete and qualified for the lower tariff.

But a KRA audit found that these shipments had motors integrated into the rear wheel assemblies – effectively making them complete electric bicycles not just parts. KRA ruled that such imports should be taxed at a higher rate:

  • 25% import duty

  • 16% VAT

  • $81 excise duty per unit

Tribunal’s Ruling: Motor is what defines an E-Bike

The tax tribunal ruled in favour of KRA, saying the defining feature of an electric bicycle is the motor, not the battery. The tribunal put it this way: “Even if the bicycle has a battery, and there is no motor to convert the electrical energy to kinetic energy to propel the bike, then the battery has no value in turning the bike into electrical.” This confirmed KRA’s stance that Ebee’s imports should be taxed as complete units.

Implications for Kenyas E-Mobility Industry

This ruling goes beyond Ebee Mobility and could have far reaching implications for Kenyas e-mobility sector, especially for companies like BasiGo, Ampersand and Spiro. It redefines what is considered local assembly, making it harder for companies to access Kenya’s tax incentives for manufacturing.

While Kenya has been encouraging local production and assembly of electric vehicles, this decision means companies must do more than just not have batteries to qualify for lower import duties. They must not have key components like motors to qualify as complete units.

Financial and Market Impact

Ebee Mobility faces a financial hit as KRA initially demanded $53,302 in back taxes and later reduced it to $20,857 after review. While this may not be a business killer, it raises questions on the tax policies for companies investing in sustainable mobility solutions in Kenya.

The bigger question is how will this tax interpretation impact Kenya’s e-mobility hub ambitions? If tax classifications make it hard for companies to establish local assembly operations, the country may not attract investments in the sector.

What’s Next for E-Mobility in Kenya?

The ruling shows we need clearer tax guidelines that support Kenya’s vision for sustainable transport and fair taxation. As more companies join the electric mobility space, similar disputes will arise and we need stakeholders – both in government and industry – to establish transparent regulations that balance growth and tax compliance.

For now, businesses in e-mobility space must walk a narrower than expected line between ‘import’ and ‘local assembly’, re-strategize to comply with KRA’s interpretation while keeping prices affordable for consumers.