Kenya's tax appeal tribunal has upheld the Kenya Revenue Authority's (KRA) decision to classify Ebee Mobility Kenya's consignment of e-bikes as fully built units rather than assembly parts, dealing a significant setback to the e-mobility startup. The ruling means that Ebee Mobility will have to pay higher taxes on its imports, which could have far-reaching implications for the country's e-mobility industry.

Ebee Mobility had argued that the bikes were imported in parts for local assembly, a classification that would have qualified for a lower 10% tax rate. However, the KRA maintained that the shipments included complete e-bikes, missing only the batteries, and should attract a 25% import duty, 16% Value Added Tax (VAT), and excise duty at $81 (KES10,520) per part.

The tribunal's ruling comes amid Kenya's efforts to promote local assembly by lowering taxes, particularly for e-mobility startups. The decision raises questions about the consistency of Kenya's tax policies in supporting the sector. Industry stakeholders have previously expressed concerns that unclear tax policies could discourage local assembly by making imports more expensive.

KRA initially demanded $53,302 (KES 6.9 million) in back taxes from Ebee in November 2023, before reducing the figure to $20,857 (KES 2.7 million) after Ebee applied for a review. The KRA's filings indicated that Ebee had declared its shipments under a preferential tariff code meant to promote local assembly. However, a post-clearance audit found that the imported units were essentially complete bicycles, lacking only batteries, which should be taxed as fully assembled products under HS Code 8711.60.00.

Ebee argued that its batteries were sourced from Kenyan companies, which should qualify the imports as locally assembled products. However, the tribunal disagreed, emphasizing that the motor – not the battery – was the key component that defined an electric bike. "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," the tribunal stated.

The ruling could have broader consequences for Kenya's e-mobility industry, particularly for companies that rely on importing parts for local assembly. The decision may affect two-wheeler and electric vehicle assemblers like BasiGo, Ampersand, and Spiro, as it sets a precedent that motors in imported parts can determine tariff classification. It is unclear whether Ebee Mobility will appeal the ruling or push for policy revisions that offer clearer tax guidelines for partially assembled electric bikes.

The decision could also prompt other e-mobility startups to reassess their import strategies or explore alternative assembly models to ensure they qualify for lower tax rates. As Kenya positions itself as an emerging hub for e-mobility, the tribunal's ruling raises questions about the country's ability to provide a supportive regulatory environment for the sector.

Industry stakeholders will be watching closely to see how this ruling affects the e-mobility industry in Kenya and whether the government will take steps to clarify its tax policies and provide a more supportive environment for startups like Ebee Mobility.