Disabled Persons Exempted From Custom Taxes On A Car Import

Case Study : Mutava v Commissioner of Customs and Border Control (Tax Appeal E825 of 2024) [2025] KETAT 176 (KLR)

• Ngina, who is a disabled person, applied for tax exemption on the importation of a used Toyota Harrier Hybrid. Under Paragraph 8 of the 5th Schedule of the East African Community Customs and Management Act, 2004 (EACCMA).
• The KRA rejected the application, stating that her disability did not meet the legal criteria for exemption. Ngina sought a review of this decision, which KRA again rejected on July 22, 2024.
• Aggrieved, Ngina filed this appeal before the Tax Appeals Tribunal on July 26, 2024.

Key Legal Issues

1. Was Ngina entitled to Customs Duty and VAT exemption under Paragraph 8 of the 5th Schedule to the EACCMA?
2. Was the KRA’s Review Decision of July 22, 2024, justified?

Ngina’s Arguments:

• Legitimate Expectation: Since she held a valid tax exemption certificate, she had a reasonable expectation that her vehicle importation would also qualify for exemption.
• Disability Rights Violated: KRA’s decision was discriminatory and violated her rights under Articles 27, 28, and 54 of the Constitution of Kenya.
• KRA’s Internal Procedures Were Unfair: Requiring taxpayers to purchase and ship a car before seeking exemption was unreasonable and unjust.
• Misinterpretation of the Law: KRA wrongly applied the law by insisting that only physically modified vehicles qualify for exemption.

KRA’s Arguments:

• Exemption Was Not Automatic: The income tax exemption certificate did not extend to Customs Duty or VAT.
• Vehicle Was Not “Specially Designed” for Disability Use: The Toyota Harrier Hybrid was an automatic car but not modified for disabled persons, which is a legal requirement for exemption.
• Statutory Interpretation: The EACCMA, Persons with Disabilities Act (PWDA), and VAT Act require that the vehicle be specifically designed or modified for disabled persons to qualify for exemption.

Tribunal’s Findings (21/03/2025)

1. Appellant’s Disability Qualified for Exemption: The expert medical opinion of Prof. Erastus Amayo confirmed Ngina’s condition. KRA did not challenge this medical report or provide an alternative expert opinion.
2. KRA Misapplied the Law on “Specially Designed” Vehicles: Paragraph 8 of the 5th Schedule to EACCMA does not limit exemption only to physically modified vehicles. The law broadly covers all persons with disabilities, not just those requiring modified vehicles. Failure to define “special design” created ambiguity, which must be resolved in favor of the taxpayer.

Section 8 of the 5^th Schedule to the EACCMA provides that;

Disabled, Blind and Physically Handicapped Persons

Materials, articles and equipment, including one motor vehicle, which:

a)  are specially designed for use by disabled or physically handicapped persons or;

b) are intended for educational, scientific or cultural advancement of the disabled for use of an organization approved by the Government for the purpose of this exemption:

Provided that;

1)  the exemption in respect of the motor vehicle shall not apply to paragraph (b);

2) a person shall be accorded an exemption on a motor vehicle once in every four years;

3) one motor vehicle, which the Commissioner in a Partner State, is satisfied, is imported as a replacement of another motor vehicle originally imported under (2) and which has been written off due to accident, fire or theft.

Provided that customs duty shall be payable at the appropriate rate if the written off motor vehicle is disposed of locally.”

3. KRA’s Decision Was Procedurally Unfair: KRA’s internal processes were unjust, forcing applicants to purchase vehicles before exemption approval. Lack of clear criteria made the process discriminatory.

4. KRA’s Review Decision Was Unjustified: No rational basis was provided for rejecting the exemption. KRA failed to adequately explain its decision, violating Article 47 of the Constitution (Fair Administrative Action).

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