On Tuesday 23 June, the Kenyan National Assembly passed the 2020 Finance Bill that will result in the introduction of a 14% VAT on off-grid solar products.
The adopted Bill removed the current VAT exemption for “specialized equipment for the development and generation of solar and wind energy, including deep cycle batteries which use or store solar power upon the recommendation of the Cabinet Secretary responsible for matters relating to energy.” This in effect meant that, likely effective 1 July 2020, the status of solar equipment and accessories which were exempt would now be subject to VAT at the rate of 14%.
GOGLA’s position on the introduction of VAT is as follows:
GOGLA and the local industry have been heavily involved in the discussions and negotiations related to this legislative development over the last few months. A previous similar proposal to reintroduce VAT was already proposed by the National Treasury in April, an effort ultimately rejected by the National Assembly through efforts of GOGLA and other stakeholders on grounds that it would conflict with the national priorities for universal energy access. This week’s development, which was clarified by the National Treasury to protect the local manufacturing industry, is disappointing and worrying.
The country was well poised to continue to make significant progress in bringing energy access to vast areas of the country through off-grid solutions that the government already realizes and acknowledges cannot be served otherwise. The introduction of new taxes on off-grid solutions will hamper this progress by affecting job creation and important improvements in quality of life and solutions that are bringing new opportunities for economic activity to these hard to reach communities.
We remain confident that the government is still committed to realize universal energy access by 2022, as His Excellency President Uhuru Kenyatta reiterated at the 2020 Off-Grid Solar Forum in Nairobi. Over the next few weeks and months, GOGLA will continue to engage with the government and all relevant stakeholders to pursue a suitable policy solution that will enable the off-grid industry to effectively help reach this goal.