Download EY - East Africa Budget 2015/2016

Proposal title
Date
Budget
2015/2016
Economic and Tax focus
Cont
2015 Economic outlook
Business and Personal Taxation
1.1 Global Economic Outlook
1
2.1Capital Gains Tax
11
1.2 African Economic Outlook
2
2.1.2 Taxation of gains on property
1.2.1 EAC Economic Outlook
2
other than investment shares
11
1.2.2 Kenyan Economic Outlook
4
2.2 Tax loss Utilization Period
12
1.2.2.2 Sectoral Analysis 5
2.3 Definition of training fees clarified
12
1.3 Economic Outlook for 2015 and Beyond 8
2.4 Income from residential property
12
1.4 Proposed Budget Estimates
8
2.4.1 Residential rental income tax 12
1.4.1 Proposed Expenditure 2015/16 8
2.4.2 Withholding tax on rent
12
1.4.2 Expenditure Allocation
8
2.4.3 Tax amnesty for landlords
13
1.4.3 Proposed Expenditure Financing 9
2.5 Specified sources of Income
13
2.6 Film Industry13
2.6.1 Payments made to actors
and crew members
13
2.6.2 Capital Deduction
13
2.7 Rebate to employers with
apprenticeship programs
13
2.8 Capital Deductions
13
2.9 Rates of taxes
14
2.9.1 Corporation Tax rate 14
2.9.2 Winnings from bookmakers 14
2.10 The extractive Industry
14
2.10.1 Taxation of Subcontractors 14
tents
Indirect taxes
Tax modernization
3.1 Value Added Tax
16
3.1.1 Definitions
16
3.1.2 Lodging of VAT claims
16
3.1.3 Withholding VAT agents
16
3.1.4 Change of VAT status
16
3.1.4.1 List of exempt
supplies expanded
to include:
16
3.1.4.2 Zero-rated supplies
expanded
to include - 16
3.1.4.3 Previously exempt
supplies
now taxable 17
3.2 Customs and International Trade
17
3.2.1 Amendments in relation to the
EAC Common External
Tariff (CET)
17
3.2.2 Increases in CET rates 17
3.2.3 Decrease in CET rates 17
3.2.4 Stay of application of
CET rates
18
3.2.5 Duty Remission
21
3.2.6 Harmonization of Export Duty
on Hides and Skins
21
3.3 Excise Duty22
3.4 Miscellaneous Bill, 2015
22
4 Tax modernization
Miscellaneous provisions
23
61 Retirement Benefits Act
6.2 Amendment of the Proceeds
of Crime and Anti-Money
Laundering Act
6.3 Amendment to the
Consumer Protection Act
6.4 Exemption of Stamp
Duty for Asset Transfer
to REITs 6.5 Road Maintenance
Levy Fund Act
29
29
29
29
29
Financial Sector Amendments
5.1 Banking Act (Cap.488)
26
5.1.1 Annual Licensing
26
5.1.2 Minimum Core Capital 26
5.1.3 Central Bank Act 26
5.2 Insurance Act (Cap. 487)
26
5.2.1 Minimum core capital 26
5.2.2 Investment provisions 27
5.2.3 Insurance agents
27
5.2.4 Supervisory power
of the Regulator
27
Regional Highlights
7.1 Uganda
7.2 Tanzania
7.3 Rwanda
specific amendments
31
31
31
2015 Economic Outlook
1.1 Global Economic Outlook
Iceland
Finland
Norway
Russia
Sweden
Estonia
Latvia
Lithuania
Denmark
Canada
Ireland
U. K.
Isle of Man
Jersey
Guernsey
Portugal
United States of America
Neth.
Germany
Poland
Belarus
Belgium
Czech
Ukraine
Luxemburg
Slovakia
Austria Hungary
Moldova
Switz. Slovenia
Romania
France
Italy
Serbia
Montenegro Bulgaria
Macedonia
Spain
Albania
Greece
Bermuda
Mauritania
Belize
Jamaica
Barbados
Honduras
Guatemala
Aruba Curacao
Nicarogua
El Salvador
Tobago
Trinidad
Panama
Costa Rica
Venezuela
Colombia
Libya
Kuwait
Bahrain
Qatar
Egypt
Suriname
French Guiana
Sierra Leone
Liberia
Ivory Ghana
Coast
Chad
Thailand
Cambodia
Djibouti
South
Sudan
Cameroon
Equatorial
Guinea
Democratic
Republic of
Congo
Peru
Congo
Ethiopia
Uganda
Burundi
Vietnam
Philippines
Northern Mariana Islands
Guam
Sri Lanka
Somalia
Maldives
Malaysia
Brunei
Kenya
Seychelles
Rwanda
Indonesia
Tanzania
Comoros
Brazil
Angola
Malawi
Zambia
Bolivia
ZimbabweMozambique
Namibia
Paraguay
Laos
Sudan
Nigeria
Gabon
Ecuador
Taiwan
India
Oman
Senegal
Gambia
Guinea
Japan
Pakistan
U. A. E.
Mali
Niger
Bissau
South
Korea
China
Afghanistan
Iraq
Saudi Arabia
British
Virgin Islands
Dominican Republic
Guyana
Syria
Jordan
Algeria
Western
Sahara
Bahamas
Cayman Islands
Lebanon
Israel
Morocco
Mongolia
Uzbekistan
Armenia Azerbaijan
Turkey
Cyprus
Malta
Tunisia
Mexico
Kazakhstan
Georgia
Botswana
Madagascar
Mauritius
Fiji
Reunion
Australia
Chile
Swaziland
Argentina
Uruguay
South Africa
Lesotho
New Zealand
In 2014, the Global economy expanded by 3.3% similar to the
revised growth recorded in 2013. Major economies and different
economic blocs registered divergent levels of economic growth
as reported below:
The United States of America’s economy recorded a growth of
2.2% in 2014 compared to 1.7% in 2013. Improved growth rate
was supported by expansionary monetary policy, high exports
and increased domestic consumption.
The Euro area GDP grew by 0.8% in 2014 compared to 0.4%
recorded in 2013. The rebound is attributable to accommodative
monetary policy, slowdown in fiscal consideration and eased
inflationary pressure due to low oil prices.
United Kingdom recorded an improved growth of 3.0% in real
GDP in 2014 compared to 1.7% in 2013. This was largely driven
by robust private consumption and strong business investment.
Japan recorded a decelerated growth of 0.4% in 2014 compared
to a growth of 1.5% in 2013. The slower growth was partly
attributed to decreased domestic demand arising from an
increase in consumption tax from 5.0% to 8.0% implemented in
2014.
Emerging Economies of Brazil, Russia, Indonesia, India, China
and South Africa (BRIICS) recorded a slower growth in GDP
growth of 3.4% in 2014 compared to a growth rate of 4.5% in
2013. The slower growth rate was mainly attributed to weak
external demand and weak private investment in Brazil, Russia
and South Africa.
Despite stagnant growth in global economy, economic activity in
sub Saharan Africa was robust with the GDP estimated to have
grown by 5.1% in 2014 compared to 4.4% in 2013. This was
supported by increased external demand and strong growth in
public and private investment.
It is expected that in 2015 most developed and developing
economies will experience improved growths subject to
continued recovery of financial markets in EURO area, improved
oil prices and expansion in world trade. More specifically, the
world economy is projected to grow by 3.5% in 2015 according to
the Kenyan Economic Survey.
1
Budget 2015/2016 | Economic and Tax focus
1.2 African Economic Outlook
Guinea
Bissau
Guinea
Mali
Niger
Egypt
Chad
Sudan
Burkina Faso
Ghana
Senegal
Gambia
Libya
Eritrea
Djibouti
Nigeria
Equatorial Guinea
Sierra Leone
Sao Tome
Liberia
Gabon
Côte d’Ivoire
Congo
EY office
No EY office,but
support available
Democratic
Republic of
Congo
Burundi
Angola
Namibia
Average GDP
Ethiopia
South
Central African Sudan
Benin
Republic
Togo Cameroon
Uganda
Somalia
Kenya
Rwanda
Tanzania
Comoros
6
Malawi
Zambia
Zimbabwe
Botswana
Mauritius
4
Reunion
Mozambique
South Africa
8
Seychelles
Mad
agas
car
Algeria
Western
Sahara
Mauritania
Real GDP in the East Africa Region increased by 5.8% in
2014 compared to a 5.3% growth in 2013. The growth was
supported by improved agricultural production coupled
with strong domestic demand as well as infrastructural
investments. The last three years EAC economies growth
rates are reported below:
Tunisia
co
oc
or
M
Cape
Verde
1.2.1 EAC Economic Outlook
Swaziland
2
Lesotho
Most Africa economies experienced low inflationary pressures
due to low oil prices and declined food prices. These
developments, together with prudent fiscal policies, led to
reduced interest rates. However, in some other countries
where fiscal policy was weak and exchange rate expanded, the
monetary policy tightened to stem inflationary pressure.
The Africa economy growth is expected to expand to 5%
in 2015. The expansion will be supported by increased
external and internal demand, expansion in public and private
investment and low inflation. The positive outlook is, however,
subject to some risks among them; large fiscal deficits in some
countries and tighter global financial conditions, uneven global
recovery and domestic security-related risks.
Budget 2015/2016 | Economic and Tax focus
EAC
Burundi
Uganda
Rwanda
On average Africa recorded a growth of 4.5% in 2014
compared to a growth of 4.0% recorded in 2013. Domestic
demand, foreign direct investment, infrastructure and
increased continental trade in manufactured goods led to
improved Africa’s economic growth.
Tanzania
Kenya
0
Average GDP 2013
Average GDP 2014
The Africa economy
growth is expected to
expand to 5% in 2015.
2
EAC region inflation dropped to an average of 5.6 %in 2014
from 6.4 % reported in 2013 mainly on account of reduced
food and fuel prices.
The region’s current account deficit as a percentage of GDP
worsened to 12.4 % in 2014 compared to 11.8 % in 2013.
The future of EAC region looks promising due to interregional
infrastructural development especially in road, railway and
ICT. Further, continued integration is expected to increase
economic activities in the Partner States. Consequently the
EAC region is projected to register real growth of 6.2% in 2015
with Tanzania expected to record the highest growth of 7.0%.
Macroeconomic Statistics for EAC Countries, 2014
Indicator
Kenya
TZ
Uganda
Rwanda
Burundi
Population
(Mns)
45.6
50.8
38.9
12.1
10.5
GDP at
Constant
Prices(US$
Bns )
49.28
29.84
20.88
7.30
2.42
Real GDP
growth
5.3
7.2
5.9
6.0
4.7
Inflation (%)
6.9
5.9
5.5
2.6
7.0
Current A/C
Balance (%
of GDP)
-8.0
-13.8
-8.5
-7.1
-20.7
Sources: Economic Surveys 2015 & Oxford Economics data 2015
3
Budget 2015/2016 | Economic and Tax focus
1.2.2 Kenyan Economic Outlook
Turkana
Lou
Inflation: Average overall annual inflation increased modestly,
from 5.7% in 2013 to 6.9% in 2014. This was however within
Central Bank’s target. The modest increase in the rate of inflation
was attributed to increase in the cost of several foods and
non-food items, which outweighed notable falls in the cost of
electricity and petroleum products.
Galla
Luhya
Somali
Nairobi
Masai
Mijikenda
Kenya’s economy expanded by 5.3% in 2014, compared to a
growth of 5.7% reported in 2013. The growth was attributed
to increased domestic consumption and rapid growth in capital
investment.
Copyright © Free Vector Maps.com
The major drivers of the economy were agriculture, forestry and
fishing (14.5%); Building & construction (11.1%); wholesale and
retail trade (9.8%); education (9.7%); and finance and insurance
(9.1%).
During the year, the main macroeconomic indicators remained
relatively stable. Despite the Kenya Shilling depreciating against
the US dollar, Sterling Pound and Euro it held firmly against the
other major trading currencies.
Despite the drop in prices of fuel, electricity and some food
commodities, inflation rose slightly but remained within the
Central Bank (CBK) target. The Balance of Payments position
improved mainly on account of proceeds from the sale of the
Eurobond. However, the current account deficit worsened due to
deterioration in trade deficit.
Budget 2015/2016 | Economic and Tax focus
1.2.2.1 Selected Macroeconomic
Indicators
Exchange Rate: The Kenyan Shilling depreciated by 0.9 per cent
against major world currencies as reflected in the overall Trade
Weighted Index (TWI), which deteriorated from 107.06 in 2013
to 107.98 in 2014 associated with depreciation of the Shilling
against the currencies of major trading partners. The Shilling
was weak against the Sterling Pound, US Dollar, UAE Dirham,
Euro and Chinese Yuan though the Shilling gained against the
SA Rand, Japanese Yen and Indian Rupee. Within the EAC, the
Kenya Shilling strengthened against the Tanzanian Shilling by
7.4%. However, it depreciated against the Rwandese Franc and
Ugandan Shilling by 3.1% and 1.7% respectively in 2014.
Interest Rate: As a way of enhancing the transmission of
monetary policy signals through commercial banks’ lending rates,
the government introduced the Kenya Banks’ Reference Rate
(KBRR) and Annual Percentage Rate (APR) frameworks in July
2014.
During 2014, the interest rates recorded mixed movements
with the Central Bank Rate (CBR) standing at 8.5% throughout
the year. The 91-day Treasury bill rate dropped to 8.58% in
December 2014 from 9.26% in January 2014. On the other
hand, the interbank interest rate dropped from 10.43% in
January 2014 to 8.08% in July 2014 before hitting an all month
high of 11.79% in August 2014 and consequently falling to close
at 6.91% in December 2014.
4
The average weighted commercial lending interest rates
gradually declined from 17.03% to 15.99% supported by the
introduction of Kenya Banks’ Reference Rate (KBRR) and Annual
Percentage Rate (APR) frameworks in July 2014. The slight
decline in interest rates implies a decrease in cost of borrowing
by consumers in the local financial markets, which has a positive
effect on overall domestic consumption (and demand).
1.2.2.2 Sectoral Analysis
The table below reports Sectors’ Share to the GDP & Contribution
to GDP Growth:
Industry
The monthly trend of average lending, inflation and 91-day
Treasury bill rates in 2014 is detailed in the graph below:
% Share of Sector
Sources of Growth
to the GDP
%
2013
2014
2013
2014
26.4%
27.30%
20.80%
14.5%
10.7%
10.0%
10.90%
7.10%
Electricity and water
supply
2.00%
1.40%
2.70%
2.60%
9
Mining and
Quarrying
0.80%
0.80%
-1.50%
2.30%
0
Wholesales & Retail
Trade
8.10%
8.20%
11.00%
9.80%
1.20%
0.90%
-1.30%
-4.70%
Building &
Construction
4.50%
4.80%
4.6%
11.10%
Transport and
Communication
9.30%
9.50%
10.4%
13.40%
Financial
Intermediation
6.60%
6.70%
8.10%
9.10%
Real Estate, Renting
& Business services
4.10%
4.10%
6.00%
8.50%
5.30%
5.20%
7.50%
9.70%
1.60%
1.70%
2.30%
2.40%
91-Day Tbill
Interbank rates
19
Central bank
rates
14
Capital Market Activities: There was an increase in number of
traded shares by 7.4% to 8.1 billion compared to an increase of
38.7 % recorded in 2013. The total number of shares traded
increased by 7.4% to 8.1 billion in 2014 compared to an increase
of 38.7% recorded in 2013. Total number of deals made in the
equity market increased by 28.8 per cent to 548,991 in 2014
against the increase of 24.6 per cent in 2013. The value of
shares traded grew by 38.5 per cent to KSh 216 billion in 2014
compared to a growth of 81.4 per cent in 2013. Total Bond
turnover also increased from KSh 452 billion in 2013 to KSh 506
billion in 2014.
Agriculture, Forestry
& Fishing
Manufacturing
Hotels & Restaurants
Education
Health and Social
Services
Source: KNBS, Economic Surveys 2015 &
Oxford Economics Data 2015
5
Budget 2015/2016 | Economic and Tax focus
Agriculture: The sector recorded a decelerated growth of 3.5%
in 2014 compared to 5.2% recorded in 2013 by recording an
increase in value added from KSh 795.0 billion in 2013 to KSh
822.5 billion in 2014. In 2014, there was decline in maize
production to 39 Million Bags from 40.7 Million bags produced
in 2013. However, the negative effects were offset by increase
in other food commodities like irish potatoes and pulses.
Hotel & Restaurant: The hotel and restaurant sector
contracted to 17.2% in 2014 compared to a contraction of
4.6% recorded in 2013. This is associated to external shocks
associated to insecurity and travel advisories.
Transport and Storage: The sector recorded an accelerated
growth of 5% in 2014 compared to a growth of 1.2% reported
in 2013. The improvement in growth is associated with
increased demand for transportation of cargo due to increased
trade activities as well as a general increase in commuter
services. However, air transport sub-sector suffered a major
setback following the effects of Ebola epidemic in West Africa
coupled with adverse travel advisories by some major tourist
source countries.
In 2014, there was an improvement in railway freight with a
further decline in passenger traffic. The increase in freight
tonnage was attributed to enhanced cargo transportation
capacity through additional wagons acquired during the
year. While a decline in passenger traffic is attributed to the
stoppage of passenger transport services along the NairobiKisumu route.
Information, Communication and Technology: As a result of
increased uptake of ICT services, particularly usage of data and
stability in the growth of voice services, ICT sector remained
robust in 2014 with a growth rate of 13.4% against a growth of
12.3% recorded in 2013.
There was sustained internet usage mainly supported by
lower prices of data bundles and access to affordable internet
enabled mobile phones and subsequent increase in internet
users. In 2014, the number of internet users grew by 23.0% to
26.2 million from 21.3 million in 2013.
Mobile telephony market recorded a steady growth in
2014 with 18.2% expansion in capacity and 7.4% increase
in connections. However, there was a further decline in
fixed telephone capacity by 11% in 2014 attributed to
decommissioning of a number of exchanges.
Implementation of the digital migration saw quadrupling of the
number of TV stations with the entry of 36 digital TV stations
with analogue stations remaining unchanged at 14 stations.
Manufacturing: Manufacturing sector recorded a slowed
expansion of 3.4% in 2014 compared to 5.6% realised in 2013.
Despite the slowed expansion, the sector benefited from an
improved economic environment associated with supply of
cheaper and stable electricity, controlled inflation and strong
domestic demand.
There was suppressed external demand of industrial non-food
and processed fruits and vegetable products, beverages,
printing and production of recorded media contracted partly
on account of reduced domestic demand while manufacture of
sugar declined due a reduction in cane delivery. Production of
leather and related products declined partly due to increased
competition from imports.
To ensure enhanced growth in the manufacturing sector and
its consequent positive contribution to the GDP, the following
factors are key and should be monitored: there should be low
cost and adequate supply of labour and energy, availability
of raw materials, enhanced access to credit, infrastructure
development and increased efficiency of machinery and
equipment. These factors will help in the reduction of the cost
of production that is weighting negatively on sector.
Financial sector: The Financial sector recorded an 8.3%
growth in 2014 compared to 8.1% in 2013. This positive
growth was driven by increased uptake of loans and
advances, increased earnings from fees and commissions and
government securities. There were a number of improvements
and innovations in the financial sector. Full file credit
information sharing was introduced in February 2014 while the
CBK introduced Kenya Banks’ Reference Rate (KBRR) in July
2014 with the aim of enhancing transparency in credit pricing
within the banking industry. There was also the implementation
of Annual Percentage Rate (APR) framework in the third
quarter 2014 geared toward a credit pricing mechanism where
consumers are able to compare different bank loan costs.
1.3 Economic Outlook for 2015 and Beyond
The positive outlook of the global economy is expected to impact positively to Kenya’s economic growth. With most of the
macroeconomic indicators projected to remain stable and supportive of growth, the country’s economy is projected to grow by 6.2
% in 2015. Equally, increase in allocation of development budget to counties is expected to spur further economic growth. Further,
projected economic growth and development will be supported by continued expanded infrastructure development and capacity that
will enhance regional and global competitiveness, improved business environment, balanced regional development and competitive
sound financial sector.
Further, the government needs to focus on enhancing productivity of the various inputs and processes involved in the economic
production processes. The focus has to be on addressing supply constraints in the different sectors of the economy and to adopt
policies that exploit and enhance domestic inter-linkages in the economy and further boost productivity growth.
1.4. Proposed Budget Estimates 2015/2016
1.4.1 Proposed Budget Estimates 2015/2016
The total proposed expenditure in 2015/16 is estimated KSh 2 trillion which comprises of KSh 786.8 billion for recurrent expenditure,
KSh 721 billion for development expenditure; KSh 260.9 billion as transfers to County Governments and KSh 229.8 billion for
Consolidated Funds Services.
1.4.2 Expenditure Allocation
Energy and Infrastructure with an allocation of 18% has been allocated the largest share of the expenditure. This is due
to the on-going construction of standard gauge railway. This has been followed closely by education sector which has
been allocated 15% of the proposed expenditure. More details on how planned expenditure is as summarised in the chart
below:
Sectoral allocation
National Security
5%
Health
3%
Other allocations
32%
Governance, Justice, Law & Order
7%
Education
15%
Environment water &Natural
resources
3%
Agriculture, Rural Urban Development
4%
Public Administration & International relations
11%
Social Protection, Culture & Recreation
1%
Energy & Infrastructure
19%
Source: The National Treasury-Budget Policy Statement
Budget 2015/2016 | Economic and Tax focus
8
1.4.3 Proposed Expenditure Financing
For the 2015/16 fiscal year, the Government projects total
revenue amounting to KSh. 1.348 trillion (which represent 20.7%
of the GDP). Of the projected total revenue, KSh 1.250 trillion
will be generated from ordinary revenue (representing about
19.2% of GDP) and KSh. 0.941 trillion will be appropriation in Aid
and railway development levy.
The Income tax forms the most significant proportion of the
ordinary revenue in 2015/2016 whose contribution is projected
to be KSh 623.2 billion. The second largest revenue contributor
is expected to be VAT with a projected contribution of KSh 310.3
billion in 2015/2016.
The railway levy fund of 1.5% on all home-bound imports (for
Kenyan domestic market) is projected to grow from KSh 22.9
billion in 2014/2015 to KSh 25.7 billion in 2015/2016.
The figure below presents revenue projections for 2015/2016.
A-in-A
23%
Income TAX
46%
Value Added
Tax
23%
Import Duty
6%
Excise Duty
2%
Excise Duty
11%
9
Other Taxes
6%
Investment income
1%
Budget 2015/2016 | Economic and Tax focus
Business
and Personal
Taxation
Budget 2015/2016 | Economic and Tax focus
10
2.1 Capital Gains Tax
2.1.1Taxation of gains from investment
shares
Gross consideration payable to both a resident and non-resident
person in respect of a transaction relating to securities listed
on any security exchange approved under the Capital Markets
Act has been brought under the ambit of withholding tax. The
withholding tax rate applicable is 0.3% of the transaction value.
However, only transactions with non-resident investors seem
to have been covered through amendments in the Finance Bill
which is silent on the rate applicable to residents. We expect this
to be addressed before the Bill is signed into law. Stockbrokers
are charged with the responsibility of collecting and remitting tax
to the Commissioner.
• Currently, gains from investment shares are subject to Capital
Gains Tax at a rate of 5% on the excess of transfer value over
adjusted costs.
This proposal is aimed at simplifying the tax ascertainment
process. The adjusted and incidental cost will not be deductible
since the tax will be on gross proceeds which may lead to
taxation of loss making counters.
Effective date: 1st January 2016
2.1.2Taxation of gains on property
other than investment shares
The Eighth Schedule of the ITA is to be amended to exclude the
following transfers from the ambit of capital gains tax:
• Transfer of land where value is not more than three million
shillings. Currently, the transfer value was capped at thirty
thousand shillings
• Transfer of agricultural property having an area of less than
fifty acres if the property is situated outside a municipality,
gazetted township or an area declared by the minister, by
notice in the Gazette, to be an urban area for the purpose
of this Act. Currently, the acreage is capped at one hundred
acres.
• Administration of an estate of a deceased person within two
years of the death of the deceased or after finalisation of a
court case regarding such estate.
• Transfer of property between spouses, or former spouses
or their immediate family (children of the spouses or
former spouses) as part of divorce settlement or bona fide
separation agreement
Capital gains tax will however be applicable on compensation
for property acquired by Government for infrastructure
development. This is currently exempt from Capital Gains Tax.
Capital Gains Tax is to be payable on or before the date of
application for transfer of the property is made at the relevant
Lands’ office.
The above amendments seek to harmonize the tax law to
the prevailing economic and social conditions in addition to
expanding the tax net to increase revenue collection, as well as
streamline the collection of the tax with the other government
fees upon transfer of property.
Effective date: 1st January 2016
11
Budget 2015/2016 | Economic and Tax focus
2.2 Tax loss Utilization Period
The period within which a taxpayer must utilize their tax loss
utilization had been limited to the year the loss occurred and the
subsequent four years. This change was introduced in January
2010.
The Finance Bill had attempted to amend this by empowering
the Commissioner to extend the loss utilization period to ten
years. However, the amendments as proposed still maintain the
utilization period to 4 years with tax payers still being required to
apply to the Minister (through the Commissioner) for any further
extensions. We expect the correct amendments to be introduced
before the Finance Bill is signed into law.
The increase in the loss utilization period is aimed at boosting
investment in the capital intensive industries such as power
generating companies, manufacturers and hotel operators that
accrue tax losses in the earlier years of operation.
2.4 Income from residential
property
2.4.1Residential rental income tax
Landlords earning an annual gross rental income of ten million
shillings or less will be required to pay residential rental income
tax at a reduced flat rate. The Finance Bill however does not
provide the applicable tax rate. The Treasury Cabinet Secretary
in his speech allured to a 12% tax rate on such income. We
expect this to be included in the guidance rules issued by KRA or
through an amendment in the Finance Act.
Effective date: 1st January 2016
However, a person may make an election in writing to the
Commissioner of Domestic Taxes to be excluded from this tax, in
which case the net rent income would be taxable at the normal
rates. The commissioner is to prescribe.
Effective Date: 1st January 2016
2.3 Definition of training fees clarified
2.4.2Withholding tax on rent
The definition of ‘training fees’ has been clarified through a
proviso which specifically state that training fees does not to
include, fees paid for educational services provided by a prepprimary, primary or secondary school; a technical college or
university; an institution established for promotion of adult
education, vocational training or technical education.
A resident person making rental payment for occupation
of immovable property will be required to deduct and remit
withholding tax on this payment. The Commissioner has been
empowered to appoint agents who will be required withholding
tax on rent paid to resident landlords.
Though implied in the previous definition, this proviso has
eliminated any controversy that may arise as a result of divergent
interpretation.
Effective date: 1st January 2016
Currently, only rental payment made to a non-resident person for
occupation of property is subject to withholding tax.
Collection of income from residential property has been marred
by a number of administrative challenges. This measure is
therefore aimed at bringing this income into the tax bracket. This
is aimed at accelerating collection of tax on rental income.
Effective date: 1st January 2016
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2.4.3Tax amnesty for landlords
The Finance Bill has also proposed to introduce a tax amnesty
to landlords for undeclared/under-declared rental income. The
amnesty provisions will apply to rental income earned in 2013
and prior years (including penalties and interest thereof), as well
as any penalty and interest in respect to rental income earned in
2014 and 2015.
The amnesty is however on condition that the individual landlord
files the self-assessment returns or amended returns for 2014
and 2015 by 30 June 2016. In this regard, the landlord is
required to pay tax as indicated in the filed return. If a landlord
is not able to provide documentation in support of a given
expenditure relating to rental income, he is allowed to deduct
40% of the expenditure.
This is also aimed at encouraging landlords to register as tax
payers, thus expanding the tax net as well as ensuring collection
of tax revenue.
Effective date: 1st January 2016
2.5 Specified sources of
Income
Increase in number of specified sources of income from six to
seven. The Finance Bill, 2015 seeks to correct an error since
currently the actual items listed as specified sources of income
are seven and not six as indicated in the leading tax provisions.
2.6 Film Industry
2.6.1Payments made to actors and
crew members
Payments made by producers approved by the Kenya Film
Commission to non-resident actors, crew and supporters of
appearance or performance of an activity for the purpose
entertaining the audience included in the list of payments
exempt from withholding tax.
Effective date: 1st January 2016
2.6.2Capital Deduction
Capital expenditure on buildings in use for training of film
producers, actors and crew to be granted Industrial Building
Allowance at a rate of 100%. Currently, the applicable rate is
50%.
Effective date: 1st January 2016
2.7 Rebate to employers with
apprenticeship programs
Employers to be eligible for tax rebate if they engage at least ten
university graduates for a period of six to twelve months during
any year of income. The amount of rebate is to be stipulated by
the Cabinet Secretary through issuance of regulations.
The move is targeted at improving the quality of the skilled
manpower in the country.
Effective date: 1st January 2016
The taxation changes in this film industry are aimed at spurring
growth of the industry as well as harnessing latent talents of the
youth.
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2.8 Capital Deductions
Investment deduction of 150% on building and machinery
installed outside the municipality of Nairobi, Kisumu or Mombasa
of value not less than 200 million scrapped. In essence, the
applicable investment deduction on investments outside the
mentioned municipalities shall be at the standard rate of 100%.
Investment deduction on purchase of a new and previously
unused power driven ship increased to 100% from 40% and the
tonnage of qualifying ships reduced from 495 tons to 125 tons.
Effective Date: 1st January 2016
2.9 Rates of taxes
2.9.1Corporation Tax rate
2.10 The extractive Industry
2.10.1 Taxation of Subcontractors
Fees payable to subcontractors in mining operations will be
subject to withholding tax at a rate of 5.625% down from 20%.
This harmonizes the tax treatment of payments to subcontractor
in the mining and petroleum exploration operations.
In addition, training fees payable by contractors to be subject to
withholding tax at 12.5% down from 20%.
This is aimed at harmonizing tax treatment of the players in the
extractive industry and stimulates Foreign Direct Investment in
the Sector.
Finally, investment income in respect of rehabilitation fund is
exempt from taxation.
Effective Date: 1st January 2016
Company introducing its shares through listing at the Nairobi
Securities Exchange will enjoy a reduced rate of 25% rather than
the standard rate of 30%. Currently, the preferential rate of 25%
can only be enjoyed by companies which have listed at least 20%
of its issued share capital.
This is to encourage companies to list in the securities exchange
to spur capital markets’ growth.
2.9.2Winnings from bookmakers
Payment to both resident and non-resident Bookmarkers to
attract withholding tax at a rate of 7.5%.
Effective Date: 1st January 2016
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Indirect Taxes
3.1 Value Added Tax
3.1.4 Change of VAT status
Effective date for all VAT amendments in the Finance Bill,
2015 is 12th June 2015.
3.1.4.1 List of exempt supplies
expanded to include:
3.1.1Definitions
• Aircraft engines (tariff number 8407.10.00) and parts for
aircraft engines (tariff number 8409.10.00).
• Definition of “supply of imported services” revised by
deleting the words “or a non-registered person.’
• Aircraft parts of heading 8803, excluding parts of goods
of heading 8801 (Balloons and dirigibles; gliders, hang
gliders and other non-powered aircraft).
This clarifies a non-registered person has no obligation to
account or pay VAT on imported services.
• New pneumatic tyres, of rubber used by aircraft (tariff No.
4011.30.00).
• ‘’Duty-free shop’’ defined to mean ‘a bonded warehouse
licensed by the Commissioner of Customs for deposit of
dutiable goods on which duty has not been paid and which
have been entered for sale to passengers departing to places
outside Kenya.’
3.1.2 Lodging of VAT claims
The Finance Bill 2015 proposes to limit the time of lodging VAT
claims to 12 months from the date the tax becomes due and
payable.
3.1.3 Withholding VAT agents
Withholding VAT agents will now include any person appointed
by the Commissioner to withhold VAT. Effective 19 September
2014, only Government Ministries, Departments and agencies
were mandated to withhold VAT.
• Taxable goods imported or purchased and taxable services
for direct and exclusive use in the implementation of
official aid funded projects upon approval by the Cabinet
Secretary responsible for the National Treasury. This
excludes motor vehicles.
• Plastic bags biogas digesters.
• Parts imported or purchased locally for the assembly of
primary laptop tablets, subject to approval by the Cabinet
Secretary for the National Treasury on recommendation
by the Cabinet Secretary responsible for matters relating
to Information Technology.
• Goods and services for use by the Kenya Film Commission
subject to approval by the Cabinet Secretary to the
National Treasury.
• Goods and services for direct and exclusive use in the
construction and infrastructural works in industrial and
recreational parks of one hundred acres or more approved
by the Cabinet Secretary for the National Treasury upon
recommendation by the Cabinet Secretary responsible for
Industrialization.
3.1.4.2 Zero-rated supplies expanded
to include:
• Goods purchased from duty free shops by passengers
departing to places outside Kenya.
• Services in respect of goods in transit.
• Importation of Right Hand Drive (RHD) vehicles purchased
by returning Kenyan residents in replacement of a similar
owned Left Hand Drive (LHD) motor vehicle that was
owned for at least 12 months. This provision is subject to
the following conditions:
• The person providing proof of ownership, over 12
month use and disposal of the previously owned LHD
vehicle before changing residence.
• The RHD vehicle to be imported shall be similar to the
previously owned LHD vehicle in make, engine rating
and year of manufacture; and this provision shall only
apply to residents returning from countries that operate
LHD motor vehicles.
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3.1.4.3 Previously exempt supplies now taxable
Medicaments of tariff number
• 3004.90.10 - Infusion solutions for ingestion other than by mouth put up in measured doses or in forms or packaging for
retail sale
• 3003.90.90 - Other medicaments (excluding goods of heading 3002, 3005, or 3006) consisting of two or more constituents
which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings
for retail sale.
3.2 Customs and International Trade
3.2.1 Amendments in relation to the EAC Common External Tariff (CET)
Various amendments to the East African Community Customs Management Act (EACCMA), 2004 vide the EAC Gazette No.9 of
2015 have been introduced. Some of the amendments will affect all member states of the EAC whereas others affect individual
countries or more than one but not all member states. The amendments are effective 01 July 2015.
3.2.2Increases in CET rates
Amendments affecting all member states (Kenya, Uganda, Tanzania, Rwanda, Burundi)
Product
From
Sugar
USD
200/MT
or
100% whichever is
To
HS Codes
USD 460/MT or 100% whichever is
1701.12.10,1701.12.90
higher
1701.13.10,1701.13.90
higher
1701.14.10.1701.14.90
1701.91.00.1701.99.10
Rice
USD 200/MT or 75%
USD 345/MT or 75% whichever is
Tariff heading 1006*
whichever is higher
higher
Plastic tubes for packaging
toothpaste and cosmetics
10%
25%
3923.90.20
Iron and steel products
10%
25%
7212.40.00, 7214.10.00,
7214.20.00,7214.30.00,
7214.91.00,7214.99.00,
7215.10.00,7215.50.00,
7215.90.00,7216.10.00,
7216.21.00,7216.22.00,
7216.50.00,7216.61.00,
7216.69.00,7216.91.00,
7216.99.00
Note:
* - Some countries to stay application of these rates
3.2.3 Decrease in CET rates
Product
From
To
HS Codes
Gas cylinders
Exemption regime
0%
7311.00.00
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3.2.4 Stay of application of CET rates
The respective EAC member states will stay application of the CET rates agreed upon by the Council of Ministers on certain
products as follows:
Kenya
Product
To apply
Instead of
HS Codes affected
Paper and paper board products
25%
10%
4805.19.00,4805.91.00,
4805.92.00,4805.93.00
Other, electronic integrated circuits
25%
10%
8542.39.00
Made up fishing nets
25%
10%
5608.11.00
Towers and lattice masts
25%
10%
7308.20.00
Oil or petrol and intake air filters for
25%
10%
8421.23.00
internal combustion engines
8421.31.00
Other prefabricated buildings
25%
10%
9406.00.90
Iron and steel products
25%
10%
7213.10.00,7213.20.00
7213.99.00
Iron and steel products
10%
0%
7208.52.00,7208.53.00
7208.54.00
Bridges & Bridge sections, equipment
for scaffolding, shuttering, propping or
pit propping
25%
0%
7308.10.00,7308.40.00
Screws and bolts
25%
10%
7318.15.00
Smart cards
25%
10%
8523.52.00
Aluminium milk cans
25%
10%
7612.90.90
Aluminium alloy in sheets
10%
25%
7606.92.00
Gas cylinders
25%
0%
7311.00.00
Rice
35% or USD 200/MT
75% or USD 345/MT
1006.10.00,1006.20.00
1006.30.00,1006.40.00
Hot rolled bars and rods of alloy steel
25%
10%
7227.10.00,7227.20.00
7227.90.00
Other bars and rods of alloy steel
25%
10%
7228.10.00,7228.20.00
7228.30.00,7228.40.00
7228.50.00,7228.60.00
7228.70.00,7228.80.00
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Rwanda
Road tractors for semi-trailers
0%
10%
8701.20.90
10%
25%
8704.22.90
0%
25%
8704.23.90
Buses for transportation of more than
25 persons
10%
25%
8702.10.99
Buses for transportation of more than
50 persons
0%
25%
8702.10.99
25%
100%
1701.99.00,1701.12.90
Motor vehicles for transport of goods
with gross vehicle weight between 5 to
20 tonnes
Motor vehicles for transport of goods
with gross vehicle weight exceeding 20
tonnes
Import of 70,000MT of sugar
1701.13.90
Rice
45%
75% or USD 345/MT
1006.10.00,1006.20.00
1006.30.00,1006.40.00
Stay of application of the EAC CET on goods imported for use by the Armed Forces Shop (AFOS)
Stay of application of EAC CET on the equipment used by telecommunication firms in Rwanda at a rate of 0%. (list of items as per LN. No.
EAC/32/2015)
Tanzania
Buses for transportation of more
than 25 persons
10%
25%
8702.10.99
Import of 100,000MT of sugar
between April & June
50%
100%
1701.99.00,1701.12.90
Paper
25%
1701.13.90
10%
4804.11.00,4804.19.00
4804.19.00,4804.21.00
4804.29.00,4804.31.00
4804.39.00,4804.41.00
4804.51.00,4804.59.00
4805.19.00,4805.24.00
4805.25.00
Iron and steel products
25%
10%
7213.10.00,7213.20.00
Stay application of the EAC CET on goods imported for use by the Armed Forces Canteen Organization (AFCO)
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Uganda
Road tractors for semi-trailers
0%
10%
8701.20.90
10%
25%
8704.22.90
Motor vehicles for transport of goods
with gross vehicle weight exceeding 20
tonnes
0%
25%
8704.23.90
Maternity (Mama) kit
0%
25%
8212.20.00
Organic surface active agents
0%
10% - 25%
3402.11.00,3402.12.00
Motor vehicles for transport of goods
with gross vehicle weight exceeding 5
tonnes but not exceeding 20 tonnes
3402.19.00
Iron and steel products
25%
10%
7213.10.00,7213.20.00
Wire of iron or non-alloy steel, plated or
coated with zinc
25%
10%
7217.20.00
0%
10%
2833.19.00
10%
0%
7208.52.00,7208.53.00
Other sulphates, alums,
peroxosulphates
Iron and steel products
7208.54.00
Burundi
Road tractors for semi-trailers
Motor vehicles for transport of goods
with gross vehicle weight exceeding 5
tonnes but not exceeding 20 tonnes
Motor vehicles for transport of goods
with gross vehicle weight exceeding 20
tonnes
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0%
10%
8701.20.90
10%
25%
8704.22.90
0%
25%
8704.23.90
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3.2.5 Duty Remission
Reduced import duty rates for the following products under the duty remission scheme:
Products affected in all member states – Kenya, Uganda, Tanzania, Rwanda, Burundi
Product
From
To
HS codes
Wood splints for the manufacture of
matches
10%
0%
4421.90.00
Nylon yarn and synthetic twine for
manufacture of fishing nets
10%
0%
5402.61.00
5402.61.00
5607.50.00
Acrylic polymers for manufacture of paints
10%
0%
3906.90.00
Groats and meal of wheat (Semolina)
25%
0%
1103.11.00
Glucose and Glucose syrup
10%
0%
1702.30.00
Stayed application of the conditions on duty remission for motor cycle assembly for one year as outlined in LN. EAC/39/2013 of 30/06/2013.
Products affected in Kenya, Uganda & Tanzania
Wheat Grain
35%
10%
1001.99.00
1001.99.90
Rwanda
Wheat Grain
35%
0%
1001.99.00
1001.99.90
Remission of duty on various raw materials and industrial inputs imported by manufacturers as listed in LN. No. EAC/35/2015
Uganda
Barley
25%
10%
1003.00.90
Odoriferous mixtures of a kind used as a
raw material in the food or drink industry
10%
0%
3302.10.00
Remission of duty on various raw materials and industrial inputs imported by manufacturers as listed in LN. No. EAC/36/2015
Burundi
Remission of duty at the rate of 0% on raw materials and industrial inputs by manufacturers as listed in LN. No. EAC/37/2015
5th Schedule to the EACCMA (Exemptions Regime)
• Added: - Prison Services in all Partner states to import duty free goods
• Removed: - Gas cylinders
3.2.6 Harmonization of Export Duty on Hides and Skins
The EAC countries have harmonized export levies on hides and skins at 80% of FOB value or USD 0.52 per kg, whichever is higher.
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3.3 Excise Duty
The Kenyan Excise duty provisions have always been enshrined in the Customs and Excise Act. With the introduction of a separate
Customs Act (EACCMA) the Government intends to overhaul the Customs & Excise Act. The Cabinet Secretary for Finance tabled a
Excise Duty Bill 2014 last year which received several public comments.
During this year’s budget the Excise Duty Bill 2015 was tabled to parliament by the Cabinet Secretary. Once enacted it will come into
operation on a date to be set by the Cabinet Secretary. Several changes are proposed in this bill. Key proposals are as follows:
• Move from use of both ad-valorem and specific duty rates to generally specific duty rates
• The specific rates of duty on excisable goods will be adjusted for inflation at the beginning of every financial year
• Removal of certain goods which do not have harmful effects from the list of excisable goods (i.e. Cosmetics goods)
• Introduction of new items on the list of excisable goods( Electronic cigarettes and its cartridges, some types of motor cycles
The table below highlights key proposed changes and duty rates:
Goods Description
Current Duty Rate
Proposed Duty Rate
Fruit Juices
7%
Shs. 10 per litre
Food Supplements
7%
10%
Waters and other non-alcoholic beverages
7%
Shs. 10 per litre
Shs. 70 per litre
Shs. 100 per litre
Wines
Shs. 80 or 50%
Shs 150 per litre
Spirits
Shs 120 or 35%
Shs 175 per litre
Electronic Cigarettes
N/A
Shs 3000 per unit
Motor vehicles less than 3 years from date of
first registration
20%
Shs 150,000
Motor vehicles over 3 years old
20%
Shs 200,000
Motor cycles other than motor cycles
ambulances
N/A
Shs 10,000 per unit
Plastic shopping bags
50%
Shs. 120 per Kg
130%
Shs 10,000 per Kg
Beer, Cider, Perry and mixtures of fermented
beverages with non-alcoholic beverages and
spirituous beverages of alcoholic strength not
exceeding 10%
Cigars, cheroots, cigarillos containing tobacco
or tobacco substitute
3.4 Miscellaneous Bill, 2015
Miscellaneous Fees and Charges Bill to be enacted as the legal instrument for collection of Export Levy, Import Declaration Fee (IDF)
and Railway Development Levy (RDL).
IDF rate is proposed to reduce from 2.25% to 2%.
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Tax modernization
As part of reforming the general tax administration regime, the
following changes are have been made and/or proposed:
• Tax Appeals Tribunal Act, 2013.
• The Bill proposes that for a period of one year from the
date of the Tribunal’s first sitting, it may extend the period
of a hearing up to sixty days should there be sufficient
grounds to do so.
• The bill further proposes that the Tribunal shall hear and
determine appeals relating to a tax decision made before
its first sitting within a period of one year from the date of
this first sitting.
• Income Tax Bill expected to be completed by 30 September
2015.
• Tax Procedures Bill has been released.
• Bill tabled in parliament aimed at simplifying tax
administration processes and also promoting consistency
and efficiency in the tax laws as well as facilitating
compliance and effective collection of taxes under the
ambit of Income tax, VAT and Excise Duty.
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Client name | Proposal title
Client name | Proposal title
24
Financial Sector
Amendments
Effective date for
all financial sector
amendments in the
Finance Bill, 2015 is
1st October 2015
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5.1 Banking Act (Cap.488)
5.1.1 Annual Licensing
The Banking Act provides that every institution intending to
transact banking business, financial business or the business of
a mortgage finance company in Kenya shall, before commencing
that business, apply in writing to the Central Bank for a license.
The license is valid for a period of 12 months, and must be
renewed annually.
The Finance Bill 2015 seeks to remove the requirement of annual
licensing and instead empower the Central Bank of Kenya (CBK)
to issue non-renewable perpetual licences.
This is aimed at facilitating compliance with the risk based
supervision model in line with best international practice. The
CBK will continue to monitor banks using the risk based approach
and to carry out inspections on periodic basis while retaining
powers to withdraw the license at any time.
5.1.2 Minimum Core Capital
The Banking Act requires that every institution shall maintain
a minimum core capital of at least one billion for banks or a
mortgage finance company.
In order to strengthen the banking sector, there is a proposal
to increase the minimum core capital for banks from KShs 1
Billion to Kshs 5 Billion by December 2018. This will ensure that
the banks are not only able to participate in financing the large
projects envisaged in Vision 2030 but also ensure that the banks
are able to withstand financial shocks and crisis.
5.1.3 Central Bank Act
It has been proposed that a Central Bank of Kenya Bill, 2015,
be tabled in Parliament. The Bill will comprehensively review
the Central Banking law and aligning it with the international
best practice. The Bill has been submitted to the Commission
of Implementation of the Constitution for further inputs before
it is presented to the National Assembly. This is in line with the
requirement of the Constitution.
5.1.4 Nairobi International Financial
Centre Authority (NIFCA)
There is proposal to have the NIFCA fully operational in 2015 to
help deepen and strengthen the financial sector.
Besides, to help safeguard Kenya’s economy against financial
instability, the CBK is set to strengthen the prudential oversight
framework and effectively manage risk associated with rapid
credit growth, rising cross boarder operations and expansion of
banks activities into holding groups.
5.2 Insurance Act (Cap. 487)
5.2.1 MinimumCore capital
The Insurance Act provides that no person shall be registered as
an insurer unless the paid up capital is at least;
• Three hundred million Kenya shillings for general insurance
business;
• One hundred and fifty million Kenya shillings for life insurance
business;
• Four hundred and fifty thousand Kenya shillings for composite
insurance business; and
• Eight hundred Kenya shillings for a reinsurer, divided into three
hundred million Kenya shillings for long term business and five
hundred million Kenya shillings for general business.
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There is a proposal to amend the minimum core capital
requirement as follows;
• In the case of general Insurance business, the higher of—
• six hundred million shillings;
• risk based capital determined from time to time; or
• 20% of the net earned premiums of the preceding financial
year;
• In case of long term insurance business, the higher of—
• four hundred million shillings; or
There is a proposal to move to a more principle based investment
framework where insurance companies will be required to
prepare and submit investment policies and will be subject to
broad prescribed investment guidelines. The authority is to
specify the investment guidelines.
This investment framework will bring the insurance industry in
harmony with the framework already pertaining in the retirement
benefits and collective investment sectors. In addition, the
proposal will enable the insurers respond to economic changes.
• risk based capital determined by the Authority from time to
time; or
5.2.3 Insurance agents
• 5% of the liabilities of the life business for the financial year.
The insurance Act requires that before an insurance agent is
registered as an agent, he/she must be recommended by an
insurance company on satisfaction that the applicant has the
knowledge and experience necessary to act as an agent.
• In case of reinsurance business (general business), the higher
of—
• one billion shillings; or
• risk based capital determined by the Authority from time to
time; or
• 20% of the net earned premiums of the preceding financial
year;
• In case of reinsurance business (long term business), the
higher of—
• five hundred million shillings; or
• risk based capital determined by the Authority from time to
time; or
• 5% of the liabilities of the life business for the financial year
Insurers registered before the commencement of the schedule
are required to comply with the amendment by the 30th June,
2018.
There is a proposal to drop the above requisite and allow
Insurance Regulatory Authority (IRA) to license agents so long as
they have qualified for award of Certificate of Proficiency (COP)
which is a requirement for licensing as an insurance agent.
This will expand the insurance penetration and create the much
needed employment.
5.2.4 Supervisory Power of the
Regulator
The Finance Bill proposes to increase the supervisory role of the
Authority by amending the clauses which directly mentioned the
“Minister” with the “Authority”.
The amendment is aimed at strengthening the insurance sector.
5.2.2 Investment Provisions
The investment provisions in the Insurance Act are rules based
and are not in compliance with international core principles of
insurance supervision.
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Miscellaneous
provisions
Effective date for
the following sector
amendments in the
Finance Bill, 2015 is
1st October 2015
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6.1 Retirement Benefits Act
Under this Act, the Cabinet Secretary proposes to improve financial
transparency and accountability in Retirement Benefit Schemes by reducing
the period of preparation of annual audited accounts from 6 months to 3
months.
6.2 Amendment of the Proceeds of
Crime and Anti-Money Laundering
Act
The Finance Bill extends the mandate of the Financial Reporting Centre (FRC)
in the following respects:
• Not only identification of the proceeds of crime and the combating of money
laundering to now cover the financing of terrorism.
• To receive and analyze unusual or suspicious transactions and information
disclosed pursuant to the Prevention of Terrorism Act, 2012.
• To require reporting institutions to report on their compliance with the Act,
from which the FRC is mandated to provide appropriate direction.
The mandates of the Director of the FRC have also been increased:
• To report not just suspicious transactions but also those that appear to
involve the proceeds of crime, money laundering or financing of terrorism.
• To instruct any reporting institution to provide other or additional
information or take appropriate steps to facilitate an investigation by
providing documents.
6.3 Amendment to the Consumer
Protection Act
The Bill proposes to allow the National and County governments to be charged
a prepayment charge or penalty where they enter into an agreement in the
position of a principal borrower or guarantor or where the borrower is a public
entity.
6.4 Exemption of Stamp Duty for
Asset Transfer to REITs
The transfer of the beneficial interest in assets into Real Estate Investment
Trusts (REITs) trustees authorized under the Capital Markets Act, to be
exempted from stamp duty, as an incentive for investment in real estate.
This exemption also applies to any transfer of units in REITs done before 31st
December 2022.
6.5 Road Maintenance Levy Fund Act
Out of the Road Maintenance Levy Fund, three shillings per litre of petroleum
sold is to be paid to the Road Annuity Fund established under the Public
Finance Management Act, 2012.
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Regional Highlights
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7.1 Uganda
Tanzania
Business Tax
• Presumptive tax regime threshold increased from UGX 50m to
UGX 150m.
Customs Duty
• Export levy on raw skins increased from 60 percent to 80
percent of FOB value or Tshs. 600 per kilogram to USD 0.52
whichever is greater.
• Presumptive tax payers are not required to file returns to UR.A
• Debt to equity ratio increased from 1:1 to 1 : 1.5.
• Petroleum and mining sector licensees to register for VAT
during exploration and development stages.
Value Added Tax (VAT)
• VAT threshold increased to UGX 150m from UGX 50m.
• The threshold for persons that use a cash basis accounting
system increased from UGX 200m to UGX 500m.
Excise Duty
The following excise duty amendments were introduced:• Confectionaries and Furniture - 10%.
• Motor Vehicle Lubricants – 5%.
• Excise duty on international calls form the northern corridor
countries of EAC has been removed.
Non-tax revenue
• Mandatory payment of tax for all Public Services Vehicles
(PSVs) and goods motor Vehicles at the time of renewal of
annual licences introduced.
• Passport fees have been increased by UGX 30,000 and a
special passport at UGX 300,000 has been introduced to
obtain a passport expressly within 24 hours.
Other tax measures
• Environmental levy on used passenger motor vehicles
increased from 20% to 35% for motor vehicles of 5-10years
and 50% of those above 10 years.
• The government has ratified the following agreements;
• EAC Agreement for the avoidance of double taxation and
prevention of fiscal evasion.
• The agreement for the establishment of ATAF (African Tax
Administration Forum) on mutual assistance in tax matters.
• The OECD convention on Mutual Administrative Assistance.
Budget 2015/2016 | Economic and Tax focus
• Amendments to the Tanzania Investment Act, CAP, 38 as
follows:• Removal of PVC pipes and HDPE under HS code
3917.31.00 from the list of capital goods ;
• Removal tax exemptions provided by Tanzania Investments
Center on trailers for transportation;
Business Tax
• Restoration of Skills and Development Levy (SDL) exemption
on the agricultural sectors.
• Introduction of tax on gaming in prize at the rate of18 %.
• Introduction of principal license fee for operating the sports
betting and slot machines.
• Introduction of registration of gaming sports equipment.
Other tax measures
• Increase charges on diesel fuel, petroleum fuel, kerosene
and toll charges.
• Introduction of railway development levy of 1.5 percent of
CIF value.
Rwanda specific amendments
Business Tax
• Rwanda Cooperative Agency (RCA) to register close to 5,000
cooperatives in the next year.
• Rwanda Revenue Authority (RRA) to introduce an electronic
billing machine which will be responsible for computing all
relevant taxes.
Customs Duty
• Import duties on imported fuel for the Oil strategic reserves to
be introduced.
Other tax measure
• Rwanda will stay the application of fuel and Infrastructure
Development levy for a period of one year.
34
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EY TAX Leadership
Gitahi Gachahi
Chief Executive Officer
Email: [email protected]
Geoffrey G. Karuu
Partner, Tax
Email: [email protected]
Catherine Mbogo
East Africa Region Leader, Tax
Email: [email protected]
Francis Kamau
Partner, Tax
Email: [email protected]
Reece Jenkins
Partner, Tax
Email: [email protected]