Revenue bodies agree on uniform rates for dividends and royalties

• To fix the rates for withholding tax at five per cent on dividends and 10 per cent on royalties on land, books, professional fees, music and others;
• The rates of the existing agreements that partner states have with other countries will be maintained until they expire;
• To approve the remission of duty on goods manufactured for export
• To grant the request by Kenya for the extension of remission of duty on malt and barley

Revenue authorities in the East African Community will start charging uniform withholding tax on dividends and royalties.

This follows a resolution by the region’s finance ministers to fix the rates for withholding tax at five per cent on dividends and 10 per cent on royalties on land, books, professional fees, music and others.

Member states adopted the fixed rates after they renegotiated the East African Community Double Taxation Agreements.

“The negotiations took into account withholding tax rates as an incentive to promote cross-border investments,” the EAC Secretariat said in a statement.

The resolution was arrived at during the post-budget consultative meeting of the EAC that was chaired by Rwandan Minister of Finance, James Musoni and Tanzania’s Deputy Minister of Finance and Economic Affairs Jeremiah Sumari.

The Arusha meeting was also attended by Kenya’s Finance Minister Uhuru Kenyatta and his Ugandan counterpart Syda Bbumba.

The Treasury chiefs also agreed that partner states should not negotiate with third parties rates lower than those in the EAC agreements.

“The rates of the existing agreements that partner states have with other countries will be maintained until they expire and any renewal of existing agreements with third parties should be in accordance with the new positions,” said the statement.

Database of agreements

The EAC will take stock of all existing agreements that were concluded by partner states in order to create a database.

The ministers approved the remission of duty on goods manufactured for export subject to conditions specified in Articles 25 and 27 of the Protocol Establishing the EAC Customs Union.

Others who attended the meeting include central bank governors and their permanent secretaries as well as senior officials from all partner states.

The ministers said there was a need to fasttrack the establishment of the EAC Development Fund through the East African Development Bank, which would cater for infrastructure development among other projects.

The ministers also granted the request by Kenya for the extension of remission of duty on malt to apply an import duty rate of 0 per cent instead of 10 per cent and barley at the rate of 10 per cent instead of 25 per cent, until June 30, 2010.

Additionally, the ministers approved the exemption of taxation on spare parts for machinery imported by licensed mining companies.