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.

They also granted remission of import duty on treads for cold retreading to apply at zero per cent instead of 10 per cent.

Meanwhile, an East African Public Service Commission to oversee management and deployment of human resources in the East African Community and its organs and institutions is to be formed.

Monique Mukaruliza, the chairperson of the East African Council of Ministers said EAC ministers would examine a proposal to form the body, which, if successful, would mollify Eala legislators who have criticised how EAC staff members were recruited and deployed.

Some Eala MPs have questioned whether the community workers were bona fide employees of the regional body or accountable to their respective countries.

Dr Eriya Kategaya, the Uganda Minister for EAC Affairs and Uganda’s first Deputy Prime Minister, said professionals employed by the regional organisation should be made to understand that they were in Arusha more to serve the EAC than their home countries.

Mr Kategaya said the Council of Ministers had also been under pressure to get involved in the recruitment of people into the regional organ, a task he suggested should be handled by the proposed EA Public Service Commission.

A report for EAC Audited Accounts for the year ended June, 2008 notes that the regional body does not have a human resources management policy.

The policy would have given proper guidelines on the recruitment process, rewarding, staff rotation, promotion and other procedures intended to motivate workers.