VAT measures on Kenya, Tanzania and Uganda’s Budget 2016

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On the last weeks the governments of Kenya, Tanzania and Uganda have presented to their national parliaments their Budgets for the period 2016/2017. This follows coordinated efforts by the member countries of the East African Community (Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda), where the financial year starts on the 1st of July.

From a VAT perspective, the main proposals contained in each budget for financial year 2016/2017 are the following:

Kenya

The Finance Bill 2016 was presented to the Parliament on the 8th of June. According to the Budget Statement and to a press release by the National Treasury the VAT measures to be adopted are the following:
  • Extend the transition period for imposition of VAT on petroleum products by another year. The imposition of VAT on petroleum products was supposed to start in September 2016, but it will be postponed for one more year;
  • Exempt national park entry fees from VAT to boost tourism sector;
  • Exempt commissions earned by tour operators from VAT;
  • Exempt raw materials for manufacture of animal feeds from VAT to make animal feeds affordable to farmers and to attract more manufacturers to invest in the Sector; and
  • Exempt Liquefied Petroleum Gas (LPG) from VAT to allow access to clean, safe and efficient household energy.
Tanzania

The Finance Act 2016 was presented to Parliament on 3rd of June and the first reading was held on the 10th of June. According to the Part XV of the Finance Act 2016 some of the VAT measures to be adopted are the following:
  • Exempt from VAT the supply of raw soya beans, unprocessed vegetables and unprocessed edible animal products and vitamins and food supplements;
  • Exempt from VAT the supply of water treatment chemicals;
  • Exempt from VAT the supply of certain bitumen products;
  • Exempt from VAT the supply of aviation insurance.
  • Remove the current VAT exemption applicable to the supply of certain tourism services; and
  • Remove the VAT exemption applicable to the provision of certain fee-based financial services.
Uganda

The Budget for the period 2016/2017 was presented to Parliament on the 8th of June. According to the Budget Speech delivered by the Minister of Finance before the National Parliament, the main VAT measures to be adopted are the following:
  • Exempt from VAT supplies for aid-funded projects made by domestic suppliers and producers;
  • Allow relief from VAT on business inputs for producers of solar, wind and geothermal energy; and
  • VAT imposed on imported services used by business process outsourcing (BPO) companies will be refunded at the time of export or offset, if the services are consumed in Uganda.
As the financial year for all the countries in the East African Community starts on the 1st of July, it is expected that the respective budgets will be approved any time soon, and that most of the changes will be effective from the referred date. At this point it is not certain that all the measures proposed in the budgets will be approved, so close monitoring of this issue is advisable.