The East African Community amends customs duties and common external tariffs

Transcription

1 30 July 2018 Indirect Tax Alert The East African Community amends customs duties and common external tariffs NEW! EY Tax News Update: Global Edition EY s new Tax News Update: Global Edition is a free, personalized subscription service that allows you to receive EY Global Tax Alerts, newsletters, events, and thought leadership published across all areas of tax. Access more information about the tool and registration here. Also available is our EY Global Tax Alert Library on ey.com. Executive summary The East African Community (EAC) Council of Ministers (the Council) have agreed on changes to the EAC Customs Management Act, 2004 (EACCMA) and the EAC Common External (EAC CET). These changes were set forth in the EAC Gazette Notice No. 8 of 2018 (the Gazette) released by the EAC Secretariat on 30 June 2018 and came into effect from 1 July These respective changes impact both individual EAC Member States and the EAC region as a whole. This Alert highlights the international trade-related changes introduced by the Gazette across Kenya, Uganda, Tanzania, Rwanda and Burundi affecting importers. Detailed discussion EAC policy changes EAC CET amendments The Council amended the Common External 2017 as follows: Reduced duty rates for the following tariffs

2 2 Indirect Tax Alert Revised rate Poly vinyl alcohol 10% 0% Other paper or paper board 10% A split of the tariff for other motorboats to provide for a reduced 0% import duty rate for a motor boat ambulance under Corrections made to tariffs under heading 3907, 6005 and 8523 without changing the duty rate. Amendments to the exemptions regime Effective 1 July 2018, the Gazette also introduced specific and general exemptions from import duty under the Fifth Schedule of the EACCMA covering: Specific exemptions An exemption from duty of one motor vehicle, motorcycle or bicycle has been extended to racing riders General exemptions Qualifying sightseeing busses Qualifying overland trucks Tourism boats imported by a licensed tour operator EAC general stay of application of the CET/revocations The Council has stayed the application of conditions contained in Legal Notice LN EAC/39/2013, pertaining to duty remission on the motorcycle assembly industry, for one more year. The Legal Notice provides for duty remission for assemblers of CKD kits who procure/ manufacture the following specified parts within the EAC; main frame, suspension, or a combination of seat and seat frame, mudguard, wheel rim, break gear and exhaust pipe. The council has also revoked the application of the conditions contained in item 12 of Legal Notice LN EAC/32/2016 which was supposed to progressively reduce the levels of remission granted to gazetted importers of sugar for industrial use from 90% (current) remission to 85%, 80% up to 75% remission of 100% duty. Duty remission The EAC duty remission scheme allows waiver of duty or refrainment from exacting of duty on gazetted inputs imported by gazetted users. The gazette stipulates items approved by the Council to be imported at a lower rate under remission in accordance with Section 140 of EACCMA and the EAC Duty Remission Regulations, The following items have been granted duty remission and are available to all EAC countries provided importers are approved and gazetted before importation: and description Inputs for manufacture of pesticides, fungicides insecticides and acaricides as approved by the Ministry of Agriculture Countries eligible for duty remission on imported items Rate under remission EAC countries 10% or 0% Inputs for the manufacture of toothbrushes EAC countries 10% or 0%

3 Indirect Tax Alert 3 and description Countries eligible for duty remission on imported items Rate under remission Motorcycle kits imported by gazetted assemblers EAC Countries 10% Inputs and raw material for use in the manufacture of energy saving stoves EAC countries except Tanzania 10% or 0% Gum base of EAC countries except Tanzania 10% Raw materials used in manufacturing of textile and footwear Inputs used in manufacture of roofing tiles coated with acrylic paint and the weather side coated with natural sand granules Wheat (wheat grain) under Wheat (wheat grain) under % or 10% and 0% Kenya and Uganda 10% or 0% Kenya and Tanzania 35% 10% Kenya and Tanzania 35% 10% Aerosol cans of Kenya and Uganda 0% Odoriferous mixtures of a kind used as raw materials in the food or drink industries Plain weave fabrics of polyester stable fibre (woven grey fabric of higher (fin-er) yarn counts for wet Organic surface active agents (Anionic, Cationic, Other) (LABSA) of Uganda 10% 0% Uganda 10% Uganda 10% 0% Other Uganda 0% Self-adhesive labels Tanzania 10% Other uncoated paper and paperboard Tanzania 10% 0% Palm stearin refined bleached deodorized (RBD) Printed aluminum barrier laminates (ABL) Tanzania 10% 0% Tanzania 0% In the event that finished products (manufactured using inputs importer under country specific remission are sold in the EAC Customs territory, such goods shall attract duties, levies and other charges provided in the EAC CET. Country specific stays of application of the CET Kenya The Council has approved various stays of application of CET duty rates on select items in Kenya, effective for the one year period from 1 July These measures, effected to address specific economic needs, have a twofold effect; either an increase or a decrease in duty rates as follows:

4 4 Indirect Tax Alert Duty increment Road tractors for semitrailers 10% Liquid gas cylinders (LPG) 0% Effective rate from Flat rolled products of iron or non-alloy steel 10% or 35% or US$250/MT Leaf springs and leaves thereof or US$250/MT Clad flat rolled products of iron or non-alloy steel 10% 10% or US$250/MT U Sections I Sections H Sections L or T Sections Not further worked than hot-rolled, hot drawn or extruded of a height not more than 100 mmm 0% 35% or US$250/MT Worn clothing and other worn articles 35% or 0.4US$/Kg 35% or US$0.2/Kg Particle board Oriented strand board Other board Other board Fibreboard of wood or other ligneous materials, whether or not bonded with resins or other organic substances Plywood, veneered panels and similar laminated wood Block board Other board 35% or US$110/MT 35% or US$120/MT 35% or US$230/MT 35% or US$200/MT

5 Indirect Tax Alert Skillets, free hinge lid packers 10% 35% Nails, tacks, drawing pins and similar articles Coach screws Other wood screws Screw hooks and rings Other Other washers Rivets Other Iron and steel wool; pot scourers and scouring or polishing pads, gloves Coated electrodes of base metal, for electric arc welding Effective rate from 35% or US$350/MT 35% or US$200/MT Safety matches or US$1.35 Kg Styrene acrylic 0% 10% Unbleached kraftliner Other kraft paper weighing 150g/m2 or less Other kraft paper weighing more than150g/m2 but less than 225g/m2 unbleached Other coated and uncoated paper Fluting paper weighing 150 g/m2 or less Fluting paper weighing more than 150 g/m2 Other coated and uncoated paper Other coated and uncoated paper Other coated and uncoated paper Skillets, free hinge lid packets Flat rolled iron and steel electrolytically plated or coated with zinc Bridges and bridge sections Towers and lattice masts Scaffolding, shuttering, (pit)propping equipment Road guard rails Other Other screws and bolts Nuts 10% or 35% instead of CET rate 10% 10% or US$125 per MT 35% or US$200/MT 35% or US$250/MT

6 6 Indirect Tax Alert Other flat rolled iron and steel Other flat rolled iron and steel not further worked than Cold rolled 10% Effective rate from 35% or US$125/MT Electrolytically plated or coated with zinc 10% 35% or US$250/MT Otherwise plated or coated with zinc 10% 35% or US $250/MT Other 10% 35% or US$275/MT Other bars, angles, shapes, sections and rods of 10% 35% or US$250/MT stainless steel Not plated or coated 10% 35% or US$250/MT Other 35% or US$125/MT Other, welded of circular cross section Other, welded of circular cross section Other, welded of rectangular cross section Other, welded of non-circular cross section Other tubes, pipes and hollow profiles 35% or US$200/MT Doors, windows and their frames 35% or US$200/MT Non-electric cooking appliances including stoves, ranges, grates, cookers, barbecues, braziers, gasrings and plate warmers 10% 35% Other footwear with uppers of leather Other footwear with uppers of textile Other footwear 35% or US$10 per pair ROPP aluminium closures 35% or US$0.01 per Kg Other prefabricated buildings 35% or US$250/MT Refined soya bean oil RBD palm olein RBD palm stearine Other refined palm oil Refined sunflower oil Refined corn oil 10% 35% or US$500/MT Chapters and 62 Fabrics, apparels and garments 35% or US$5 per ton except , and

7 Indirect Tax Alert Wooden furniture of a kind used in offices Wooden furniture of a kind used in the kitchen Wooden furniture of a kind used in the bedroom Other wooden furniture 35% Road tractors for semi-trailers 10% Duty reduction Rice in husk Husked (brown) rice Semi or wholly milled rice Broken rice 75% or US$345/ MT Copolymers 10% 0% Effective rate from Effective rate from 35% or US$200/MT Uganda The Council has approved various stays of application of CET duty rates on select items in Uganda, effective for the one-year period from 1 July These measures, effected to address specific economic needs, have a twofold effect; either an increase or a decrease in duty rates as follows: Duty increment Effective rate from Liquid gas cylinders (LPG) 0% New pneumatic tyres of rubber of a kind used on 10% motorcycles Wire of iron or non-alloy steel 10% Flat Rolled products of iron or non-alloy steel 0% or US$200/MT Products of iron or non-alloy steel Flat-rolled products of iron or non-alloy steel, of a or US$200/MT width of 600 mm or more, clad, plated or coated Plated or coated with lead, including terne-plate Angles, shapes and sections of iron or non-alloy steel Other angles, shapes and sections, not further worked than hot-rolled, hot-drawn or extruded or US$200/MT

8 8 Indirect Tax Alert Flat rolled products of iron or non-alloy steel or USD 200/ MT Effective rate from or US$250/MT Clad Flat rolled products of iron or non-alloy 10% 10% or US$250/MT steel Iron or steel wool; pot scourers and scouring or 35% polishing pads, gloves and the like Coated electrodes of base metal, for electric arc 35% welding Safety matches or US$1.35/Kg Chapter 2 Meat and edible meat offal 35% Potatoes fresh or chilled, other than seed 35% Sausages and similar products 35% Chewing gum 35% Other sugar confectionery (Sweets) 35% Chocolates 35% Biscuits 35% Tomato sauce 35% Mineral water 60% Partly refined base oil 0% 10% Lubricants in liquid form 35% Soap and organic surface active products for use 35% as soap Cartons, boxes, cases, bags and other packing 35% containers of paper Toilet paper 60% Exercise books 35% Trade advertising material 35% Pictures, designs and photographs 35% Instructional charts and diagrams 0% 35% Blankets 35%

9 Indirect Tax Alert , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Corrugated iron sheets (galvanised and prepainted), Pre painted coils, Galvanised Coils, Hoop Iron, Twisted bars, Flat bars, Mild steel plates or US$200/ MT Doors, windows and their frames 35% Electric accumulators 35% Furniture and parts thereof 35% Mattress supports and mattresses 35% Toothbrushes 60% Ball point pens 60% Lubricating greases 35% Duty reduction Effective rate from 35% Effective rate from Road tractors for semitrailers 10% 0% Motor vehicles for transport of goods with 10% Gross Vehicle weight exceeding 5 tons but not exceeding 20 tons Motor vehicles for transport of goods with Gross Vehicle weight exceeding 5 tons but not exceeding 20 tons 0%

10 10 Indirect Tax Alert Effective rate from Buses for transportation of more than 25 persons 10% Umbrella heads for roofing nails 10% Jacquard Material for making spring mattresses 10% Plain weave fabrics of polyester stable fibre 10% (woven grey fabric of higher (finer) yarn counts for wet Poly cotton Mattress covers 10% Wheat (Wheat grain) 35% 10% Barley 10% Maternity kit (Mama Kit) 0% Noodles for the manufacture of toilet soap 10% Base oil 10% 0% Cash Registers (Electronic Fiscal Devices (EFD) 10% 0% , , Penstock pipes imported for use in Hydro or 10% 0% , , , , , , , , , , , , , , , , , , , , , , , Electric Power Projects. Both steel and Plastic/ fiberglass Worn clothing and other worn articles 35% or US$0.4/Kg 35%

11 Indirect Tax Alert 11 Tanzania The Council has approved various stays of application of CET duty rates on select items in Tanzania, effective for one-year period from 1 July These measures, effected to address specific economic needs, have a twofold effect; either an increase or a decrease in duty rates as follows: Duty increment Effective rate from Gypsum Powder 0% 10% Semi-refined and Refined Palm oil 10% 35% Crude Sunflower oil 10% Crude Palm Oil 0% Safety matches or US$1.35 Kg Chapter 2 Meat and edible meat offal 35% Potatoes fresh or chilled, other than seed 35% Sausages and similar products 35% Chewing gum 35% Other sugar confectionery (Sweets) 35% Chocolates 35% Biscuits 35% Tomato sauce 35% Mineral water 60% Duty reduction Effective rate from Cash registers (Electronic Fiscal Devices EFDs) 10% 0% Worn clothing and other worn articles 35% or US$0.4/Kg 35%

12 12 Indirect Tax Alert Rwanda The Council has approved various stays of application of CET duty rates on select items in Rwanda, effective for the one-year period from 1 July These measures, effected to address specific economic needs, have a twofold effect; either an increase or a decrease in duty rates as follows: Duty increment Effective rate from Liquid Gas cylinders (LPG) 0% Worn clothing and other worn articles 35% or US$0.4/Kg 35% or US$2.5/Kg % or US$5/Kg Other medical appliances used in medical laboratories 0% Duty reduction Effective rate from Road tractors for semitrailers 10% 0% Motor vehicles for transport of goods with 10% Gross Vehicle weight exceeding 5 tons but not exceeding 20 tons Motor vehicles for transport of goods with 0% Gross Vehicle weight exceeding 5 tons but not exceeding 20 tons Buses for transportation of more than 25 persons 10% Buses for transportation of 50 persons 0% Other tanker trailers and tanker semi-trailers 10% 0% Other trailers and semi-trailers for the transport 10% 0% of goods Semi milled or wholly milled rice Broken rice 75% or US$345/MT 45% or US$345/MT Other beet sugar Other cane sugar Containing added flavouring or co-louring matter Other sugar 100% or US$460/MT subject to a quota limit of 70,000MT Flat rolled products of iron or non-alloy steel 10% 0%

13 Indirect Tax Alert Iron and steel products or US$250MT 0% Iron and steel products 0% Iron and steel products or US$250/MT 10% Iron and steel products Iron and steel products Iron and steel products 10% Bars and rods of alloy or non-alloy steel or US$250/MT 10% Bars and rods of alloy or non-alloy steel Bars and rods of alloy or non-alloy steel Bars and rods of alloy or non-alloy steel Bars and rods of alloy or non-alloy steel Bars and rods of alloy or non-alloy steel Bars and rods of alloy or non-alloy steel Made up fishing nets 10% Smart cards 0% Other (sim cards) 0% Milk cans 10% Glues based on starches or on dextrins or other 0% modified starches Other adhesives based on rubber or plastic (incl. 0% artificial resins) Leather further prepared after tanning or 10% 0% crusting, including parchment -dressed leather, of bovine (including buffalo) or equine Leather further prepared after tanning or crusting, including parchment-dressed leather, of sheep or lamb, without wool on whether or not split, other than leather of heading Leather further prepared after tanning or crusting, including parchment-dressed leather, of other animals, without wool or hair on, whether or not split, other than leather of heading Goods imported for use by the Armed Forces Shop (AFOS) for Rwanda Various 0% Effective rate from

14 14 Indirect Tax Alert Burundi The Council has approved various stays of application of CET duty rates on select items in Burundi, effective for the one-year period from 1 July All measures granted to Burundi were decreases in applicable duty rates as follows: Duty reduction Effective rate from Road tractors for semitrailers 10% 0% Motor vehicles for transport of goods with 10% gross vehicle weight exceeding 5 tons but not exceeding 20 tons Motor vehicles for transport of goods with 0% gross vehicle weight exceeding 5 tons but not exceeding 20 tons Buses for transportation of more than 25 persons 10% Worn clothing and other worn articles 35% or US$0.4/Kg 35% Implications Each EAC Member State, like any other economy, is challenged every year to widen its tax base. Whereas higher tax rates are introduced to protect local industries and other new taxes are introduced to cast the net farther, it is likely that the need to widen the tax base will continue in the foreseeable future until countries become less reliant on borrowed funds to finance their budgets. The new rates became effective on 1 July 2018.

15 Indirect Tax Alert 15 For additional information with respect to this Alert, please contact the following: Ernst & Young (Kenya), Nairobi John Gikima Stephen Ndegwa Emmanuel Makheti Esther Muteti Ernst & Young (Uganda), Kampala Hadijah Nannyomo Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg Marius Leivestad Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London Rendani Neluvhalani Byron Thomas Ernst & Young LLP, Pan African Tax Desk, New York Silke Mattern Dele A. Olaogun

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