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How doyou see it? 2012 Budget Highlights

02 Kenya
General provisions Infrastructure Manufacturing Technology, media and telecommunications Health Agriculture Scrap metal Financial sector

05

Tanzania
General provisions Motor vehicles Aviation East African Development Bank (EADB)

07

Uganda
General provisions Macroeconomic objectives Key sector priorities Effectiveness of government in service delivery Agricultural production and productivity Tourism Private sector competitiveness Licence Infrastructure development Human resource development Water

Kenya

General provisions Income Tax Salaries and allowances payable to state officers such as thePresident, Members of theNational Assembly shall be chargeable to tax. Principal officers of anorganization, where found guilty, may be required to pay any outstanding tax owed by theorganization. TheBill confirms that income tax exemptions granted to charitable organizations will be valid for aperiod of 3 years, but subject to renewal. Commercial buildings distinguished from industrial buildings for capital allowance purposes. Qualifying commercial buildings shall be eligible for capital allowance at therate of 25%. Investors who buy certified hotel buildings shall be eligible to claim capital allowance before they commence business. Tax chargeable on income derived by non-resident persons from thebusiness of transmitting messages shall be accounted for as withholding tax. Qualification and disqualification rules for aperson to be appointed or terminated as amember of theLocal Committee and Tribunal have been introduced. TheCommissioner shall be obliged to provide theclerk of theLocal Committee with aresponse to ataxpayers appeal lodged with theLocal Committee within 30 days. Transfer Pricing Rules amended to allow theCommissioner to prescribe theconditions and procedure in identifying thetransfer pricing method to use. Rules governing theadministration and procedure for payment of advance tax on commercial vehicles have been enacted. Regulations prescribing conditions for persons authorized to act as tax agents have been introduced.

VAT TheSecond and Fifth Schedules to theVAT Act have been amended by reclassifying thetariff codes of certain listed items to harmonise them with theEAC Common External Tariff Codes. TheVAT Bill has been tabled for debate and approval by Parliament. Much of theconcerns raised by thestakeholders have not been addressed: Input Tax to be deducted within 3 months of thedate of supply this is down from 12 months. Theformula method has been substituted with thedirect attribution method for providers of mixed supplies. VAT remissions abolished. Application for refunds to be made within 3 months reduced from thecurrent 12 months. 30% of thetax in dispute to be paid prior to filing anappeal down from the50% provided earlier. Provision relating to tax avoidance schemes removed. Subsidiary legislation under thecurrent VAT Act shall remain in force after it has been repealed; provided it is not inconsistent with new VAT Act. Fuel and fuel oils to be exempt for aperiod of 3 years from thedate of commencement of thenew VAT Act after which they are to become vatable supplies. Management of Unit Trusts and Collective Investment Schemes, Credit Rating Bureau services and supply of credit under Hire Purchase Agreement in certain instances to be standard rated. Taxable supplies imported or purchased for oil or gas exploration under aproduction sharing agreement with theGovernment to be zero rated. Landing and parking services provided to aircraft moved from exempt to standard rated supplies.

Medicaments, vaccines and certain medical articles and dressings to be zero rated for aperiod 3 years from thedate of commencement of thenew VAT Act after which they are to become vatable supplies. Provision for Input tax to be deducted in instalments for goods acquired under hire purchase or lease finance agreement has been removed. Customs Increase of import duty on galvanized wire from 0% to 10%. Exemption of import duty on inputs used for beekeeping which include honey refiners, honey strainers, honey pumps, hive tools, queen rearing equipment and protective gear. Exemption of import duty on inputs for use in themanufacture of medical diagnostic kits. Remission of import duty on food supplements from 10% to 0% for use in feeding infants and persons suffering from HIV/AIDS. Decision to increase minimum tax payable on imported second hand clothes from KES 1.1 million to KES 1.9 million per 20 foot reversed. KRA will be rationalized to establish thecustoms services as anautonomous entity which is critical to their role of trade facilitation and border control and to enable them realign their operations with theEast African Community Common Market Protocol. Fourth Schedule to theCustoms and Excise Act covering export duty amended to align thetariff numbers to theEast African Community Common External Tariff 2012 version.

2012 Budget Highlights

Kenya

Excise Fifth Schedule to theCustoms and Excise Act covering excise duty amended to align thetariff numbers to theEast African Community Common External Tariff 2012 version. TheCustoms and Excise(determination of retail selling price) Regulations, 2012 issued to clarify excise valuation for purposes of levying ad valorem excise duty on locally manufactured products subject to duty on thebasis of retail selling price. Infrastructure Atotal of KES 267 billion allocated to various infrastructure projects; KES 123.6 billion has been allocated to roads up from KES 104.3 billion in 2011/12 and KES 79.9 billion has been allocated to energy up from KES 57.5 billion in the2011/12 budget. KES 1.45 billion allocated to thecompletion of theconstruction of therailway line linking Jomo Kenyatta International Airport to theCentral Railway Station. TheFinance Minister requested theMinistry of Internal Security to put in place legislation requiring those dealing in scrap metal to put in place procedures to enable traceability and identification of thesource of scrap metal with those breaching thelaw required to pay apenalty of up to KES 1 million or face imprisonment for aterm not exceeding 3 years. Thegovernment targets to facilitate investments to enable theexport of oil from theregion and attract petroleum industries. Private public partnership (PPP) legislation is expected to be tabled in parliament to facilitate private sector participation in infrastructure.

Substantial resources have been allocated to theministry of education to cover various costs including that of building classrooms in both primary and secondary schools. Theconstruction sector will benefit from this allocation. KES 148 billion has been allocated to thedevolved governments to enable them to begin operations as soon as they are put in place. This represents 26% of thelatest audited revenues (much higher than theminimum of 15% specified in theconstitution). KES 85 billion allocated to theMinistry of Health, some of which is expected to be spent on construction of health centers and hospitals across thevarious counties. Manufacturing Increased import duty on galvanized wire from 0% to 10% is one of themeasures thegovernment has put in place to protect local iron and steel production. Technology, media and telecommunications Theworld is expected to convert from analog to digital TV by 2015 and duty has been removed on imported converters of analogue to digital TVs. Duty on imported computer software has also been removed. KES 7.2 billion allocated to theICT sector. Government investing in digitization of registry records at thelands registry and other important registries to eliminate thebottlenecks that investors experience. Thegovernment aims to consolidate thecurrent cargo clearing system and all theentities involved are to be consolidated into one single entity. KES 480 million allocated for purchase of computers for schools.

Health Additional KES 12.3 billion allocated to health care raising thetotal allocation by 16.9% to reach KES 85 billion. Allocated resources in theBudget to facilitate recruitment of 915 doctors in theyear. KES 1 billion allocated to facilitate NACADA to full enforce provisions of theAlcohol Act. Agriculture KES 1.5 billion allocated for debt relief for coffee, rice and sugar farmers. KES 8.0 billion allocated for expansion and construction of irrigation infrastructure countrywide with theNational Irrigation Board expected to promote drip irrigation as thepreferred irrigation method. TheAgribusiness Fund allocated KES 1.0 billion to boost its operations and improve its attractiveness to theprivate sector particularly theyouth in thecountry. Government has set aside anamount of KES 1.6 billion for Strategic Grain Reserves, and KES 2.0 billion for famine relief activities. Thecontingency fund has also received aboost of KES 5 billion to cater for other urgent and unforeseen expenditures. Government will finalise aTrade Promotion Strategy whose implementation will expand and diversify exports, particularly Macadamia and Cashew nuts. TheFinance Minister proposed to exempt duty on key imported inputs for bee keeping equipment. Scrap metal Traders in scrap metal will require registration and failure to comply will be anoffence liable to amaximum fine of KShs.1,000,000 or imprisonment for amaximum term of three years or both.

2012 Budget Highlights

Kenya

Financial sector Banking Thedefinition of banking business has been expanded to include such other business activity as theCentral Bank may prescribe. TheBanking Act has been amended to ensure that where aninstitution conducts business through anagent, theinstitution shall be liable for theacts or omissions of theagent in so far as such acts or omissions relate to that business. Share-holding in excess of 25% in abank now approved for non-operating holding companies. TheBanking Act is amended to specifically require theadoption of International Financial Reporting Standards. Credit reference bureaus to broaden their reach. Enhanced regulation of institutions by theCBK.

Insurance TheIRA to carry out anassessment of theprofessional, financial and moral suitability of thepersons managing, controlling or having asignificant ownership or significant beneficial interest in aperson licensed to carry out insurance business in Kenya. Definition of significant owner included in Insurance Act to mean aperson who holds more than ten per cent of thecontrolling or beneficial interest in aperson licenced under theInsurance Act. Insurance Regulatory Authority now has power to conduct inquiries in furtherance of its supervisory role. Every insurer incorporated in Kenya required to prepare and submit to theCommissioner, within 30 days of theend of thequarter to which it relates, anunaudited revenue account, balance sheet, profit and loss account and statement of admitted assets and admitted liability. Every account, balance sheet, certificate, abstract, return or statement required to be prepared or prepared by aninsurer to be deposited with theCommissioner within four months after theend of theperiod to which they relate, without further need to print and have certified four copies of thesame as was thecase initially.

2012 Budget Highlights

Tanzania

General provisions Income Tax Introduction of NIL tax band for turnover below TZS 3,000,000 under thepresumptive tax scheme (simplified tax system for individual business people and entrepreneurs). Tax free amount for PAYE purposes increased from TZS 135,000 to TZS 170,000. Dar es Salaam Stock Exchange exempted from income tax. Imposition of 10% withholding tax on interest earned by non-residents on deposits with Tanzanian banks. Imposition of 5% withholding tax on dividends paid by resident corporations to resident corporate shareholders who hold 25% of more of theshares (previously these were exempt). Introduction of capital gains tax on asale of shares in aresident corporation by foreign/non-resident shareholder. This appears to widen theprevious tax on domestic assets. Withholding tax exemption on interest charged by foreign banks on loans to strategic investor. Holders of gaming licences exempted from paying income tax on their income, which is already subject to gaming tax. VAT Introduction of 10% VAT for supplies to previously VAT relieved entities including, NGOs, individuals, companies and TIC certificate holders (other than those already enjoying exemptions under existing certificates). VAT exemption on Electronic Fiscal Devices. VAT exemption on various equipment to be used for storage, transportation and distribution of natural gas (compressed natural gas and piped natural gas).

Customs Extend thestay of application of CET rate of 35% on wheat grain under HS Codes 1001.90.20 and 1001.90.90 and apply 0% for aperiod of one year. Increase duty rate from 0% to10% on galvanized wire under HS Code 7217.20.00. Split thetariff line under HS Code 2106.90.91 and grant exemption on infants foods fortification food supplements and mineral premixes. Reduce CET rate on Set Top Boxes from 25% to 0%. Reduce CET rate on electricity under HS Code 2716.00.00 from 10% to 0%. Reduce CET rate on inner glass flask under HS Codes 7020.00.90 from 25% to 0%. Split HS Code 8523.80.00 to apply CET rate of 0% from 25% on software. Grant duty remission from 25% to 0% to soap manufacturers using palm stearin and RDB under HS Codes 1511.90.40. Grant duty remission from 10% to 0% to soap manufacturers using LABSA as raw materials under HS Codes 3402.11.00, 3402.12.00 and HS Code 3402.19.00 for one year. Reduce CET rate from 10% to 0% on cathodes under HS Code 7403.11.00. Extend application of CET of 25% instead of 35% on cement under HS Code 2523.90.00 for one year. Grant duty remission on castor oil and its fractions under HS Code 1515.30.00 from 10% to 0%. Split HS Code 7308.90.90 to apply 10% instead of 25% on road guards rails.

Grant exemption of import duty on: - Machinery and spares used in mining activities (excluding spare parts for motor vehicles); - Refrigerated trailers; and - Beekeeping equipment including honey refiners, strainers, pumps, hive tools, queen rearing equipment and protective gears. Grant duty remission on medical diagnostic kits. Grant exemption from import duty to Armed Forces Canteen Organization (AFCO) for one year. Grant duty remission on foods for infants and people with HIV/AIDS. Abolish import duty exemption on non-utility vehicles of 3000cc and above for all beneficiaries except donor funded projects, diplomats and diplomatic missions. Reduce tax exemption on deemed capital goods to 90% from 100% i.e. introduce 10% duty. Excise Abolish excise duty of TZS 40 per litre on HFO (heavy fuel oils). Introduction of excise duty on music and film products including DVDs, VCDs, CDs, video and audio tapes etc. Introduction of excise duty on imported non-utility vehicles for all beneficiaries except for: - Themining companies holding agreements with theGovernment providing tax exemptions; - Diplomats and diplomatic missions; - Religious organizations; and - Donor funded projects. Introduction of excise duty of TZS 83 per litre on imported fruit juices and TZS 8 per litre on locally produced fruit juices.

2012 Budget Highlights

Tanzania

Introduction of excise duty exemption on fuel used by theoil and gas exploration companies. Impose excise duty on Natural Gas for industrial use at therate of TZS 0.35 per cubic feet. Increase excise duty on airtime from 10% to 12%. Adjust thespecific excise duty rates on soft drinks, beers, spirits, cigarettes and wine as follows: - Carbonated soft drinks from TZS 69 per litre to TZS 83 per litre; - Beer made from thelocal un-malted cereals from TZS 248 per litre to TZS 310 per litre; - Other beers from TZS 420 per litre to TZS 525 per litre; - Wine produced with more than 25% imported grapes from TZS 1,345 per litre to TZS 1,614 per litre; - Wine with domestic grape content exceeding 75% from TZS 145 per litre to TZS 420 per litre; and - Spirits from TZS 1,993 per litre to TZS 2,392 per litre. Excise duty on cigarettes has been amended as follows: - Cigarettes without filter tip and containing domestic tobacco more than 75% from TZS 6,820 to TZS 8,210 per thousand cigarettes; - Cigarettes with filter tip and containing domestic tobacco more than 75% from TZS 16,114 to TZS 19,410 per mil; - Other cigarettes not mentioned in above from TZS 29,264 to TZS 35,117 per mil; - Cut rag or cut filler from TZS 14,780 per kilogram to TZS 17,736 per kilogram; and - Excise duty rate on cigars remains at 30%.

Export levy Increase on export duty on raw hides from 40 per cent or TZS 400 per kilogram to 90 per cent or TZS 900 per kilogram, whichever is greater. Gaming tax Increase in gaming tax for Casinos from 13% of gross gaming revenue to 15% of gross gaming revenue. Introduction of gaming tax on sports betting at arate of 6% of thetotal stakes. Introduction gaming tax on SMS lotteries at arate of 43%. Introduction of gaming tax of 15% on internet casinos. Introduction of aclause in theGame of Chance Act which will explicitly state that Gaming Tax shall be afinal tax. Motor vehicles Introduction of afee of TZS 5 million for personalised platenumbers for three years. Importation of motor vehicles aged more than 8 years from theyear of manufacture will now be subjected to excise duty of 20%. Aviation Increase in Airport Service Charges from thecurrent rate of USD 30 to USD 40 for passengers travelling outside thecountry and from TZS 5,000 to TZS 10,000 for local travel passengers.

East African Development Bank (EADB) Provide immunity status to theproperties owned by theEADB including houses, deposits, monies and bank account against legal proceedings, court decisions and nationalizations/ acquisitions acts. Give theEADB corporate status as is thecase with theInternational monetary Fund, theWorld Bank and Africa Development Bank to enable it to be afforded priority whenever crises occur in financial market. Empower theMinister of Finance to implement thedecisions of theEADBs governing board, by amending theschedule to Act through theGovernment Notice and subsequently inform theParliament. Define theEADBs properties as including its houses and financial deposits entrusted to EADB for supervision.

2012 Budget Highlights

Uganda

General provisions Income Tax Withholding tax on income derived from Treasury Bills and Bonds increased from 15% to 20% as afinal tax. PAYE Threshold raised from UGX 130,000 to UGX 235, 000 per month and thetax bands will be adjusted accordingly. Anadditional 10% tax on individuals with chargeable income of UGX 120 Million and above per year. Value Added tax VAT on water reinstated at 18%. VAT on biodegradable packaging materials reinstated. VAT exemption on gambling and lottery services reinstated and instead thegaming and pool betting tax increased from 15% to 20%. Excise Duty on spirits made from locally made raw materials increased from 45% to 60%. Specific rate and ad valorem duty rate on undenatured spirits of UGX 2,000 or 80%, whichever is higher. 10% duty on cosmetics and perfumes. Non tax revenue Various fees and charges for theprovision of Government services, permits and authorisations to be published. Other measures Reforms on Excise Duty Law, TheStamps Act, TheLotteries. Pool betting and Gaming Act. Introduction of aTax Procedure Code to improve compliance and ease tax administration.

EAC Pre-budget consultations Need to take stock and analyse theexisting duty remission schemes within theregion to ensure equality and uniformity of theintra EAC trade regime. Import duty on set top boxes for analogue digital and terrestrial transmission reduced from 25% to 0% for one year. Import duty on food supplements and mineral premix used in fortification reduced from 25% to 0%. Import duty on vacuum packaging bags reduced from 25% to 10% for one year. Macroeconomic objectives Achieve agrowth rate of at least 7% per annum in themedium term. Thereturn to single digit inflation rates. Improve Ugandas balance of payments by reducing thecurrent account deficit. Key sector priorities Removing infrastructure constraints in transport and energy to facilitate private sector development as theengine of growth. Promoting support to thecritical productive sectors of theeconomy including agriculture, tourism in order to generate employment and increase production. Improving thequality of social services focusing on education, health and access to water. Strengthening public sector management for efficient service delivery.

Effectiveness of government in service delivery Implementation of thenational identity cards. Strengthened performance and contract management. Salary enhancement for public servants. Eliminate inefficiency and wastage in public expenditure. Support anti-corruption agencies to tackle corruption in all government agencies. Agricultural production and productivity Theagricultural sector has recorded anannual growth of 3%. Provision of improved seed and farm inputs and implements to increase production and productivity of seven security commodities. Provision of improved breeding stock for theseven commodities. Completion of irrigation schemes and embarking on establishing of new ones. Facilitation of maize farmers in specific zones with improved seeds and access to flour milling plants. Consultation to nucleus farmers in theprivate sector on how to provide cost effective agricultural mechanized support to small holders farmers. Total direct and indirect allocations to theagriculture sector will amount to UGX 585.3 billion. Tourism Improve accessibility to tourist sites by upgrading theroad infrastructure. Support enactment of hospitality through grading hotels and hospitality training. Promoting eco-tourism and use of tourist companies.

2012 Budget Highlights

Uganda

Private sector competitiveness Reduction on physical costs in transport and electricity. Providing thenecessary policy, legal and regulatory framework. Licence Elimination of 27 licences all found to be either obsolete or redundant. Establishment of anelectronic license registry. Establishment of aOne Stop Centre to provide online registration services for thevarious licenses required to start abusiness. Infrastructure development Transport infrastructure UGX 1,651 billion allocated to works and transport sector for construction and maintenance of roads. 142 units of road equipment purchased to ensure prompt and efficient road maintenance. Several water transport projects ferries and landing sites to commence. Feasibility study to upgrade Kampala Kasese railway. Engineering design for Malaba Kampala standard gauge railway line.

Energy Fully commission the250 MW Bujagali Hydro Power Project. Start construction of 600 MW Karuma Hydro Power Project. Complete preliminary designs for the600 MW Ayago and 140 MW Isimba Hydro Power Projects. Provide financial support in theconstruction of 125 MW of renewable Mini Hydro Projects. Further expand theRural Electrification Programme to increase access to power. Ensure aggressive power loss reduction by rolling out prepaid meters and investing in thedistribution network. Oil and Gas Bills before parliament to be enacted. ThePetroleum (Exploration and Production Bill) 2012. ThePetroleum (Refining, Gas processing and Conversion, transportation and Storage ) Bill 2012. ThePublic Finance Bill 2012, Petroleum Revenue Management Framework.

Human resource development Education Increase of national budget on education from UGX 1,418 billion to UGX 1,669 billion. Theincrease will include salary increases and science teachers, scientists and other civil servants. Increased funding of graduate venture fund with anallocation for UGX 16 billion. Health Increase on theavailability of basic medicines. Address of poor child and maternal health, weakness in thedrug management system. Water Increase in allocation from UGX 271 billion to UGX 355 billion. Piped water systems, schemes will be improved for rural water supply and completed. Construction of new, expansion of theexisting infrastructure.

2012 Budget Highlights

Contacts
CEO Sammy Onyango sonyango@deloitte.co.ke Audit Anne Muraya amuraya@deloitte.co.ke Bernadette Wahogo bwahogo@deloitte.co.ke David Nchimbi dnchimbi@deloitte.co.tz Eshak Harunani eharunani@deloitte.co.tz Fred Aloo faloo@deloitte.co.ke Fred Okwiri fokwiri@deloitte.co.ug George Opiyo gopiyo@deloitte.co.ug Iqbal Karim ikarim@deloitte.co.ke Joe Wangai jwangai@deloitte.co.ke Business Development Services Doreen Mbogho dmbogho@deloitte.co.ke Consulting Joe Eshun jeshun@deloitte.co.tz John Kiarie jkiarie@deloitte.co.ke Kimani Njoroge knjoroge@deloitte.co.ke Marthinus Van Jaarsveld mvanjaarsveld@deloitte.co.ke Enterprise Risk Services Julie Nyangaya jnyangaya@deloitte.co.ke Financial Advisory Harveen Gadhoke hgadhoke@deloitte.co.ke Tax Bill Page bpage@deloitte.co.ug Nikhil Hira nhira@deloitte.co.ke Offices Kenya Deloitte Place Waiyaki Way, Muthangari Nairobi Tel.: +254 4441344 or +254 4230000 8th Floor, Kenya Reinsurance Plaza Moi Avenue Mombasa Tel.: +254 2225827 or +254 2221347 Tanzania 10th Floor, PPF Tower Corner of Ohio Street & Garden Avenue Dar es Salaam Tel.: +255 222116006 or +255 222115352 Uganda 3rd Floor Rwenzori House 1 Lumumba Avenue Kampala Tel.: +256 417701000 or +256 414343850
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