United Republic of Tanzania Standard Incentives for Investors

Written on 30 May 2022. Posted in Investment Guide

The Tanzania Investment Act 1997 defines “incentives” as tax reliefs and concessional tax rates which may be accessed by an investor under the Income Tax Act, the Customs Tariff Act, the Tanzania Revenue Authority Act, the Value-Added Act, and any other law for the time being in force, and includes additional benefits that may be accessed by an investor under sections 19 and 20 of the Tanzania Investment Act 1997.

1. Fiscal and Non-Fiscal Incentives offered to Investors

   1. Access to various services related to permits, licenses and approvals in the TIC One Stop Facilitation Centre.
   2. The recognition of private property and protection against any non-commercial risks. Tanzania is an active member of the World Bank Foreign Investment Insurance wing, MIGA (Multilateral Investment Guarantees Agency). Likewise, Tanzania is a member of The International Centre for Settlement of Investment Disputes (ICSID) also a body affiliated to the World Bank.
   3. Zero percent (0%) Import Duty on Project Capital Goods, Computers and Computer Accessories, Raw Materials and Replacement Parts for Agriculture, Animal Husbandry and Fishing, Human and Livestock Pharmaceuticals and Medicaments, Motor Vehicle in Completely Knocked down (CKD) form and inputs for Manufacturing Pharmaceutical Products.
   4. Ten percent (10%) - Import Duty for Semi-processed/semi-finished goods).
   5. 100% capital expenditure to Agricultural sector.
   6. The Income Tax Laws allows 50% Capital allowances in the first year of use for Plant and Machinery used in manufacturing processes and fixed in a factory, fish farming; or providing services to tourists and in a hotel. Thereafter, wear and tear rates apply to the remainder as below:
      1. VAT Deferment granted on project capital Goods such as Plant & Machinery. However, the persons have to carry on an economic activity, keep proper VAT records and file returns, has no Tax outstanding and VAT payable in respect of each unit of the Capital goods is 20 million Shillings or above.

2. Strategic and Special Strategic Investment Status

   1. Additional fiscal incentives to strategic investors who meet criteria under section 20 of the Tanzania Investment Act, 1997 as follows:
      1. If locally owned, the minimum investment capital for the proposed project is not to be less than Tanzanian Shillings equivalent to twenty million US dollars (USD 20,000,000 and If wholly owned by a foreign investor or is a joint venture, the minimum investment capital for the proposed project is not less than Tanzanian Shillings equivalent to Fifty Million US dollars (USD 50,000,000);
      2. The project should contribute significantly in creation of employment opportunities
      3. New and innovative technology to be introduced by the prospective strategic investment project
      4. The project should contribute to capacity to produce for export and contribute to foreign exchange earnings
      5. The investment should be in a special geographical area.
   2. Special strategic investment status. The government may identify projects and grant special strategic investment status, if the proposed projects meet the following criteria:
      1. A minimum of investment capital of not less than the equivalent in Tanzanian Shillings of three hundred million US dollars (USD 300,000,000)
      2. Investment capital transaction is undertaken through registered local financial and insurance institutions
      3. At least one thousand five hundred direct employment is created with satisfactory number of senior positions in the projects that do not require high and sophisticated technology; and
      4. Capacity to significantly generate foreign exchange earnings, produce significant important substitution of goods or supply of important facilities necessary for development in the socio-economic or financial sector.
   3. Upon grant of a strategic or special strategic investment status to a project, the Minister for Finance shall propose to the National Investment Steering Committee additional specific fiscal incentives
   4. Where the National Investment Steering Committee approves additional specific fiscal incentives, the Minister for Finance shall confer such additional fiscal incentive as approved by the National Investment Committee under an order published in the Gazette.
   5. The National Investment Steering Committee may review every project conferred additional specific fiscal incentives in respect of compliance of incentives granted and advise the Government on whether or not to continue issuing the incentives.

3. EAC Customs Management Act provides 0% import duty on Hotel Equipment’s
   

   Any of the following goods engraved or printed or marked with the hotel logo imported by a licensed hotel for its use: Washing machines; Kitchen Ware; Cookers; Fridges and freezers; Air Conditioning Systems; Cutlery; Televisions; Carpets; Furniture; Linen and Curtains; as well as Gymnasium equipment

4. Import Duty Drawback

   1. Import Duty draw back on raw materials used to produce goods for exports and deemed exports. Deemed exports cover locally produced or manufactured goods, which are sold to foreign agencies or entities operating in Tanzania, which are exempt from payment of import duties.
   2. Zero-rated VAT on exports.
   3. The right to transfer outside the country 100% of foreign exchange earned, profits and capital.
   4. Automatic permit of employing 5 foreign nationals on the project holding Certificates of Incentives.

5. Land for Investment in Mainland Tanzania.

Through the land act, foreign investors can obtain land for investment through Tanzania Investment Centre (TIC), where a ‘’Derivative Right’’ is granted while Domestic investors own land directly through the certificate of right of occupancy. TIC has established a land bank registry where land suitable for various investment sectors including manufacturing and agriculture has been identified, surveyed and availed with key infrastructure.

South Sudan Standard Incentives for Investors

Written on 30 May 2022. Posted in Investment Guide

The grant of Incentives to Investors in South Sudan is governed by the South Sudan Tax System (according to Taxation Act 2009), and Benefits and Incentives for Investors (according to Investment Promotion Act 2009.

When establishing business in South Sudan, one is required to obtain a tax identification number (TIN). The TIN will be provided the time of registration/incorporation of the business name. The significant milestone in tax policy for Republic of South Sudan was passage of Taxation Act 2009 that provided for sound tax policy framework; a strong basis for tax administration, and a modern, easily administrated tax law.

1. Business Personal Income Tax

2.   Business Profits Tax

 Dividends, interest and royalties subject to a 10% withholding tax. The Act is very investor-friendly including:

• A very low and simple rate structure
• And liberal business deduction and depreciation systems: depreciation over 10 years for building; 3 years for equipment including vehicles and; 4 years for all other assets.

3. New Tax System

The Act is designed as a package and is one of the few comprehensive tax laws in Africa which encompasses:

• Personal income tax marginal rate is 0, 10, and 15%
• Excise duties range from 5 to20%
• Business profile tax is 10% on small sized businesses and 15% on medium sized businesses

Taxation in South Sudan takes place at the Republic of South Sudan level, State level and County/Payam/Boma levels. Taxes are payable to the Directorate of Taxation.

4. Excise Tax

Excise tax is levied on goods produced in South Sudan; the import excisable goods into South Sudan; and the provision of excisable services in South Sudan. The following table provides a detailed list of excisable goods and their corresponding excise tax. 

5. Tax Concessions and Incentives Regime

The Government of the Republic of South Sudan has designated the following sectors as priority for Investment, and investors in these sectors are entitled to benefits and incentives:

1. Agriculture and Agribusiness
2. Physical infrastructure
3. Social infrastructure
4. Mining, quarrying, energy and electricity, petroleum and gas industries
5. Prospecting of natural resources for economic use
6. Forestry
7. Medium to heavy manufacturing industries
8. Transport, telecommunications, print and electronic media, and ICT
9. Commercial banking, insurance, property management, and financial institutions
10. Pharmaceuticals, chemicals, and medicinal and surgical industries
11. Tourism and hotel industry development 

Investors in the aforementioned sectors enjoy the following incentives:

• Duty exemptions: agricultural import-tools, equipment, machinery and tractors, pharmaceutical, animal feeds, seeds – for boosting food and cash crops productions are exempt from any duties and taxes for a period that shall be determined by law.
• Tax Incentive: these include capital allowances ranging from 20% to 100%, deductible annual allowances ranging from 20% to 40% and other depreciation allowances ranging from 8% to20%.
• Special Incentive: special incentives may be granted by Board of Directors of South Sudan Investment Authority to investments in strategic or transformational sectors. These special incentives are only available on special applications by investments in areas designated as Strategic or Transformational.

Tax incentives and duties exemptions are requested through an application to the Ministry of Finance and Planning which is obtained and administered by South Sudan Investment Authority, the Government mandated agency to regulate, promote investment opportunities in South Sudan, Region and in the World.

Rwanda Standard Incentives for Investors

Written on 30 May 2022. Posted in Investment Guide

1. Preferential corporate income tax rate of zero percent (0%)
   

   An international company which has its headquarters or regional office in Rwanda is entitled to a preferential corporate income tax rate of zero per cent (0%) if it fulfils the following requirements:
   1. to invest the equivalent of at least ten million United States Dollars (USD 10,000,000), in both tangible or intangible assets, in Rwanda;
   2. to provide employment and training to Rwandans;
   3. to conduct international financial transactions equivalent to at least five million United States Dollars (USD 5,000,000) a year for commercial operations through a licensed commercial bank in Rwanda;
   4. to be well established in the sector within which it operates;
   5. to use the equivalent of at least two million United States Dollars (USD 2,000,000) per year in Rwanda;
   6. to set up actual and effective administration and coordination of operations in Rwanda and perform at least three (3) of the following services in Rwanda:
      1. procurement of raw materials, components or finished products;
      2. market control and sales promotion planning;
      3. information and data management services;
      4. treasury management services;
      5. research and development work;
      6. training and personnel management.

2. Preferential corporate income tax rate of fifteen percent (15%)
   

   A preferential corporate income tax rate of fifteen percent (15%) is accorded to:
   1. A registered investor, exporting at least fifty percent (50%) of turnover of goods and services produced in Rwanda, including business processing outsourcing. This incentive excludes unprocessed minerals, tea and coffee without value addition according to the provisions of this Law.
   2. A registered investor undertaking one of the following operations: energy generation, transmission and distribution from peat, solar, geothermal, hydro, biomass, methane and wind. This incentive excludes an investor having an engineering procurement contract executed on behalf of the Government of Rwanda;
   3. A registered investor in the sector of transport of goods and related activities whose business is operating a fleet of at least five (5) trucks registered in the investor’s name, each with a capacity of at least twenty (20) tons.
   4. A registered investor operating in mass transportation of passengers and goods with a fleet of at least ten (10) buses registered in the investor’s name, each with a capacity of at least twenty-five (25) seats;
   5. A registered investor in the Information and Communications Technology (ICT) Sector with an investment involving one of the following activities: service, manufacturing or assembly. This incentive excludes ICT retail and wholesale trade as well as ICT repair industries and telecommunications;
   6. A registered investor operating in the following financial services: global business activities, private equity funds, fund management, wealth management; mutual funds, collective investment schemes, captive insurance schemes, venture capital, and asset backed securities. This incentive excludes locally oriented fund and wealth management, retail banking and insurance activities.
   7. An investor registered in building low-cost housing and upon fulfilling the criteria provided under the instructions of the Minister in charge of housing.
   8. An investor registered in any other priority economic sector as may be determined by an Order of the Minister in charge of finance.

3. Corporate income tax holiday of up to seven (7) years
   

   A registered investor investing an equivalent of at least fifty million United States Dollars (USD 50,000,000) and contributing at least thirty percent (30%) of this investment in form of equity in the sectors specified below is entitled to a maximum of seven (7) years corporate income tax holiday:
   1. Energy projects producing at least twenty-five megawatts (25 MW). This incentive excludes an investor having an engineering procurement contract executed on behalf of the Government of Rwanda and fuel produced energy;
   2. Manufacturing;
   3. Tourism;
   4. Health;
   5. Information and Communication Technology (ICT) Sector with an investment involving manufacturing, assembly and service. This incentive excludes communication, ICT retail and wholesale trade as well as ICT repair companies or enterprises and Telecommunications;
   6. Export related investment projects;
   7. An investor registered in another priority economic sector as may be determined by an Order of the Minister in charge of finance.

4. Corporate income tax holiday of up to five (5) years
   

   Microfinance institutions approved by competent authorities are entitled to a tax holiday of a period of five (5) years from the time of their approval. However, this period may be renewed upon fulfilling conditions prescribed in the Order of the Minister in charge of finance.

5. Exemption of customs tax for products used in Export Processing Zones
   

   A registered investor investing in products used in Export Processing Zones is exempted from customs taxes and duties according to the provisions of customs rules and regulations of the East African Community.

6. Exemption of Capital Gains Tax
   

   A registered investor does not pay capital gains tax. However, income derived from the sale of a commercial immovable property shall be included in the taxable income of the investor.

7. Exemption of Value Added tax on Raw materials and Machinery on Manufacturing and Mining industries

upon approval of the list of these materials by Ministry of Finance and Economic Planning.

8. Value Added Tax refund
   

   The refund of the Value-Added Tax paid by investors shall be made within a period not exceeding fifteen (15) days upon receipt of the relevant documents by the tax administration authority.

9. Accelerated depreciation
   

   A registered investor is entitled to a flat accelerated depreciation rate of fifty percent (50%) for the first year for new or used assets if he/she meets the following criteria:
   1. Invest in business assets worth at least fifty thousand US dollars (USD 50,000) each;
   2. Operate in at least one of the sectors below and meet the requirements: export projects; manufacturing; telecommunications; agro processing; education; health; transport excluding passenger vehicles with less than nine (9) people seating capacity; tourism investments worth at least one million eight hundred thousand United States Dollars (USD 1, 800,000); construction projects worth at least one million eight hundred thousand United States dollars (USD 1,800,000); and any other sectors provided the investment is worth at least one hundred thousand United States dollars (USD100,000)
   3. Meet the obligations defined below:
      1. keep the assets for at least three (3) years after benefiting from the accelerated depreciation;
      2. inform the Commissioner General of the Rwanda Revenue Authority of the disposal of the business assets in case such disposal is made before three (3) years.

10. Carry forward of losses in income tax law
    

    If the investment allowance (accelerated Depreciation) results into the company making losses, then the loss and other verified business losses are carried forward for next 5 fiscal years.

11. Immigration incentives
    

    A registered investor and his/her dependents shall be issued with a residence permit in accordance with relevant laws. A registered investor who invests an equivalent of at least two hundred fifty thousand United States Dollars (USD 250,000) may recruit three (3) foreign employees without necessarily demonstrating that their skills are lacking or insufficient on the labour market in Rwanda.

Kenya Standard Incentives for Investors

Written on 30 May 2022. Posted in Investment Guide

Investment incentives, both fiscal and non-fiscal, are available in Kenya. The Kenya Revenue Authority implements the issuance of the fiscal (tax) incentives in collaboration with other Authorities e.g. Capital Market Authority, Export Processing Zones Authority (for issuance of the EPZ incentives) among others as provided under the Income Tax Act, Laws of Kenya. The tax incentives are mainly in form of capital deductions. These deductions are made at the point of computing the gains or profits of a person / company for any year of income. Capital deductions are divided into four deductions:

1. Industrial Building Deductions
   It applies to the capital expenditure incurred by a person on the construction of an industrial building to be used in a business carried out by them or their lessee. This allowance is claimed by the person who incurred the capital expenditure i.e. the owner of the building and the building must be used for the purpose of the business only so as to enjoy the industrial building deduction. It is granted on a straight-line basis on the balance of constructions. The applicable rates are as follows:
   • Industrial Building-2.5% capital deduction applicable within the first Forty (40) years of operation
   • Hotels - 10% capital deduction applicable within the first 10 years of operation
   • Hostels and Educational Buildings certified by the commissioner-50% capital deduction for the first 2 years of operation.
   • Buildings used for training of film producers, actors or crew - 100% capital deduction.
   • Rental residential building approved by the minister in a planned developed area - 25% capital deduction.
   • Commercial building- 25% capital deduction in a developed area.

2. Farm Works Deductions
   This refers to expenditure by the owner or tenant of agricultural land on construction of farm works. Applicable rates include
   • Farmhouse- Allow 1/3 of the expenditure on one house. Employee houses qualify.
   • Any other immovable buildings for the proper operation of the farm deduct 100% of the whole amount.

3. Wear and Tear Deductions
   This is an allowance that is granted to the investor to cater for wear and tear on machinery.

Categories & Applicable Rates for Wear and tear Deductions in Kenya

4. Export processing zones (EPZ) incentives
   Licensed EPZ projects (foreign, local or joint venture) are entitled to the following incentives:

Fiscal benefits

• 10-year corporate income tax holiday and a 25% tax rate for a further 10 years thereafter (except for EPZ commercial enterprises)
• 10-year withholding tax holiday on dividends and other remittances to non-resident parties (except for EPZ commercial licence enterprises)
• Perpetual exemption from VAT and customs import duty on inputs–raw materials, machinery, office equipment, certain petroleum fuel for boilers and generators, building materials, other supplies. VAT exemption also applies on local purchases of goods and services supplied by companies in the Kenyan customs territory or domestic market. Motor vehicles which do not remain within the zone are not eligible for tax exemption.
• Perpetual exemption from payment of stamp duty on legal instruments
• 100%investment deduction on new investment in EPZ buildings and machinery, applicable over 20years.

Other benefits of investing in EPZ include:

• Operation under essentially one licence issued by EPZA. EPZA seeks to minimize bureaucracy and administrative procedures and facilitates licensing, set up and operations of EPZ projects.
• Rapid Project approval and licensing (with exception of projects requiring environmental licence from National Environmental Management Agency (NEMA).
• Liberalised foreign exchange regime and easy repatriation of capital and profits, access to foreign currency accounts, domestic and offshore borrowing.
• Onsite customs documentation and inspection by Customs Staff. All zones have a resident Customs office for on-site customs documentation and clearance.
• Unrestricted investment by foreigners.
• EPZA provides One Stop Shop service for facilitation and aftercare.
• All zones are built to exacting international standards and provide facilities suited to export production
• Serviced land and ready factory buildings are available for sale or lease to licensed EPZ companies. Water, sewerage, electricity, all weather roads and an illuminated perimeter fence or wall are standard requirement for zones.
• Zone developers provide 24-hour security, street lighting, landscaping and street cleaning services in the zones. Private garbage collection firms are retained to dispose of normal office waste.
• Office premises and storage warehouses are available for lease in most zones.

Through the Tax Remission for Exports Office (TREO), the government of Kenya encourages local manufacturers to export their products by remitting duty and VAT (duty drawbacks) on raw materials used. Other forms of physical and tax incentives are availed under the Special Economic Zones (SEZ) scheme.

Burundi Standard Incentives for Investors

Written on 30 May 2022. Posted in Investment Guide

The following are the fiscal and non-fiscal incentives offered to investors in Burundi:

1. Exemption of charges on property transfer (mutation fee)
2. No duty on Raw material, Capital goods & Specialized vehicles
3. No customs duty is charged if investment goods are made within the EAC or COMESA
4. Corporate tax rate: 30%. It is reduced by 2% if 50-200 Burundians are employed; it is reduced by 5% if more than 200 Burundians nationals are employed.
5. Free repatriation of profit after payment of tax
6. Cheapest labour force in the region
7. Business registration in less than one working day
8. Moderate climate along the year

Economic Environment

Written on 24 May 2022. Posted in Investment Guide

The COVID-19 pandemic inflicted high and rising human costs worldwide, and the necessary protection measures severely impacted economic activity. As a result of the pandemic, the global economy was projected to contract sharply by –3% in 2020, much worse than during the 2008/2009 financial crisis.

In a baseline scenario, which assumed that the pandemic would fade in the second half of 2020 and containment efforts be gradually unwound—the global economy was projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support. Because the economic fallout was acute in specific sectors, policymakers implemented substantial targeted fiscal, monetary, and financial market measures to support affected households and businesses domestically.

Internationally, strong multilateral cooperation was essential to overcome the effects of the pandemic, including helping financially constrained countries facing twin health and funding shocks, and channeling aid to countries with weak health care systems (IMF, April 2020).

The global economy grew at 2.9% in 2019, 0.6% lower than the growth registered in 2018 (IMF, 2020). In 2019, the USA economy grew at 2.3% in 2019, 0.6% lower than the growth registered in 2018 where the economy of the United Kingdom grew by 1.4% up from 1.3% in 2018, and that of China by 6.1% in 2019, 0.6% lower than the growth registered in 2018.

In contrast, the global economy grew at 3.6% in 2018, 0.2% lower than the growth registered in 2017 and all advanced economies experienced sluggish growth over the year with exception of the United States of America (USA) (IMF, 2019).

In the UK, the sluggish growth in 2018 and 2019 was as a result of the continuing uncertainty over the ‘No Deal Brexit’, which was passed by the UK in 2020.

China experienced slower growth in 2018 and 2019 compared to 2017 mainly as a result of the trade war with the USA and declining manufacturing output. Some of the factors that led to sluggish growth were addressed in 2020 e.g. a Brexit Deal was reached; US, Mexico and Canada signed a new trade deal code-named USMCA replacing the 25-year old NAFTA. USA and China signed phase one trade agreement in January 2020 and there is optimism that USA-China trade war will soon be fully resolved by signing phase two USA-China trade agreement whereas the USA policy on Iran continues to worsen.

The table below provides a summary of global output growth over the period 2014-2019 and projects for 2020 and 2021.

Summary of Global Output Growth 2014-2021 (% change)

_{Source: IMF, World Economic Outlook, April 2019 and April 2020; 2020 and 2021 are year over year projections.}

Since 2014, Africa’s growth has slowed down from a decadal average of 5% to around 3%. This moderate growth continued in 2019, stabilizing at 3.4%, the same as in 2018.

Growth is forecast to pick up to 3.9% in 2020 and 4.1% in 2021_{(AfDB, 2020)}. In 2019, East Africa was the fastest growing region, and North Africa continued to make the largest contribution to Africa’s overall GDP growth, due mainly to Egypt’s strong growth momentum. Six African countries were among the world’s 10 fastest-growing economies: Rwanda at 8.7%, Ethiopia 7.4%, Côte d’Ivoire 7.4%, Ghana 7.1%, Tanzania 6.8%, and Benin 6.7%.

For Burundi, the economic recovery strengthened in 2019 (3.3% growth in real GDP) on the back of higher coffee exports, a slight increase in public investment, and a particularly good year for agricultural production. The fiscal deficit rose to 4.2% for 2019, after 3.3% in 2018, mainly due to an increase in recurrent expenditures that was not offset by good performance in tax collection. The deficit has been financed through increased recourse to central bank advances and the accumulation of domestic payment arrears. The risk of debt distress remains high (63.5% of GDP in 2019 compared with 58.4% in 2018) because of increased domestic debt. In inflation, the fall starting in 2018 (from 16.1% in 2017) continued in 2019, with a rate of –3.1% (food prices dropped almost 11%).

Real GDP grew by an estimated 5.9% in 2019, driven by household consumption and investment on the demand side and services on the supply side (such as public administration, information technology, finance and insurance, and transport and storage). GDP was down from 6.5% in 2018, caused mainly by unfavorable weather and reduced government investment. At 5.2%, inflation remains within the central bank’s 5 ± 2.5% target band.

Real GDP of Rwanda was estimated to grow at 8.7% in 2019, higher than the regional average. Growth was mainly in services (7.6%) and industry (18.1%), particularly construction (30%). Investment drove growth, led by public investment in basic services and infrastructure. Real GDP per capita increased 6.1% in 2019. Inflation moved up slightly to 1.6% in 2019, driven by increased domestic demand.

Real GDP growth of South Sudan was an estimated 5.8% in 2019, a large increase from 0.5% in 2018. The 2019 rebound was driven mainly by reopening some oil fields, including those in Upper Nile state, and resuming production, and by the peace agreement signed in September 2018. The oil sector remains the key driver of the economy, followed by services and agriculture. Inflation fell to 24.5% in 2019 from 83.5% in 2018 due to reduced financing of the fiscal deficit.

Real GDP growth of Tanzania was estimated at 6.8% in 2019, down slightly from 7% in 2018. A markedly diversified economy, characterized by robust private consumption, substantial public spending, strong investment growth, and an upturn in exports underpinned the positive outlook. Tourism, mining, services, construction, agriculture, and manufacturing are notable sectors. Growth is projected to be broadly stable at 6.4% in 2020 and 6.6% in 2021, subject to favorable weather, prudent fiscal management, mitigation of financial sector vulnerabilities, and implementation of reforms to improve the business environment. Inflation fell to an estimated 3.3% in 2019 from 3.6% in 2018 due to an improved food supply.

The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining. Agriculture grew at just 3.8%. Retail, construction, and telecommunications were key economic drivers. Inflation is expected to remain below 5%, strengthening the domestic economy.

Regional Initiatives

Written on 24 May 2022. Posted in Investment Guide

The EAC has various regional initiatives in roads (https://www.eac.int/infrastructure/road-transport-sub-sector/projects); railways  (https://www.eac.int/infrastructure/railways-transport-sub-sector/projects);

Renewable energy (https://www.eac.int/energy/renewable-energy/projects-and-programmes); climate change (https://www.eac.int/environment/climate-change/projects); and fisheries https://www.lvfo.org/content/ongoing-projects) among others. Details of these regional initiatives are on the respective webpages above and also with the EAC Secretariat (https://www.eac.int; This email address is being protected from spambots. You need JavaScript enabled to view it.).

Institutional Framework

Written on 24 May 2022. Posted in Investment Guide

The EAC institutional framework is responsible for investment promotion and creating a conducive investment environment for current and future investors. The Sectoral Committee on investment acts as the technical arm and guides investments in the Community. The stakeholders with regard to the EAC Investment Promotion and Initiatives include:

1. The EAC Organs (Summit, EAC Council of Ministers and EAC Secretariat), and Sectoral Council on Trade, Industry, Finance and Investment shall be involved in identification, approval, implementation and monitoring of regional investment projects.
   
   
2. EAC Secretariat-Department of Investment and Private Sector Promotion (I&PSP). This department will set up a Regional Investment Promotion Office to coordinate regional investments. The main task of the Regional Investment Promotion Office will be to promote regional investment initiatives in partnership with the National Investment Promotion Agencies (IPAs). IPAs shall designate staff to work with the regional office on regional investment initiatives. EAC Investment Guide Online version shall be part of the EAC web portal i.e. www.eac.int/investment-guide and it shall be updated using information/ data from publications/ documents at national, regional, continental and global levels recognised/ authenticated by the EAC. The mandate to update the EAC investment Guide shall be vested in the EAC Secretariat-Department of Investment and Private Sector Promotion (I&PSP).
   
   
3. The Partner States Governments: The National Investment Promotion Agency (IPA) in addition to promoting and supporting national investments, will provide services under the EAC Regional Investment Promotion Office to investors that want to invest in more than one Partner State or already have investments in more than one Partner State.
   
   
4. The East African Court of Justice will ensure adherence to the law in the interpretation and application of compliance with the EAC Treaty, protocols and other legislations. It will also handle investment arbitration matters.
   
   
5. The East African Legislative Assembly will support regional investment initiatives through legislating on enabling laws and providing oversight over regional investment initiatives.
   
   
6. EAC Institutions. The East African Community Competition Authority (EACA), shall promote and protect fair trade and ensure consumer welfare in the community pursuant to EAC Competition Act (2006). The East African Development Bank will offer structured financial products and services to organisations in the health, education, hospitality and tourism, infrastructure development, energy and utilities, and agriculture sectors. The East African Health Research Commission will coordinate and map out a regional agenda on health research as well as the translation of its results into policy and practice within the Partner States as regards investment initiatives in health sector. The East African Science and Technology Commission will assist in coordination of the development and implementation of Science, Technology and innovation investment initiatives. The Inter-University Council for East Africa will coordinate the harmonization of higher education and training systems in East Africa, facilitate their strategic development and promote internationally comparable standards and systems to ensure high quality human capital development necessary for developing and implementing investments.
   
   
7. Private sector: include private sector representative organisations, East African Business Council (EABC) and other regional private sector apex institutions and will play a lead role in investment identification, promotion, selection, planning, execution, monitoring and evaluation.
   
   
8. Non-state actors: including academic institutions, financial institutions, Civil Society organisations that include trade unions, political leaders, community groups, employee union, community groups, environmentalists and public in general will support EAC regional Investment initiatives through promotion, research monitoring and evaluation, dissemination of information in order to increase impact of regional investments.

Institutional Framework for Investment Promotion, Coordination & Management

Investment Framework

Written on 24 May 2022. Posted in Investment Guide

Investment provisions in the EAC Customs Union Protocol consist of rules on pre and post-entry treatment, investment incentives, competition and dispute settlements etc. On the other hand, Article 29 of the Common Market Protocol requires Partner States to protect cross-border investments and investment returns of investors of other Partner States within their territories and a schedule for removal of existing restrictions on the free movement of capital within the EAC region.

The proposed EAC Investment Policy 2019-2024 intends to unlock the constraints by putting in place a common legal and regulatory framework for the collective promotion of EAC as a single investment destination. The EAC Investment Policy 2019-2024 will pursue a coordinated region-wide approach to the promotion of investment opportunities seeking to attract domestic, regional and foreign direct investment. This is to complement nationalistic efforts that have been targeting and competing for the same investment catchment areas (source investments markets) at substantial cost to the Partner States themselves. The EAC investment policy will enable the Community to meet its investment targets, particularly in light of the current difficult global economic realities.

The EAC Treaty requires Partner States to "harmonise and rationalise investment incentives, including those relating to taxation of industries". 

The EAC Common Market Protocol provides for freedom of movement of goods, labour, services, and capital. Its provisions on investment call for the protection and harmonization of tax regulations. A Policy on EAC Domestic Tax Harmonization was developed and endorsed by the Finance Ministers during the 8th Meeting of the Sectoral Council on Finance and Economic Affairs held in May 2018. Detailed harmonization proposals for VAT and excise taxes rates were being developed for consideration by the finance ministers. The 2006 EAC Model Investment Code provides for the free transfer of assets, and protection from uncompensated expropriation. EAC countries can negotiate and enter investment treaties with third countries. A Model Investment Treaty was adopted in 2016, with the objective of guiding, and serving as a template for, negotiations.

The EAC investment Framework supports free movement of people, capital, labour, services and right of establishment and residence; promotes balanced and competitive industrial/manufacturing sector in the region; promote participation of the citizenry and having them fully aware of the EAC affairs; strengthens relations with other regional and international organisations; supports duty Drawback Schemes; supports Duty and VAT Remission Schemes; supports Manufacturing-Under-Bond (MUB) Schemes; provides for Export Processing Zones (EPZ);  provides for the establishment of free ports within the EAC;  and provides for Harmonisation of Duty Exemption Regimes.

On the other hand, double taxation remains a major hurdle for cross-border investment flows. Investment income generated from cross-border operations are taxed not only in the country of generation, but also in the country of residence of the taxpayer. An Agreement on the Avoidance of Double Taxation was signed in November 2011, but the ratification process is ongoing (EAC, 2016, The Double Taxation Avoidance Agreement of the East African Community Handbook). The ratification process is slow due to fears of loss of revenue and tax evasion. So far, Kenya, Rwanda and Uganda had ratified the Agreement.

Furthermore, the EAC Partner States have their own institutions and regulatory mechanisms for dealing with foreign investment. Each country has its own requirements with respect to such matters as company registration and incorporation procedures, permits and licenses, property acquisition, access to capital and land, ownership and management control, and exit procedures.

Trade Regime

Written on 24 May 2022. Posted in Investment Guide

The EAC Customs Union Protocol furthers the liberalisation of intra-regional trade in goods; promotes production efficiency in the Community; enhances domestic, cross-border and foreign investment; and promotes economic development and industrial diversification; Trade Facilitation - The Partner States have agreed to cooperate in simplifying, standardising and harmonising trade information and documentation so as to better facilitate trade in goods.

The Customs Union Protocol spells out the rules and regulations that are to govern trade within and outside the Community. The areas of cooperation in the Customs Union are:

1. Customs administration;
2. Matters concerning trade liberalisation;
3. Trade related aspects including the simplification and harmonisation of trade documentation, customs regulations and procedures;
4. Trade remedies;
5. National and joint institutional arrangements;
6. Training facilities and programmes on customs and trade;
7. Production and exchange of customs and trade statistics and information; and
8. The promotion of exports.  

The key pillars of the EAC Customs Union are the Common External Tariff; the EAC Rules of Origin; and the Customs Management Act, 2004.

The EAC Common External Tariff (CET)

With effect from 1^st July, 2022 the EAC Common External Tariff (CET) will be structured under four bands of:

• 0% for raw materials and capital goods;
• 10% for intermediate goods not available in the region;
• 25% for intermediate  goods available in the region; and
• 35% for imported finished products available in the region

 
The EAC Customs Management Act, 2004

The EAC Customs Management Act, 2004 governs the administration of the Customs Union, including legal, administrative and operational matters. 

The Directorate of Customs under the EAC Secretariat identifies policy issues and coordinates and monitors customs and trade-related activities in the EAC.

The Community has developed anti-dumping regulations, as elaborately highlighted in the EAC Customs Union Protocol.

 
EAC Single Customs Territory (SCT)

The EAC Single Customs Territory (SCT) came into effect in 2014. Implementation of the SCT is aimed at improving trade facilitation through the introduction of ‘hard and soft infrastructure', which facilitate the interconnectivity of customs systems to facilitate seamless flow of information between customs stations and a payment system to manage transfers of revenues between EAC Partner States.

The Single Customs Territory has been implemented to facilitate faster clearance and improvement in cargo movement along the two corridors (Northern and Central) and the now Standard Gauge Railway line.

The implementation of the SCT has witnessed the development of requisite instruments, the information Technology has been revamped to respond to the new operating environment and the capacity of both the public and private sectors equally enhanced to facilitate the smooth rollout of the SCT.

There has been increased trade and investment in the EAC as a result of elimination of non-tariff barriers based on an online monitoring and tracking system, improved infrastructure like the One Stop Border Posts (OSBP), introduction of the Integrated Border Management (IBM) and use of Information, Communication and Technology (ICT).

 
Standardisation, Quality Assurance, Metrology and Testing (SQMT)

Under Article 81 of the Treaty Establishing the Community, the EAC Partner States recognised the importance of standardisation, quality assurance, metrology and testing (SQMT) for the promotion of trade and investment and consumer protection, among other things.

 
Non-Tariff Barriers (NTBS)

Under Article 13 of the Customs Union Protocol, the EAC Partner States have agreed to remove all existing non-tariff barriers to trade and not to impose any new ones. Also, Re-exports are exempted from the payment of import or export duties.

EA Competition Policy

The Community also put in place an EAC Competition Policy and Law with an aim to deter any practice that adversely affects free trade within the Community. Its implementation agency, the EAC Competition Authority, deals with all competition issues having cross-border effects. In principle, domestic competition issues remain under the jurisdiction of national competition laws and institutions.

Trade Agreements

The EAC has increased market access to EAC goods and services by entering into a number of key trade agreements such as;

1. the Tripartite Agreement between the EAC, SADC and COMESA to establish a Tripartite Free Trade Agreement (TFTA);
2. the US-EAC Trade and Investment Agreement; and
3. the Economic Partnership Agreement (EPAs) aimed at the formation of a free trade area between the EAC and the European Union (EU) which has been signed by two Partner States, i.e. Republics of Kenya and Rwanda.

EAC Partner States have also ratified the African Continental Free Trade Agreement (AfCFTA) that will integrate the EAC regional economy into the African continental trade and bring about sustainable trade and investment opportunities and unleash the region’s growth potential.