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The East African : Jun 14th 2015
The EastAfrican NEWS JUNE 13-19,2015 Kenya, Uganda review taxes on oil and gas Kenya to ha≥monise withholding tax; Uganda extends VAT ≥efunds fo≥ explo≥ation and development By KENNEDY SENELWA Special Correspondent K enya and Uganda have reviewed their tax poli- cies in a bid to streamline the operations of oil and gas companies. Kenya will harmonise withholding tax for training and contractual services for exploring oil and other minerals, while Uganda has extended VAT refunds for upstream activities in exploration and development. “I propose to amend the Income Tax Act to harmonise tax treatment in this industry at the withholding tax rate of 12.5 per cent, and 5.6 per cent for training and contractual services respectively,” said Kenya’s Treasury Cabinet Secretary Henry Rotich. He said last year’s review of extractive industries taxation in the country provided separate tax treatment for training services and contractual fees for the petroleum and mining sectors, which created disharmony. VAT Act changed Uganda has made changes to the VAT Act to allow licensed petroleum and mining firms to register for VAT during the exploration and development stages of operations. Uganda’s Finance Minister Matia Kasaija said registration will enable companies exploring for crude oil with other minerals to obtain relief from VAT payable on goods and services supplied to them. “Previously licensees were not allowed to register because they do not make taxable supplies during the exploration and development stages, which is a requirement for refund of VAT on inputs,” he said. Standard and Mutual, a mining consultancy firm based in Nairobi, said harmonisation of withholding tax regimes in the extractives industry will make Kenya competitive as the proposed levels are at par with global standards. “Getting capital to invest in the extractives sector is hard. It takes a long time before a return on investment DISPUTE EA BUDGETS 2015-2016 11 A worker at the Ngamia 3 oil exploration site in Turkana, Kenya. Picture: File Tullow Uganda Ltd has filed an arbitration case against the Ugandan government relating to the assessment of VAT on the oil exploration company’s importation of certain goods and services. A tribunal was constituted by the Washington DCbased International Centre for Settlement of Investment Disputes, a member of the World Bank Group, on June 25, 2014 to hear the case. is made. Any measures that simplify operations are welcome,” said Standard’s director of mining and metals Cliff Otega. The Income Tax Act pro- vides for a comprehensive regime for the petroleum and mining sectors, allowing industry players to be taxed in accordance with the commercial rules under which they operate. Mr Kasaija said that the VAT threshold had remained at Ush50 million ($16,000) since inception in 1997, and the Act now provides for a tax rate applicable to nonresidents providing goods and services to the licensee. “This threshold has been overtaken by events such as growth in the economy, exchange rate depreciation and inflation. The VAT threshold has been revised to Ush150 million ($47,700) to take into account these changes,” he said. Uganda plans to start com- mercial production of 6.5 billion barrels of crude oil discovered in the Albertine basin in 2018, but disputes with exploration companies could push the timeline further.
Jun 7th 2015
Jun 21st 2015