Tax Harmonization

Tax harmonization is provided for in Article 83(C) of the Treaty. It provides that Partner States agree to “harmonize their tax policies with a view to removing tax distortions in order to bring about a more efficient allocation of resources within the Community”.

Achievements realized so far are:

  1. Two Policy frameworks for harmonization of domestic taxes were developed and were the basis for the preparation of the draft EAC policy on harmonization of domestic taxes. The two policy frameworks are:
    • “Policy for Harmonization of Income Taxes within the East African Community”
    • “Policy for harmonization of VAT & Excise duties”
  2. EAC Tax Treaty Policy was finalized and adopted by the Sectoral Council on Finance and Economic Affairs. The policy sets out policy positions that should be adopted in future and in current tax treaties when negotiating the tax treaties with 3rd parties.
  3. EAC Model Tax Treaty was developed, adopted and is under implementation.  It will guide negotiations of Tax treaties with the 3rd parties.
  4. Council Directive (CD) on harmonized tax procedures was developed and adopted by the Council in September, 2014.
  5. An EAC framework on harmonization of domestic taxes has been finalized and is currently being used as an input to the on-going process of developing EAC Tax Policy on harmonization of domestic taxes.