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Taxes levied by the Local Government include Ground Rates, Trading and Operational
Licenses, Market dues, Parking fees and Building plans.
2.0 GETTING STARTED.
2.1 Tax Registration and Tax Identification Number (TIN).
Every person who is liable to tax in Uganda shall apply to the Commissioner to be
registered as a taxpayer. The application shall be in the format prescribed by the
commissioner and the person shall provide such information and documentation as the
commissioner may require. New Investors can pick registration forms from the URA
Liaison Officer at Uganda Investment Authority, or from any other URA office . Registration
is free of charge.
2.2 Requirements.
Upon registration, an Income Tax File number will be allocated to you identifying your file
and tax office, followed by a Tax Identification Number (TIN) for each applicant. The TIN is
your unique identifier for all tax purposes.
The taxes or charges payable will vary from business to business depending on the
nature. It is important that an entrepreneur understands very well which taxes and
charges affect ones business and how often it occurs. For instance;
A motor vehicle license is four monthly, eight monthly or twelve monthly.
A trading license is annual.
Import Duty, Excise Duty, Income Tax, and Value Added Tax, are transactional just
like many other taxes or statutory charges.
Income tax comes in only when one begins making profits. But even then one may
still not be subject to Income tax if the profit is not assessable to tax.
Value added tax has to be charged only by registered persons.
You must know your entitlements under a tax system e.g. VAT refunds, offset of tax
credits, allowable deductions, Zero rated or exempt supplies, tax free allowances,
investment incentives, etc.
3.0 CUSTOMS DUTIES STRUCTURE.
Uganda is a member of the East African Community (EAC) and the Common Market for
Eastern and Southern Africa (COMESA).
3.1 Summary of Customs duties.
Uganda Incentive Regime 2006/07
The Common Market for Eastern and Southern Africa (COMESA) is the largest African
economic grouping comprising 20 member states with a population close to 400 million
people. The member states are Uganda, Kenya, Angola, Burundi, Comoros, Democratic
Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Libya, Madagascar, Malawi,
Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Zambia and Zimbabwe.
The mission of the COMESA treaty is the promotion of intra-COMESA Trade. COMESA
launched the first ever African Free Trade Area (FTA) on 31 st October 2000. Uganda is an
active member of COMESA but not yet a member of the COMESA FTA. The current
membership of the FTA is 13 comprising Union des Comoros, Libya, Burundi, Djibouti,
Egypt, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Zambia and Zimbabwe.
COMESA is scheduled to launch a Customs Union with a Common External Tariff in 2008
which will greatly help the 20 member states to realize a fully integrated and internationally
competitive economic community in which goods, services, capital and persons are able to
move freely.
Following the launching of the COMESA FTA, it was agreed that trade between COMESA
FTA and non-FTA members would be conducted on the basis of reciprocity. Currently,
Uganda offers imports into Uganda from COMESA countries at 80% tariff reduction.
COMESA import duty rates are 0% for raw materials, 4% for intermediate goods and 6%
for finished products.
COMESAs Regional Customs Bond Guarantee scheme (RCBG) was launched in
September 2006 and became effective early 2007. The scheme was designed to reduce
transit costs that were associated with the former practice of nationally executed customs
bond for transit traffic. The implementation of the scheme is providing a consistent service
to traders and increasing the reliability of the transport system.
3.6 Export Schemes/Incentives
3.6.0 Manufacturing under Bond.
This scheme allows manufacturers to seek custom license to hold and use imported raw
materials intended for manufacture for export in secured places without payment of taxes.
It makes available working capital, which would have been tied up through paying duties
immediately after importation. The annual licence fee for a bonded factory is $1,500 per
calender year or on pro rata basis if issued within calender year.
3.6.1 Duty Draw Back
This is a refund of all or part of any import duty paid on materials inputs imported to
produce for export or used in a manner or for a purpose prescribed as a condition for
granting duty draw back. Duty may be refunded on raw materials imported and used on
the goods locally produced for export. The rationale is to enable manufacturers and other
exporters to compete favorably in foreign markets without the handicap of including costs
of imported inputs in the final export price.
Uganda Incentive Regime 2006/07
Duty draw back may also be allowed on goods imported for use in the manufacture of
goods which are transferred to a free port or to an export processing zone (EPZ) provided
that:
The goods shall be a direct result of imported goods used in the manufacture of
such goods.
The owner of the goods shall have obtained authorization from the commissioner
prior to the manufacture.
3.6.2 Export Processing Zones (EPZs) and Free Ports
A free zone is a designated area where goods introduced into the designated area are
generally regarded, so far as import duties are concerned, as being outside the customs
territory and includes an export processing zone or freeport zone. The commissioner may
designate areas in EPZs or in Freeports in which customs formalities shall be carried out.
An export processing zone (EPZ) is a designated part of a zone or territory of Uganda,
where any goods introduced are generally regarded for the purpose of import duties and
taxes, as being outside the customs territory but are duly restricted by controlled access
and where the benefits provided under the Act apply. The activities which may be carried
out within the EPZ are manufacturing, commercial and service activities for export.
A freeport is a customs controlled area where imported duty free goods are stored for the
purpose of trade. A licensee of a freeport may only carry out those activities that are
required to preserve goods, or to improve their packaging, preparation for shipment or
marketability quality, without changing the character of the goods. The activities shall
include ware housing and storage, labelling, packing and repacking, sorting, grading,
cleaning and mixing, breaking bulk, simple assembly, and grouping of packages under
Customs supevison.
Incentives, criteria and eligibility (Provisional pending Parliament decision)
Export Scheme
Fiscal Incentives
Justification.
Criteria/Conditionality
for eligibility
1. EPZ
2. Free Ports
- To encourage value
addition of agriculture
products for export.
- To increase value of
exports and more foreign
exchange.
- To create jobs.
- To make
Uganda
competitive on exports
from EAC and COMESA
countries.
- Develop a regional hub
for
commercial
distribution.
- New investments.
- Minimum capital employed
should be $ 500,000.
7
Rate
30%
25%-45%
20% Computed at 80% of Gross rent after
allowing a threshold of Shs. 1,560,000
i.e. 20%*(80% of gross rent 1,560,000)
30% (as in tax on corporate income)
Annual
Nil
10% of excess of 1,560,000
126,000 + 20% of excess of 2,820,000
546,000 + 30% of excess of 4,920,000
Annual
10% of chargeable income
282,000 + 20% of excess of 2,820,000
709,000 + 30% of excess of 4,920,000
Monthly for employees
Nil
10% of excess of 130,000
10,500 + 20% 0f excess of 235,001
45,500 + 30% of excess of 410,001
Withholding Tax
Certain payments are liable to withholding tax. A summary of the withholding tax rates
applicable to other payments is set out below.
Type of Payment.
Payee
Branch Profits
Management & Professional Fees.
Royalty Payments.
Dividends.
Interest.
Rent
Natural Resource Payment
Performing Artists & Sports Persons.
Contractors and Professionals
Good and Services (also see
Section
6%
119A
15%
15%
118
117
6%
119
Payee
15%
15%
15%
15%
15%
15%
15%
15%
15%
Section
82
85
83
83
83
83
83
84
85
Please note that any payment to a person in Uganda from the Government of Uganda, a
Government institution, a local authority, any company controlled by the Government of
Uganda or any person designated in a notice issued by the Minister responsible for
finance (See schedule 4 attached on page 23) of an amount in aggregate exceeding one
million shillings for the supply of goods or materials of any kinds or any service is subject
to a 6% withholding tax.
In the 1997/98 Budget Speech, the Hon Minister for Finance, under section 14 of the
Finance Statute 1997, repealed sections 25 of the Investment Code 1991 which provided
for 3 to 6 years tax holiday (see S167 of the IT ACT). The Minister proposed a new
incentive regime of investment capital allowances to replace the tax holiday facility. The
new incentive regime is specified in the Income Tax Act, 1997 in sections 26-38, these
investment capital allowances can be summarized in three categories:
Category 1
The incentives covered in this category are capital allowances/expenses which are
deductible once from the Companys Income.
Type of allowance
Initial allowance
granted in 1st year of
production
Initial allowance
granted in 1st year of
production
Start-up costs
Scientific Research
Capital Expenditure
Training Expenditure
Mineral Exploration
Expenditure
Initial allowance
granted in 1st year of
use of an Industrial
Building.
Repairs and Minor
Capital Equipment
Rate.
50%
Condition.
Granted on cost base of plant & machinery for Industries
located in Kampala, Entebbe, Namanve, Jinja & Njeru .
Granted on actual cost over the first four years in four equal
installments.
100% Granted on actual cost of scientific research incurred during
a year of income in the course of carrying on a business, the
income of which is included in gross income. Must be
undertaken in the development of the persons business.
100% Granted on actual cost of training incurred during a year of
income for the training or tertiary education of a citizen or
permanent resident of Uganda employed in the business by
the employer (not exceeding 5 years in total)
100% Granted on actual cost incurred in mineral exploration.
Expenditure of a capital nature incurred in searching for,
discovering and testing, winning access to deposit of
minerals in Uganda.
20% Granted on the cost base of an industrial building, (including
tourism facilities like hotels and lodges and capital
expenditure incurred on the extension of an existing
industrial building but excluding commercial building).
100% Granted on actual cost incurred in a year.
Expenditure on repair of property occupied or used
for the business.
Cost of minor capital equipment (a depreciable asset
costing less than fifty currency points and functioning
in its own right).
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Depreciable Assets only (classes 1-4 & Farm works) (sixth schedule) under declining
balance method per annum:
Class.
Class 1
Class 2
Class 3
Class 4
Farming
Costs
Rate.
Condition.
40% Computers and data handling equipment.
35% Light automobiles (buses with less than 30 seater, or
goods vehicles with a load capacity of less than 7 tons).
Construction and earth moving equipment.
30% Heavy automobiles (buses with 30 or more seater, or
goods vehicles designed to carry or pull 7 or more tons)
Specialized trucks, trailers, tractors, plant & machinery
used in farming, manufacturing & mining operations.
20% All other depreciable assets (Railroad cars, Locomotives
and equipment, Vessels, tugs and similar water
transportation equipment, aircraft, specialized public
utility plant, equipment and machinery, Office furniture,
fixtures & equipment, etc).
20% Farm works i.e. labor quarters, immovable building, other
works necessary for the farm)
5%
The deductions covered under category 1, enable the investor to recover most of his costs
in the first year of operation. After applying the initial allowances, the cost base of an asset
to which the initial allowance applies is reduced by the amount of the initial deduction
allowed to get the written down value of the asset at the end of the year of income, upon
which, and in the subsequent years, deductions as shown in Categories 2 & 3 are applied
until the Plant/Machinery, Building or Equipment is completely written off. Each year, after
allowing the deductions, the resulting Net Income is taxed at an appropriate rate of
corporation tax.
5.0 VAT REGISTRATION
Uganda Incentive Regime 2006/07
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This is for those businesses, which qualify, that is, businesses going to supply taxable
goods and services. VAT registration is either compulsory or voluntary depending on your
circumstances and the annual registration threshold is Ushs 50 million per annum.
Voluntary registration is permissible under the law for those whose turnover is below the
threshhold, but granted at the discretion of the Commissioner General. Where a person
qualifies for registration, a registration certificate is to be issued effective from the
beginning of the period in which the duty to register arose (in case of compulsory
registration) and/or effective from the beginning of the month immediately following the
month in which the person applied S9 (3)(in case of voluntary registration).
5.1 Registration as an Investment Trader:
An Investment Trader is a person approved by Uganda Investment Authority as an
investor local or foreign. For the purpose of VAT, the investor must have plans to make
taxable supplies in due course in order to qualify for refund of input tax incurred during the
investment period for a renewable period of four years. The Commissioner General will
only register such an enterprise provided satisfactory evidence is produced supporting the
intention to make taxable supplies.
Registration as an Investment Trader allows one to claim a refund of input tax suffered in
the period prior to making taxable supplies provided the period does not exceed two years.
An Investment Trader shall abide by all the duties and obligations of a registered person,
including the keeping of proper books of accounts and the filing of regular returns.
A person shall cease to be an Investment Trader immediately after making a taxable
supply in the course of business (see VAT Regulation 6).
5.2 Benefits of VAT registration:
Able to recover the whole or part of the tax charged by your suppliers (input tax).
This will lead to
Reduced cost of input,
Improved profits and
Competitive pricing.
A registered person can issue tax invoices to his customers who can then claim the
tax charged.
Section 2a(3) & (4) Upon registration, a person who has paid tax on taxable
supplies or imports of goods, including capital assets, prior to registration, may
claim the input tax paid or payable thereof. However, such a claim is only
acceptable for goods acquired not more than six months prior to the date of
registration. In addition such goods must be still in stock, hence the need of a
detailed stock take on registration. This credit arises on the date of registration.
NOTE that the input tax credit is claimed on a separate application form and not the
1st VAT returns.
Uganda Incentive Regime 2006/07
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c)
d)
e)
f)
14
g)
h)
i)
j)
k)
The supply of goods as part of the transfer of a business as going concern by one
taxable person to another person;
l)
m)
The supply of precious metals and other valuables to the Bank of Uganda for the
State Treasury;
n)
The supply of passenger transportation services (other than Tour and Travel
operators)
o)
The supply of petroleum fuels, subject to excise duty, (motor spirit, kerosene and
gas oil)
p)
q)
r)
The supply of machinery used for the processing of agricultural or dairy products;
s)
t)
The supply of accommodation in tourist lodges and hotels outside Kampala and
Entebbe;
u)
The supply of computers, printers, parts and accessories falling under headings
84.71 and 84.73 of the harmonized coding system of the customs law
v)
w)
The supply of lifejackets, life saving gear, headgear and speed governors.
x)
The supply of Mobile toilets and Ekoloo toilets made form polyethylene;
y)
z)
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Importer should be registered for VAT and henceforth filing monthly VAT Returns.
Should have a certificate of incorporation
Should have fulfilled the customs procedures concerning entering of goods.
The verification account on the Customs Bill of Entry should be in original form with
a well detailed verification account to facilitate classification of the goods.
5) All documents relating to transaction of the goods like Bill of lading / Airway Bill,
commercial invoice, packing list as well as any other relevant documents.
6) Importer should make an application in writing prior to effecting the deferment
process.
5.8.2 What items are deferrable?
1) Plant and machinery (chapter 84, 85, 90). Towers and masts of Harmonized System
Code 7308.20.00 specifically for transmission purposes. A Machine is a device
consisting of fixed and moving parts that modifies mechanical energy and transmits
it in a more useful form.
*Note: Spares and components when imported separately are not deferrable.
2) Green houses & Cold rooms (chapter 94)
3) Specialized vehicles-Trucks of heading 8705
4) Flower cuttings (other cuttings)
5.8.3 The VAT deferment process:
Once all the above conditions have been fulfilled, the importer through his appointed agent
lodges the documents to Tariff section (Customs Headquarters). The following are the
processes involved.
1) New applicants are required to make a formal application to Assistant
Commissioner Trade.
2) A completed form 230 this form is called the application for Deferment of VAT with
VAT returns (form 200) together with a Customs bill of entry with all relevant
accompanying documents are forwarded to Supervisor Tariff.
3) Once approved, a release order is issued which enables the release of the goods
on credit from Customs to the owner.
NOTE
1. In case of intention to import machinery in phases, a schedule showing a
break down of various items to be imported should be forwarded to Tariff
before goods are brought into the country.
Uganda Incentive Regime 2006/07
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The scheme will be implemented in phases, and the first phase will cover firms in
the Manufacturing, Agro-Processing, Health, Hotel, Printing & Publishing, and
Telecommunication Sectors that satisfy the following conditions.
Must have a generating set of at least 100KVA capacity
Must be VAT registered except if exempted by Law.
Must have applied, been verified and approved by URA.
2) Also to be considered with effect from 1st December 2006 are firms having
generators with capacities below 100KVA but strictly in the following sectors.
Flower
Telecommunications and
Banking.
3) The beneficiary enterprises will notify URA on the Generator Duty Free Diesel
Form (DFD) application form of the specific fuel Importer from among currently
limited to those listed below with whom they will have agreed to supply the duty free
diesel.
a. Caltex Oils (U) Ltd,
b. Petrocity, Kobil
c. Petro
4) The qualifying enterprise will be required to keep a clear record of the purchases
and utilization of the tax-free diesel.
5) All Generators owned by the beneficiary Enterprises should have odometers and
fuel meter or Kilowatt-hour readers that are in good working condition. Those with
out these facilities will be required to have them installed within three months from
1st June 2006.
6) Each qualifying Enterprise will be allowed to consume diesel up to a specific
monthly ceiling based on the generator capacity and level of operation.
7) Any violation of the terms relating to this facility will lead to automatic
disqualification from the scheme and other punitive measures applied in
accordance with the Law.
Note: The above conditions may be reviewed as and when circumstances
dictate.
Uganda Incentive Regime 2006/07
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Disclaimer: This is just a simplified guide. It is not the law. Please always refer to the law
or to URA in case of any questions about the contents of this document. Incentives may be
subject to change without notice.
Contacts
For any inquiries, queries and complaints use the call center Toll-free help line.
URA Call Centre Toll Free Line: 08001-17000
URA Website: www.ugrevenue.com
Inquires: prte@ura.go.ug and call_center_gp@ura.go.ug
Commissioner Generals Office: 256-414-334416/7
Customs & Excise Department Hdqt: 256-414-317196/200
Domestic Taxes Departmen Hdqtt: 256-414-317168/166/080
Prepared by:
Gimbo Martha Were
URA Liaison Officer
Uganda Investment Authority
Tel-Mob: 256-772-593027
Tel-Dir: 256-414-301155
Tel-Gen: 256-414-301000/100
Fax-UIA: 256-414-342903
Email: mgimbo@ura.go.ug
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