uganda revenue authority incentive regime 2006-07

8/9/2019 Uganda Revenue Authority Incentive Regime 2006-07

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The Investor Guide to Uganda TaxSystem/URA Services and the Current

Tax Incentive Regime

2006/2007

!0 UGA"#A$S TA% &'RT(')I'!

Ugandas tax system is segmented into Central Government and Local Government Taxstructures. The principal taxes levied by the Central Government (administered throughUganda Revenue Authority are !ncome Tax both on individuals and companies" #alue

Added Tax" !mport $uty" %xcise $uty" &tamp $uty" 'otor #ehicle ees" )ermits and *on+tax revenues collected by various 'inistries.

Uganda Incentive Regime 2006/07 1


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Taxes levied by the Local Government include Ground Rates" Trading and,perationalLicenses" 'ar-et dues" )ar-ing ees and uilding plans.

2!0 G*TTI"G START*#!

2! Tax Registration and Tax Identi+ication "um,er -TI".!

%very person /ho is liable to tax in Uganda shall apply to the Commissioner to beregistered as a taxpayer. The application shall be in the ormat prescribed by thecommissioner and the person shall provide such inormation and documentation as thecommissioner may re0uire. *e/ !nvestors can pic- registration orms rom the URALiaison ,icer at Uganda !nvestment Authority" or rom any other URA oice . Registrationis ree o charge.

2!2 Reuirements!

A copy o the Certiicate o !ncorporation.

A copy o the business plan.

1orm 2 indicating the particulars o the directors and copies o identiication.

! directors dierent rom shareholders" a board resolution on directorship !

A copy o your business premise tenancy agreement plus payment receipt.

Upon registration" an !ncome Tax 1ile number /ill be allocated to you identiying your ileand tax oice" ollo/ed by a Tax !dentiication *umber (T!* or each applicant. The T!* isyour uni0ue identiier or all tax purposes.

The taxes or charges payable /ill vary rom business to business depending on the

nature. !t is important that an entrepreneur understands very /ell /hich taxes andcharges aect ones business and ho/ oten it occurs. 1or instance3

A motor vehicle license is our monthly" eight monthly or t/elve monthly.

A trading license is annual.

!mport $uty" %xcise $uty" !ncome Tax" and #alue Added Tax" are transactional 4ustli-e many other taxes or statutory charges.

!ncome tax comes in only /hen one begins ma-ing proits. ut even then one maystill not be sub4ect to !ncome tax i the proit is not assessable to tax.

#alue added tax has to be charged only by registered persons.

5ou must -no/ your entitlements under a tax system e.g. #AT reunds" oset o taxcredits" allo/able deductions" 6ero rated or exempt supplies" tax ree allo/ances"investment incentives" etc.

!0 CUST'1S #UTI*S STRUCTUR*!

Uganda is a member o the %ast Arican Community (%AC and the Common 'ar-et or%astern and &outhern Arica (C,'%&A.

! Summary o+ Customs duties!



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a). Import Duty.There are basically three tax rates (tari bands 78" 978 and :;8 import duty. !t ischarged on the Customs #alue o the goods (see section 8 or 78 on the #AT value (Customs #alue = !mport $uty (&ee section

;.7 belo/ or details and exemptions.

d.! 3ithho4ding Tax

&ection 99?(


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Goods originating rom TanFania exported to Uganda shall be duty ree3

Goods originating rom Uganda and TanFania exported to Eenya shall be duty ree3

A selected list o goods originating rom Eenya exported to Uganda and TanFania

/ill be sub4ect to an interim tari protection or a period o ive (; years rom thedate o entry into orce o the treaty" commencing /ith 978 in the irst year"reducing to >8" @8 (current" 8" :8 in the second" third" ourth and ith year

respectively" and ultimately attaining 78 in the sixth year. The reduced tari is applicable to goods /hich satisy the %AC Rules o ,rigin.

. )reerential tari treatment or eligible goods originating rom C,'%&A and &A$Ccountries upto .

;. A standard and harmoniFed exemption regime /hich does not give any oicer orminister any discretionary po/ers to grant exemption.( ; thschedule o the %ACC'A.

@. A harmoniFed list o prohibited and restricted goods /hich are not allo/ed to beimported in or exported out any one partner state.(:ndH . 6ero tari on most o the capital goods" agricultural inputs" medicines and medicale0uipment" ra/ materials and chemicals.

?. Computation o taxes based on C!1 value at the initial port o discharge in the %astArican Community e.g 'ombasa" $ar es &alaam. Airreight cost is excluded in the valueor computation o duties.

97. Use o !normation Technology in Customs processes to enhance eiciency andreduce delays.

99. $uty remission schemes or inputs used in manuacture o some products includingI &ugar or industrial use (?78

!nputs or the manuacture o exercise boo-s and other essential goods

The %AC Common %xternal Tari shall not apply to trade bet/een Eenya and Uganda orC,'%&A member states and TanFania or &A$C member states.! Some o+ the tax incentives under *AC Customs Genera4 *xem5tion Regime



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!mported inputs by persons engaged in horticulture" agriculture or loriculture" /hich

the Commissioner is satisied are or use in the horticulture" agriculture orloriculture sector.

!nputs imported by a manuacturer or use in the manuacture o agricultural

e0uipment. Rerigerated Truc-s

)ac-aging materials and ra/ materials or manuacture o medicaments.

!mported pac-aging materials exclusively or export products.

)ac-aging materials or mil- (tetra pac- and grain milling are #AT+ree but etch a

duty i imported rom outside the %ast Arican Community. All other pac-aging materials and those or domestic consumption pay duty rom

978+:;8 basically to protect the local industry. 1irst Arrival )rivileges in the orm o duty exemptions or personal eects and

(motor vehicle previously o/ned or at least 9: months to all investors andexpatriates coming into Uganda.

$iagnostic Reagents recommended by the $irector o 'edical &ervices or the

$irector o #eterinary &ervices or use in hospitals and clinics sub4ect to such

limitations as the Commissioner in a )artner &tate may impose. &plints imported by a manuacturer or use in the manuacture o matches

Any o the ollo/ing goods (Dotel %0uipment engraved or printed or mar-ed /ith

the hotel logo imported by a licensed hotel or its useI ashing machines3 Eitchenare3 Coo-ers3 1ridges and reeFers3 Air Conditioning &ystems3 Cutlery3Televisions3 Carpets3 1urniture3 and Linen and Curtains.

$iapers" Urine bags and hygienic bags

Any media containing Computer &ot/are.

! #ocuments reuired ,y customs +or c4earance o+ im5orted goods!

9 A Customs ill o %ntry duly completed and signed by a cutoms agent.: ,ther documents related to the purchase and importation o the goods such asI

a. Commercial !nvoiceb. ill o Lading (or imports by seaa"c. Air/ay ill (or imports by aird. Rail/ay Consignment *ote (or imports by rail.e. 1reight !nvoice.. !nsurance Certiicate (i goods /ere insured.g. )roorma !nvoice.h. Certiicate o ,rigin.i. )ermits (i necessary.

4. ,riginal and Translated certiicates o cancellation or permanent export ormotor vehicles.

-. Road Transit Customs document (commonly -no/n as C@


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The Common 'ar-et or %astern and &outhern Arica (C,'%&A is the largest Aricaneconomic grouping comprising :7 member states /ith a population close to 77 millionpeople. The member states are Uganda" Eenya" Angola" urundi" Comoros" $emocraticRepublic o Congo" $4ibouti" %gypt" %ritrea" %thiopia" Libya" 'adagascar" 'ala/i"'auritius" R/anda" &eychelles" &udan" &/aFiland" 6ambia and 6imbab/e.The mission o the C,'%&A treaty is the promotion o intra+C,'%&A Trade. C,'%&Alaunched the irst ever Arican 1ree Trade Area (1TA on


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$uty dra/ bac- may also be allo/ed on goods imported or use in the manuacture ogoods /hich are transerred to a ree port or to an export processing Fone (%)6 providedthatI

The goods shall be a direct result o imported goods used in the manuacture osuch goods.

The o/ner o the goods shall have obtained authoriFation rom the commissionerprior to the manuacture.

!6!2 *x5ort &rocessing ;ones -*&;s. and (ree &orts

A ree Fone is a designated area /here goods introduced into the designated area aregenerally regarded" so ar as import duties are concerned" as being outside the customsterritory and includes an export processing Fone or reeport Fone. The commissioner maydesignate areas in %)6s or in 1reeports in /hich customs ormalities shall be carried out.

An export processing Fone (%)6 is a designated part o a Fone or territory o Uganda"/here any goods introduced are generally regarded or the purpose o import duties andtaxes" as being outside the customs territory but are duly restricted by controlled accessand /here the beneits provided under the Act apply. The activities /hich may be carriedout /ithin the %)6 are manuacturing" commercial and service activities or export.

A reeport is a customs controlled area /here imported duty ree goods are stored or thepurpose o trade. A licensee o a reeport may only carry out those activities that arere0uired to preserve goods" or to improve their pac-aging" preparation or shipment ormar-etability 0uality" /ithout changing the character o the goods. The activities shallinclude /are housing and storage" labelling" pac-ing and repac-ing" sorting" grading"

cleaning and mixing" brea-ing bul-" simple assembly" and grouping o pac-ages underCustoms supevison.

Incentives< criteria and e4igi,i4ity -&rovisiona4 5ending &ar4iament decision.

*x5ort Scheme (isca4 Incentives =usti+ication! Criteria/Conditiona4ity+or e4igi,i4ity

9. %)6 + 78 corporate tax or 97 yearsand :;8 there ater.+ $uty ree inputs.+ %xemption rom #AT.+ %xemption rom /ithholding taxor 97 years.+ :78 sales on the local mar-et.+ %xemption rom stamp duty.

+ To encourage valueaddition o agricultureproducts or export.+ To increase value oexports and more oreignexchange.+ To create 4obs.+ To ma-e Ugandacompetitive on exportsrom %AC and C,'%&Acountries.

+ >78 export o total production+ #alue addition leading tchange o tari heading andKo


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+ %xemption rom #AT+ %xemption rom /ithholding taxor 97 years.+ :78 sales on local mar-et.+ exemption rom stamp duty.

+ !ncentive or utureintreprenuerialdevelopment.+ )rovide mar-et or localservices and utilities.+ !nternal revenuegeneration.

+ %vidence o inancial capacity

!0 #'1*STIC TA%*S STRUCTUR*

Tax on Cor5orate Income

Resident and *on Resident companies'ining Companies

Rate

78 o Gross rent aterallo/ing a threshold o &hs. 9";@7"777i.e. :78(>78 o gross rent M 9";@7"777:7"777;@"777 = :7"777:">:7"779+"?:7"777,ver "?:7"777

Annua4

978 o chargeable income:>:"777 = :78 o excess o :">:7"77727?"777 =


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)ayee &ection )ayee &ectionranch )roits 9;8 >:'anagement H )roessional 1ees. @8 99?A 9;8 >;Royalty )ayments. 9;8 > 9;8 >Contractors and )roessionals 9;8 >;Good and &ervices (also see @8 99?

)lease note that any payment to a person in Uganda rom the Government o Uganda" aGovernment institution" a local authority" any company controlled by the Government oUganda or any person designated in a notice issued by the 'inister responsible orinance (&ee schedule attached on page :


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!n the 9??2K?> udget &peech" the Don 'inister or 1inance" under section 9 o the1inance &tatute 9??2" repealed sections :; o the !nvestment Code 9??9 /hich providedor # to $ years tax holi"ay %see &1$' of the IT ACT).The 'inister proposed a ne/incentive regime o investment capital allo/ances to replace the tax holiday acility. Thene/ incentive regime is speciied in the !ncome Tax Act" 9??2 in sections :@+" theseinvestment capital allo/ances can be summariFed in three categoriesI

Category

The incentives covered in this category are capital allo/ancesKexpenses /hich aredeductible oncerom the Companys !ncome.

Ty5e o+ a44o9ance Rate! Condition!

!nitial allo/ancegranted in 9styear oproduction

;78 Granted on cost base o plant H machinery or !ndustrieslocated in Eampala" %ntebbe" *amanve" in4a H *4eru .

!nitial allo/ancegranted in 9styear oproduction

2;8 Granted on the cost base o plant and machinery or!ndustries located else/here in Uganda

&tart+up costs :;8 Granted on actual cost over the irst our years in our e0uinstallments.

&cientiic ResearchCapital %xpenditure

9778 Granted on actual cost o scientiic research incurred durina year o income in the course o carrying on a business" tincome o /hich is included in gross income. 'ust beunderta-en in the development o the persons business.

Training %xpenditure 9778 Granted on actual cost o training incurred during a year oincome or the training or tertiary education o a citiFen orpermanent resident o Uganda employed in the business bthe employer (not exceeding ; years in total

'ineral %xploration%xpenditure

9778 Granted on actual cost incurred in mineral exploration.%xpenditure o a capital nature incurred in searching or"discovering and testing" /inning access to deposit ominerals in Uganda.

!nitial allo/ancegranted in 9styear ouse o an !ndustrialuilding.

:78 Granted on the cost base o an industrial building" (includintourism acilities li-e hotels and lodges and capitalexpenditure incurred on the extension o an existingindustrial building but excluding commercial building.

Repairs and 'inorCapital %0uipment

9778 Granted on actual cost incurred in a year.

%xpenditure on repair o property occupied or usedor the business.

Cost o minor capital e0uipment (a depreciable assecosting less than ity currency points and unctioninin its o/n right.

Category 2 #educti,4e Annua4 A44o9ances



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$epreciable Assets only (classes 9+ H 1arm /or-s (sixth schedule under decliningbalance method per annumI

C4ass! Rate! Condition!

Class 9 78 Computers and data handling e0uipment.Class :


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This is or those businesses" /hich 0ualiy" that is" businesses going to supply taxablegoods and services. #AT registration is either compulsory or voluntary depending on yourcircumstances and the annual registration threshold is Ushs ;7 million per annum.#oluntary registration is permissible under the la/ or those /hose turnover is belo/ thethreshhold" but granted at the discretion o the Commissioner General. here a person0ualiies or registration" a registration certiicate is to be issued eective rom thebeginning o the period in /hich the duty to register arose (in case o compulsoryregistration andKor eective rom the beginning o the month immediately ollo/ing themonth in /hich the person applied &? (


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#AT deerral acility is available to an !nvestment Trader on plant and machineryincluding specialiFed vehicles" ra/ materials or drugs" seedlings" greenhousee0uipments" plastic sleeves and tea clone or a period o one month. (&eere0uirements and procedure in section ;.2 belo/.

!nvestors /ho register as !nvestment Traders are entitled to #AT reund on buildingmaterials or industrialKcommercial buildings.

! ',4igations o+ a AT registered 5erson

Eeep proper records as is re0uired by la/.

&ubmit monthly returns and pay tax due on time.

Charge #AT on all taxable supplies

! Taxa,4e &erson dea4ing in 1ixed Su554ies!

here a taxable person is dealing in mixed supplies (i.e. standard rated and exemptsupplies" only part o the input tax may be credited using a ormula stipulated in &ec (:>

(2(b and the thschedule para.9(" ( i.e. The *ormal 'ethod o Apportionment. herethe raction KC is Less than ;8" *o credit or input tax paid is allo/ed3 and /here theraction is Greater than ?;8" the taxable person may credit all input tax or the period. Anexample is hotel accomodation outside Eampala and %ntebbe is #AT exempt /hereasother hotel services are standard rated.

The process o attributing input tax to taxable and exempt supplies is reerred to asapportionment o input tax. The result o apportionment must be a air and reasonableinput tax credit to the taxable person. &ection :> o the #AT Act and paragraph 9; o the#AT regulations 9??@ provide that /here a registered taxpayer is disadvantaged by theprovisions o &ec.(:>(2(b o the #AT Act" the Commissioner General may approve "(in

/riting" on application by the taxable person" an alternative method o calculating theinput tax to be credited reerred to as the &tandard Alternative 'ethod (&A'.

! Im5orted Service/Reverse Charges!

&ections (c and ;(c o the #AT Act imposes #AT on any import o services by anyperson and the person liable to pay the #AT is the receipient or importer o the service.

Also see para. 9 o #AT Regulations 9??@" the recipient o the service is obliged todeclare such services" complete and pay #AT thereon to an authoriFed ban- on aprescribed orm (1orm #AT ;77. A #AT registered person may claim such payments asinput tax in the monthly #AT return as per the povisions o &ec :> o the #AT Act.

The value o the imported services is the gross amount beore deducting /ithholding tax(o 9;8 on oreign payments.

!mported services include" but are not limited to" the ollo/ingIConsultancy services" Technical support" !T support" Audit eesKAccounting Consultancy"Legal consultancy" !nter+company service charges" Royalties" Reuters charges"



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'management ees and )roessional ees" ComputerKsot/are support" !ternet access"trainning costs" ,utside data processing or ban-s" regional sourcing" $ebt collection ees"Technical servicesKdevelopment costs" !nsurance consultancy" &ervice ees and!normation services" !&, Certiication" Constructio survey and design" ,shoreadvertising" &urveyors and Ris- assessors or !nsurance companies" Architectural design"

!6 ;ero Rated Su554ies!

6ero rated supplies are goods and services /hich are exempt rom #AT but in respect o/hich a #AT (input tax is claimable. &uch taxable suppliers may register or #AT. 6erorated supplies include the ollo/ingI

a &upply o goods or services /here the good or services are exported romUganda3

b The supply o international transport o goods or passengers and tic-ets or theirtransport3

c The supply o drugs and medicines3

d The supply o educational materials and the supply o printing services oreducational materials 3( Neducational materialsO means materials suitable or useonly in public libraries and educational establishments speciied in paragraph :o the &econd &chedule to the !T Act3

e The supply o seeds" ertiliFers" pesticides" and hoes3 (NpesticidesO meansinsecticides" rodenticides" ungicides and herbicides but does not includepesticides pac-aged or personal or domestic use.

The supply o cereals" /here the cereals are gro/n" milled or produced inUganda3

g The supply o machinery" tools and implements suitable or use only in

agriculture3

h The supply o mil-" including mil- treated in any /ay to preserve it3.!7 AT *xem5t Su554ies

Certain goods and services are exempt rom #AT. A person registered or #AT cannotclaim an input tax on exempt goods and services neither is such a person re0uired toregister or #AT. &imilarly" such person cannot charge #AT (as an output tax on goodsand services exempt rom #AT.The ollo/ing goods and services are exempt rom #AT.

a The supply o unprocessed oodstus" including agricultural products and livestoc-3b The supply o postage stamps3

c The supply o inancial services3

d The supply o insurance services3

e The supply o unimproved land3

The supply by /ay o lease or letting o immovable property other thanUganda Incentive Regime 2006/07 14


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A lease or letting o commercial premises3

A lease or letting o hotel or holiday accommodation3

A lease or letting or periods not exceeding three months3

A lease or letting or par-ing or storing cars or other vehicles3 or

A lease or letting o service apartments

g The supply o education services3

h The supply o medical" dental" and nursing services3

i The supply o social /elare services3

4 The supply o betting" lotteries and games o chance3

- The supply o goods as part o the transer o a business as going concern by onetaxable person to another person3

l The supply o burial and cremation services3

m The supply o precious metals and other valuables to the an- o Uganda or the

&tate Treasury3n The supply o passenger transportation services (other than Tour and Travel

operators

o The supply o petroleum uels" sub4ect to excise duty" (motor spirit" -erosene andgas oil

p The supply o dental" medical and veterinary e0uipment3

0 The supply o eeds or poultry and livestoc-3

r The supply o machinery used or the processing o agricultural or dairy products3

s The supply o photosensitive semiconductor devices" including photovoltaic

devices" /hether or not assembled in modules or made into panels3 light emittingdiodes3 solar /ater heaters and solar coo-ers

t The supply o accommodation in tourist lodges and hotels outside Eampala and%ntebbe3

u The supply o computers" printers" parts and accessories alling under headings>.29 and >.2< o the harmoniFed coding system o the customs la/

v The supply o computer sot/are3

/ The supply o lie4ac-ets< lie saving gear


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!B AT #e+erment on &4ant< 1achinery *ui5ment!

This is a acility granted to #AT registered taxpayers /here by payment o #AT atimportation on speciied imports is postponed to the uture. URA then collects the #AT onproduction o inal goods" /here applicable.

!B! The +o44o9ing are the conditions that have to ,e +u4+i44ed

9 !mporter should be registered or #AT and henceorth iling monthly #AT Returns.: &hould have a certiicate o incorporation" >;" ?7. To/ers and masts o DarmoniFed &ystemCode 2.:7.77 speciically or transmission purposes. A 'achine is a deviceconsisting o ixed and moving parts that modiies mechanical energy and transmitsit in a more useul orm.

E"oteI &pares and components /hen imported separately are not deerrable.: Green houses H Cold rooms (chapter ?27; 1lo/er cuttings (other cuttings

!B! The AT de+erment 5rocessI

,nce all the above conditions have been ulilled" the importer through his appointed agentlodges the documents to Tari section (Customs Dead0uarters. The ollo/ing are theprocesses involved.

9 *e/ applicants are re0uired to ma-e a ormal application to AssistantCommissioner Trade.

: A completed orm :


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:. !n respect o importation o unassembled or disassembled 'achinery"diagram K assembly plan (identiying each imported part should be attached.

A contract may be re0uired or consideration as a unit or classiicationpurposes.

!B! AT discharge

A period o thirty (


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$.2 Duty +ree Diesel

This is a short termincentive acility by government to Large &cale %nterprises in order toalleviate the impact o po/er shortages on their operations. The acility operates by /ay oa tax /aiver o &hs.;7KB per litre on $iesel used in the generation o po/er or businessoperations. Conditions or 4oining the scheme /ith eect rom 9stune :77@.

9 The scheme /ill be implemented in phases" and the irst phase /ill cover irms inthe 'anuacturing" Agro+)rocessing" Dealth" Dotel" )rinting H )ublishing" andTelecommunication &ectors that satisy the ollo/ing conditions.

'ust have a generating set o at least 977E#A capacity

'ust be #AT registered except i exempted by La/.

'ust have applied" been veriied and approved by URA.

: Also to be considered /ith eect rom 9st $ecember :77@ are irms havinggenerators /ith capacities belo/ 977E#A but strictly in the ollo/ing sectors.

1lo/er

Telecommunications and an-ing.


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7!0 *%CIS* #UT? SCF*#U)* ('R (I"A"CIA) ?*AR 2006/07

The ollo/ing goods and services are liable to %xcise $uty as speciied in the %xcise Tari(Amendment Act :77@. investors intending to deal in excisable goods and services arere0uired to register /ith URA.

!tem Rate o excise duty9. %xtracts" %ssences and Concentrates 978:. Cigars" Cheroots" Cigarillos containing tobacco 9;78a &ot cup" Regular &iFe (P27mm Length including the ilter &hs.9?"777 per

9777 stic-sb &ot cupI Eing &iFe (Q27mm Length including the ilter &hs. :;"777 per

9777 stic-sc Dinge Lid &hs. >"777 per

9777 stic-sd ,ther 9;78e &mo-ing tobacco" /hether or not containing 9;78

Tobacco substitutes in any proportion!. NDomogenisedO or NreconstitutedO tobacco 9;78

!!. ,ther 9;78


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#isc4aimer This is 4ust a simpliied guide. !t is not the la/. )lease al/ays reer to the la/or to URA in case o any 0uestions about the contents o this document. !ncentives may besub4ect to change /ithout notice.

Contacts

1or any in0uiries" 0ueries and complaints use the call center Toll+ree help line.

URA Call Centre Toll 1ree LineI 7>779+92777URA ebsiteI ///.ugrevenue.com!n0uiresI prteura.go.ugand callScenterSgpura.go.ugCommissioner Generals ,iceI :;@+9+

uganda revenue authority incentive regime 2006-07

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