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The Investor Guide to Uganda Tax

System/URA Services and the Current


Tax Incentive Regime
2006/2007

1.0 UGANDAS TAX PORTFOLIO.


Ugandas tax system is segmented into Central Government and Local Government Tax
structures. The principal taxes levied by the Central Government (administered through
Uganda Revenue Authority) are Income Tax both on individuals and companies, Value
Added Tax, Import Duty, Excise Duty, Stamp Duty, Motor Vehicle fees, Permits and Nontax revenues collected by various Ministries.
Uganda Incentive Regime 2006/07

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.

A copy of the Certificate of Incorporation.


A copy of the business plan.
Form 7 indicating the particulars of the directors and copies of identification.
If directors different from shareholders, a board resolution on directorship.
A copy of your business premise tenancy agreement plus payment receipt.

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

a). Import Duty.


There are basically three tax rates (tariff bands) 0%, 10% and 25% import duty. It is
charged on the Customs Value of the goods (see section 3.2 below for details).
b). Excise Duty
This is any Duty of Excise imposed, under the Excise Law, on the Excise Value (Import
Duty + Customs Value). It is generally imposed on goods that are manufactured and some
services offered in Uganda. (See section 7.0 below for details)
c). VAT
This is duty of 18% or 0% on the VAT value (Customs Value + Import Duty) (See section
5.0 below for details and exemptions).
d). Withholding Tax
Section 119(3) of the IT Act imposes a duty of 6% on the Customs Value of goods
imported into Uganda. (See section 4.1.1 below for exemptions)
Total Amount Payable (TAP) = Import Duty + VAT + WHT + Excise Duty (where
applicable)
3.2 The EAC.
The EAC Customs Union commenced operations on 1st January 2005 and comprises of
Uganda, Kenya and Tanzania as member states. With effect from July 2007, Rwanda and
Burundi will join the EAC.Therefore, Uganda customs is governed by the East African
Community Management Act (EACMA), 2005 and below are the basics.
1. Common duty rates which apply uniformly on goods imported into East African
Community (The EAC Common External Tariff CET). This is a three band CET
structure of 0%,10% and 25% applied as below. The highest rate of 25% will be reviewed
after 5 year.
0% is applied on Raw Materials and Capital goods.
10% is applied on semi-processed and intermediate goods.
25% is applied on finished goods.
Additional policy measure beyond the maximum CET rate of 25% is applied to
goods (commonly referred to as sensitive goods) imported into East Africa. These
goods are treated as such because they are manufactured within the community
and for industry protection.
2. Zero rates on most of the goods originating and traded within East Africa.
3. Reduction to zero duty rates within 5 years on goods originating from Kenya and
imported into Uganda and Tanzania (Elimination of Internal Tariffs and other Charges of
Equivalent Effect).
Goods originating from Uganda exported to Tanzania shall be duty free;
Uganda Incentive Regime 2006/07

Goods originating from Tanzania exported to Uganda shall be duty free;


Goods originating from Uganda and Tanzania exported to Kenya shall be duty free;
A selected list of goods originating from Kenya exported to Uganda and Tanzania
will be subject to an interim tariff protection for a period of five (5) years from the
date of entry into force of the treaty, commencing with 10% in the first year,
reducing to 8%, 6% (current), 4%, 2% in the second, third, fourth and fifth year
respectively, and ultimately attaining 0% in the sixth year.
The reduced tariff is applicable to goods which satisfy the EAC Rules of Origin.
4. Preferential tariff treatment for eligible goods originating from COMESA and SADC
countries upto 31st December 2008.
5. A standard and harmonized exemption regime which does not give any officer or
minister any discretionary powers to grant exemption.( 5 th schedule of the EACCMA).
6. A harmonized list of prohibited and restricted goods which are not allowed to be
imported in or exported out any one partner state.(2 nd & 3rd schedules of the EACCMA).
7. Tax incentives for producers of goods for export through Export Schemes where duty on
inputs is waived.( See brief on export schemes in 3.6 below). These include.
Export Processing Zones (EPZs).
Freeport Trade Zones
Manufacturing under bond
Duty Draw Back for manufactures of goods for export.
Inward Processing.
8. Zero tariff on most of the capital goods, agricultural inputs, medicines and medical
equipment, raw materials and chemicals.
9. Computation of taxes based on CIF value at the initial port of discharge in the East
African Community e.g Mombasa, Dar es Salaam. Airfreight cost is excluded in the value
for computation of duties.
10. Use of Information Technology in Customs processes to enhance efficiency and
reduce delays.
11. Duty remission schemes for inputs used in manufacture of some products including:
Sugar for industrial use (90%)
Inputs for the manufacture of exercise books and other essential goods
The EAC Common External Tariff shall not apply to trade between Kenya and Uganda for
COMESA member states and Tanzania for SADC member states.
3.3 Some of the tax incentives under EAC Customs General Exemption Regime

Uganda Incentive Regime 2006/07

Imported inputs by persons engaged in horticulture, agriculture or floriculture, which


the Commissioner is satisfied are for use in the horticulture, agriculture or
floriculture sector.
Inputs imported by a manufacturer for use in the manufacture of agricultural
equipment.
Refrigerated Trucks
Packaging materials and raw materials for manufacture of medicaments.
Imported packaging materials exclusively for export products.
Packaging materials for milk (tetra pack) and grain milling are VAT-free but fetch a
duty if imported from outside the East African Community.
All other packaging materials and those for domestic consumption pay duty from
10%-25% basically to protect the local industry.
First Arrival Privileges in the form of duty exemptions for personal effects and
(motor vehicle previously owned for at least 12 months) to all investors and
expatriates coming into Uganda.
Diagnostic Reagents recommended by the Director of Medical Services or the
Director of Veterinary Services for use in hospitals and clinics subject to such
limitations as the Commissioner in a Partner State may impose.
Splints imported by a manufacturer for use in the manufacture of matches
Any of the following goods (Hotel Equipment) 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; and Linen and Curtains.
Diapers, Urine bags and hygienic bags
Any media containing Computer Software.
3.4 Documents required by customs for clearance of imported goods.
1) A Customs Bill of Entry duly completed and signed by a cutoms agent.
2) Other documents related to the purchase and importation of the goods such as:
a. Commercial Invoice
b. Bill of Lading (for imports by seaa),
c. Airway Bill (for imports by air)
d. Railway Consignment Note (for imports by rail).
e. Freight Invoice.
f. Insurance Certificate (if goods were insured).
g. Proforma Invoice.
h. Certificate of Origin.
i. Permits (if necessary).
j. Original and Translated certificates of cancellation or permanent export for
motor vehicles.
k. Road Transit Customs document (commonly known as C63) prepared at
sea-port and entry port in Uganda.
l. URA Form 1 for motor vehicles.
m. Any other relevant documents.
3.5 COMESA
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

- 0% corporate tax for 10 years


and 25% there after.
- Duty free inputs.
- Exemption from VAT.
- Exemption from withholding tax
for 10 years.
- 20% sales on the local market.
- Exemption from stamp duty.

- 80% export of total production.


- Value addition leading to
change of tariff heading and/or
35% value addition.
- Creation of jobs (skilled and
semi-skilled) based on sectors.
- New investments.
- Minimum capital of $500,000.
- Evidence of technical and
skills transfer.

2. Free Ports

- 0% corporate tax for 10 years


and 20% there after.
- Duty free inputs.

- 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.

Uganda Incentive Regime 2006/07

- New investments.
- Minimum capital employed
should be $ 500,000.
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- Exemption from VAT


- Exemption from withholding tax
for 10 years.
- 20% sales on local market.
- exemption from stamp duty.

- Incentive for future


intreprenuerial
development.
- Provide market for local
services and utilities.
Internal
revenue
generation.

- Evidence of financial capacity.

4.0 DOMESTIC TAXES STRUCTURE


Tax on Corporate Income
Resident and Non Resident companies
Mining Companies
Tax on Rental Income
Individual Rental Income Tax
Corporate Rental Income
Resident Individuals(annual)
0-1,560,000
1,560,001-2,820,000
2,820,001-4,920,000
Over 4,920,000
Non-Resident Individuals
0-2,820,000
2,820,001-4,920,000
Over 4,920,000
Pay As You Earn (PAYE)
0-130,000
130,001-235,000
235,001-410,000
410,001 and above

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.

Withholding Tax Rates and Income Tax Sections


Resident
IT Act
Non-Resident
IT Act
Uganda Incentive Regime 2006/07

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.

4.1 Summary of the Current Incentive Regime under Domestic Taxes.


4.1.1 Withholding Tax Exemptions.
The following are exempt from withholding tax.
(a) a supply or importation of petroleum or petroleum products, including
furnace oil, lubricants, other than cosmetics, and fabrics or yarn
manufactured out of petroleum products;
(b) a supply or importation of plant and machinery;
(c) a supply or importation of human or animal drugs;
(d) a supply or importation of scholastic materials;
(e) importations by organizations within the definition of exempt organization
in section 2(bb)(i)(B);
(f) a supplier or importer
(i) who is exempt from tax under this Act; or
(ii) who the Commissioner is satisfied has regularly complied with the
obligations imposed on the supplier or importer under this Act; or
(g) The supply or importation of raw materials.

4.1.2 Capital Allowances


Uganda Incentive Regime 2006/07

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 .

75% Granted on the cost base of plant and machinery for


Industries located elsewhere in Uganda
25%

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).

Category 2: Deductible Annual Allowances


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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)

Category 3: Other Annual Depreciation Allowances


Industrial
Building
Allowance
Intangible
Assets
Horticulture.

5%

Cost base net of initial allowance/deduction on a


straight-line basis per annum on qualifying
industrial building (includes approved
commercial building, Hotels and Hospitals.)
Varies. Granted on cost of asset in equal annual
installments over its useful life on condition that it
has an ascertainable useful life and value e.g.
leasehold, patents, royalties.
20%
Granted on Actual cost in four equal annual
installments. Cost must be incurred on
acquisition of horticultural plant and/or on
Construction of a green house.

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
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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.
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VAT deferral facility is available to an Investment Trader on plant and machinery


including specialized vehicles, raw materials for drugs, seedlings, greenhouse
equipments, plastic sleeves and tea clone for a period of one month. (See
requirements and procedure in section 5.7 below).
Investors who register as Investment Traders are entitled to VAT refund on building
materials for industrial/commercial buildings.

5.3 Obligations of a VAT registered person:

Keep proper records as is required by law.


Submit monthly returns and pay tax due on time.
Charge VAT on all taxable supplies

5.4 Taxable Person dealing in Mixed Supplies.


Where a taxable person is dealing in mixed supplies (i.e. standard rated and exempt
supplies), only part of the input tax may be credited using a formula stipulated in Sec (28)
(7)(b) and the 4th schedule para.1(f), ( i.e. The Normal Method of Apportionment). Where
the fraction B/C is Less than 5%, No credit for input tax paid is allowed; and where the
fraction is Greater than 95%, the taxable person may credit all input tax for the period. An
example is hotel accomodation outside Kampala and Entebbe is VAT exempt whereas
other hotel services are standard rated.
The process of attributing input tax to taxable and exempt supplies is referred to as
apportionment of input tax. The result of apportionment must be a fair and reasonable
input tax credit to the taxable person. Section 28 of the VAT Act and paragraph 15 of the
VAT regulations 1996 provide that where a registered taxpayer is disadvantaged by the
provisions of Sec.(28)(7)(b) of the VAT Act, the Commissioner General may approve ,(in
writing), on application by the taxable person, an alternative method of calculating the
input tax to be credited referred to as the Standard Alternative Method (SAM).
5.5 Imported Service/Reverse Charges.
Sections 4 (c) and 5(c) of the VAT Act imposes VAT on any import of services by any
person and the person liable to pay the VAT is the receipient or importer of the service.
Also see para. 14 of VAT Regulations 1996, the recipient of the service is obliged to
declare such services, complete and pay VAT thereon to an authorized bank on a
prescribed form (Form VAT 500). A VAT registered person may claim such payments as
input tax in the monthly VAT return as per the povisions of Sec 28 of the VAT Act.
The value of the imported services is the gross amount before deducting withholding tax
(of 15%) on foreign payments.
Imported services include, but are not limited to, the following:
Consultancy services, Technical support, IT support, Audit fees/Accounting Consultancy,
Legal consultancy, Inter-company service charges, Royalties, Reuters charges,
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Mmanagement fees and Professional fees, Computer/software support, Iternet access,


trainning costs, Outside data processing for banks, regional sourcing, Debt collection fees,
Technical services/development costs, Insurance consultancy, Service fees and
Information services, ISO Certification, Constructio survey and design, Offshore
advertising, Surveyors and Risk assessors for Insurance companies, Architectural design,
5.6 Zero Rated Supplies.
Zero rated supplies are goods and services which are exempt from VAT but in respect of
which a VAT (input tax) is claimable. Such taxable suppliers may register for VAT. Zero
rated supplies include the following:
a) Supply of goods or services where the good or services are exported from
Uganda;
b) The supply of international transport of goods or passengers and tickets for their
transport;
c) The supply of drugs and medicines;
d) The supply of educational materials and the supply of printing services for
educational materials ;( educational materials means materials suitable for use
only in public libraries and educational establishments specified in paragraph 2
of the Second Schedule to the IT Act);
e) The supply of seeds, fertilizers, pesticides, and hoes; (pesticides means
insecticides, rodenticides, fungicides and herbicides but does not include
pesticides packaged for personal or domestic use.)
f) The supply of cereals, where the cereals are grown, milled or produced in
Uganda;
g) The supply of machinery, tools and implements suitable for use only in
agriculture;
h) The supply of milk, including milk treated in any way to preserve it;
.
5.7 VAT Exempt Supplies
Certain goods and services are exempt from VAT. A person registered for VAT cannot
claim an input tax on exempt goods and services neither is such a person required to
register for VAT. Similarly, such person cannot charge VAT (as an output tax) on goods
and services exempt from VAT.The following goods and services are exempt from VAT.
a) The supply of unprocessed foodstuffs, including agricultural products and livestock;
b)

The supply of postage stamps;

c)

The supply of financial services;

d)

The supply of insurance services;

e)

The supply of unimproved land;

f)

The supply by way of lease or letting of immovable property other than


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A lease or letting of commercial premises;

A lease or letting of hotel or holiday accommodation;

A lease or letting for periods not exceeding three months;

A lease or letting for parking or storing cars or other vehicles; or

A lease or letting of service apartments

g)

The supply of education services;

h)

The supply of medical, dental, and nursing services;

i)

The supply of social welfare services;

j)

The supply of betting, lotteries and games of chance;

k)

The supply of goods as part of the transfer of a business as going concern by one
taxable person to another person;

l)

The supply of burial and cremation services;

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)

The supply of dental, medical and veterinary equipment;

q)

The supply of feeds for poultry and livestock;

r)

The supply of machinery used for the processing of agricultural or dairy products;

s)

The supply of photosensitive semiconductor devices, including photovoltaic


devices, whether or not assembled in modules or made into panels; light emitting
diodes; solar water heaters and solar cookers

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)

The supply of computer software;

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)

The supply of insecticides and acaricides;

z)

The supply of feasibility studies, engineering designs and consultancy services


and civil works related to roads and bridges construction and water works.

aa) The supply of contraceptive sheaths


bb) The supply of liquefied petroleum gas.
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5.8 VAT Deferment on Plant, Machinery & Equipment.


This is a facility granted to VAT registered taxpayers where by payment of VAT at
importation on specified imports is postponed to the future. URA then collects the VAT on
production of final goods, where applicable.
5.8.1 The following are the conditions that have to be fulfilled:
1)
2)
3)
4)

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.
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2. In respect of importation of unassembled or disassembled Machinery,


diagram / assembly plan (identifying each imported part) should be attached.
A contract may be required for consideration as a unit for classification
purposes.
5.8.4 VAT discharge:
A period of thirty (30) days is given to the beneficiary of the VAT deferment facility to be
able to install plant/machinery. After the thirty days, the VAT deferred is supposed to be
discharged.
The following are the procedures for discharge:
(a) Form 231 fully completed and endorsed with VAT returns for three preceding
months, form 230 and released order should be forwarded to the Tariff section.
(b) Issuance of the discharge notice completes the VAT deferment process.
Failure to discharge VAT in the specified period, a Demand Note shall be issued to the
importer and the VAT amount recovered according to prescribed law.
5.8.5 Inspection
Officers in Tariff section will inspect premises to ascertain if machinery where VAT has
been deferred is being utilized.
5.8.6 Transfer of ownership
The equipment is not supposed to be transferred or sold without authority from the
Commissioner Customs.
6.0 SHORT TERM INCENTIVES
Note: Other short term incentives available to investors who will have set up business in
Uganda include the following. (Please contact URA for details and guidance).
6.1 Hotel Construction Materials.
This is a short term incentive facility by government, in respect to taxes on construction
materials sourced from abroad, to revamp and modernize the tourism and hotel industry in
the country. The Ministry of Finance will, on case by case basis, pay, on behalf of the
hoteliers, the duties and taxes, on construction materials, approved by the minister prior to
importation for the construction and renovation of their hotels. However, the facility does
not cover cement, steel and other locally produced items. For persons intending to
construct and deal in hotel business especially at this time as government prepares for
Commonwealth Heads of Government Meeting (CHOGM),

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6.2 Duty Free Diesel


This is a short term incentive facility by government to Large Scale Enterprises in order to
alleviate the impact of power shortages on their operations. The facility operates by way of
a tax waiver of Shs.450/= per litre on Diesel used in the generation of power for business
operations. Conditions for joining the scheme with effect from 1 st June 2006.
1)

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

d. Shell Uganda Ltd,


e. Gapco
f. Mogas

g. M-oil (U) Ltd,


h. Total (U) Ltd
g. Hared Petroleum

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.
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7.0 EXCISE DUTY SCHEDULE FOR FINANCIAL YEAR 2006/07


The following goods and services are liable to Excise Duty as specified in the Excise Tariff
(Amendment) Act 2006. investors intending to deal in excisable goods and services are
required to register with URA.
Item
Rate of excise duty
1. Extracts, Essences and Concentrates
10%
2. Cigars, Cheroots, Cigarillos containing tobacco
150%
a) Soft cup, Regular Size (<70mm Length including the filter) Shs.19,000 per
1000 sticks
b) Soft cup: King Size (>70mm Length including the filter)
Shs. 25,000 per
1000 sticks
c) Hinge Lid
Shs. 48,000 per
1000 sticks
d) Other
150%
e) Smoking tobacco, whether or not containing
150%
Tobacco substitutes in any proportion
I. Homogenised or reconstituted tobacco
150%
II. Other
150%
3. Beer
a) Made from malt
60%
b) Whose local raw material content, excluding water,
is at least 75% by weight of its constituents
30%
4. Spirits
60%
5. Wine
a) made from locally produced raw materials
20%
b) Other
70%
6. Waters, including mineral waters and aerated waters,
13%
containing sweetening matter or flavoured
7. Mineral water, bottled water and other water purposely for drinking 10%
8. Airtime
12%
9. Landlines and public payphones
5%
10. Cement
Shs. 500 per 50kg
11. Fuel
a) Motor Spirit (gasoline)
Shs. 720/ per litre
b) Gas oil (automotive, light, amber for high speed engine) Shs. 450/ per litre
c) Other gas oils
Shs. 450/ per litre
d) Gas Oil for Thermal Power Generation to national grid
Nil effective Ist
March 2006
e) Illuminating Kerosene
Shs.200/ per litre
12. Cane or beet sugar and chemically pure sucrose in solid form Shs.50 per kg
13. Cane or beet sugar for industrial use
0%
14. Sacks and Bags
10%
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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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