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Maintaining the Momentum:

Infrastructure Investment for


Growth and Social Economic
Transformation

Uganda Budget
Synopsis
June 2014
Authority will collect taxes of Shs
9,577 billion (USD 3,830.8M); and
UGANDA BUDGET
Non-Tax Revenues of Shs 206 billion
HIGHLIGHTS (USD 82.4M). Other domestic
funding will be sourced by issuing
ECONOMIC PERFORMANCE Government securities worth Shs
Theme of the budget 1,437 billion (USD 574.8M) on
domestic markets; and net
Maintaining the Momentum: Government drawdown from savings
Infrastructure Investment for of Shs 1,102 billion (USD 440.8 M).
Growth and Socio-Economic
Transformation
TAX PROPOSALS
GPD Growth
The objectives of the various tax measures
Ugandas economy grew through
for the Financial Year 2014/15 are to
Financial Year 2013/14 albeit more
raise revenues, enhance transparency in
modestly than the 6.2% that was
collection and enforcement, improve
projected year ago. The economy is
compliance and encourage.
projected to grow by at least 7% in
2014/15.
The tax following tax proposals have been
put forward.
Inflation
Inflation remained low during the
year and dropped to 5.4% by May
2014 and Annual core inflation INCOME TAX
declined to 3.3%.
Elimination of Initial Allowances on
Eligible Property
Key expenditure areas FY 2014/15
Sector Allocation (UGX/US$) %
Initial allowance on eligible property
UGX (Bn) USD (M) will be terminated. A person who
Security 1,006 402 7%
places an item of eligible property
Infrastructure 2,576 1,030 17% into service for the first time during a
Energy and
year of income will no longer be
Mineral 1,676 670 11%
development allowed a double tax deduction for
Education, that year of income of accelerated
Health and 3,550 1,420 25%
Water depreciation and ordinary
not not not depreciation.
Agriculture indicated indicated indicated

Resource envelope
Presumptive Tax Threshold
Total resource envelop is projected
at Shs 15,054 billion (USD
The presumptive tax rate has been
6,021.6M). Domestic sources will
increased from 1% to 3%.
contribute Shs 12,321 billion (USD
4,928.4M). Uganda Revenue

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Tax on Sports and Pool Betting The definition of start-up costs will
winnings and Designation of be restricted to only non-recurring
Gambling Houses to withhold the tax preliminary costs, which are
associated with starting up a
15% tax has been introduced on business.
winnings derived from sports and
pool betting. Other Technical Amendments.

Gambling houses have been Details of the other technical


designated as withholding tax proposals are to be contained in the
agents. Income Tax (Amendment) Bill 2014.

Elimination of exemption on Interest


VALUE ADDED TAX
Income on Agricultural Loans
Termination of Exemptions under
Interest income on agricultural loans the Second Schedule of the VAT
will not be exempt from income tax. Act.

Capital Gains Tax on sale of The following supplies will be


Commercial Property subject to VAT at 18%:-

Capital gains derived from the sale i. Supply of New Computers,


of commercial property will be Desktop Printers, Computer
subjected to tax. Parts & Accessories and
Computer Software Licenses;
Thin Capitalization Rules
ii. Supply of hotel accommodation
Deductions for interest paid to non- in tourist lodges and hotels
associated persons will be limited to outside Kampala District;
not more than 50 percent of
earnings before interest and iii. Supply of Liquefied Petroleum Gas;
depreciation.
iv. Supply of Feeds for Poultry and
Elimination of exemption on Income Livestock
derived from Educational
Institutions v. Supply of Agriculture and Diary
Machinery
The exemption of income derived by
a person from managing or running vi. Supply of Packaging Materials
an educational institution for to the Diary and Milling
commercial gain has been Industries
eliminated.
vii. Supply of Salt
Definition of Start-up Costs.
viii. Supply of Insurance Services
except medical and life

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Excise duty on kerosene at 200
ix. Supply of Specialized Vehicles, shillings per litre has been
Plant and Machinery services reinstated.
and civil works related to roads
and bridges Sugar
construction,Agriculture, Excise duty on sugar was increased
Water, Education and Health. from 25 shillings to 50 shillings.

Mobile Money Withdraw Fees.


Termination of Zero-rated Supplies 10% excise duty was introduced on
under the Third Schedule of VAT mobile money withdrawal fees.
Act.

The following supplies have been Bank Charges and money transfer
excluded from zero-rating and will fees
therefore be subjected to VAT at
18%:- 10 % excise duty has been
introduced on bank charges and
i. Supply of Printing Services for money transfer fees.
Educational Materials

ii. Supply of cereals, grown, milled NON TAX REVENUE


or produced in Uganda
Some Non Tax Revenue rates are
iii. Supply of processed milk and proposed to be revised through the
milk products Finance Bill 2014 and details will be
contained in the Finance Bill 2014.
iv. Supply of Machinery and Tools
for Agriculture
OTHER TAX MEASURES
v. Supply of Seeds, Fertilizers,
Treatment of Government Taxes
Pesticides and Hoes
Government transactions are to be
EXCISE DUTY treated in the same way as those of
private sector within the tax system.
All goods and services procured by
The following excise duty Government, directly or with the
amendments were proposed:- donor support will be tax inclusive.

Petrol and Diesel NEW TAX LAWS AND OTHER


Excise duty on petrol and diesel was REFORMS
increased by 50 shillings.

Kerosene New Excise Duty, Stamps Duty,


Lotteries and Gaming bills as well as

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the Tax Procedures Code are now
before Parliament.

Decisions made at the EAC Pre-


Budget Consultations by the
Ministers of Finance
The East African Community
Ministers of Finance agreed to the
introduction of a 1.5% infrastructure
levy on selected imports into EAC to
finance railway infrastructure
development.

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KENYA HIGHLIGHTS Total resource envelop is projected
at USD 13,572. Domestic sources
Economic Performance will contribute USD 12,490 and
external sources USD 1,082.
Thematic areas of the budget
Enhance business environment for
job creation
TAX PROPOSALS
Improve our productivity and
competitiveness in the domestic
Corporation Tax
and international markets,
Reduce the cost of living on a long- Corporation tax rate remains at 30%
term basis for residents and 37.5% for non-
Protect the poor and vulnerable and residents.
to sustain long-term growth
Reduce unemployment among our Proposal to allow deduction of
youth and women expenditure paid by employers for
Strengthen devolution so as to vacation trips made within Kenya for
facilitate efficient delivery of a period of next 12 months.
services

GPD Growth Transfer Pricing


Proposal to amend the definition of
The economy grew at 4.7% in the
Permanent Establishment (PE) to
year 2013 compared to growth of
align it with the OECD and UN Model
4.6% in year 2012. The economy is
Convention.
projected to grow by 5.8% and 6.4%
in the years 2014 and 2015
respectively which translates to
Withholding Tax
6.1% in the fiscal year 2014/15. Proposal to streamline the taxation
regime of the extractive industry (Oil
Inflation & Gas and Mining Companies).
Inflation to remain within the upper Changes include replacement of the
limit target of 7.5% in 2014 current withholding tax with income
tax on assignment of rights based on
Key expenditure areas FY 2014/15 net gain.

Sector %
Education 27% Personal Taxes
Energy, infrastructure & ICT 23%
No changes in tax brackets. The
Public admin & international relation 15%
highest tax bracket rate remains at
Governance, justice, law & order 10%
30%.
National security 8%

Resource envelope
Customs and Excise duty
Import Duty Exemption

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Proposal to exempt from duty
machinery, spares and inputs for
direct and exclusive use in the
development and generation of Solar
and Wind energy

Proposal to exempt imported inputs


used in the processing and
preservation of seeds for planting

Duty Increase

Proposal to increase duty on


importation of wide range of iron and
steel products from 0% and 10% to
25% to cushion local manufacturers
from cheap imports

Abolition of Custom Duty

Proposal to abolish customs bond on


Importation of refined industrial
sugar and wheat effective
immediately. Previously
Manufacturers and millers under the
Duty Remission Scheme were
required to execute a security bond
equivalent to taxes payable. The
move is meant to encourage
industrial expansion for more jobs.

Introduction of new
Bills/Regulations

Proposal to introduce;

Stand-alone Excise Duty bill


Tax Procedures Bill that will contain
uniform procedures across three tax
legislations VAT, Excise Duty and
Income Tax
Structures to ensure pending VAT
refunds are fast tracked

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TANZANIA HIGHLIGHTS Income tax
Economic Performance
Exemption from taxes of all incomes
and gains to the holders of the bonds
Theme of the budget that will be issued by the African
Development Bank in Tanzania
Reduce the cost of living, by domestic capital market.
continuing with efforts to reduce
inflation rate; improve social Impose 15 percent final withholding
services; improve roads, energy and tax on Board of Directors fees.
irrigation infrastructure; increase
wages and salaries of public servants, Introduction of tax on income derived
reducing the tax burden for workers, from gaming by companies.
creation of employment
opportunities and enhance good Remove exemption of withholding
governance. taxes on Rental charges on aircraft
lease paid to a non-resident by a
GPD Growth person engaged in air transportation
business.
Gross Domestic Product (GDP) grew
by 7.0 per cent in the year 2013 as Remove powers of the Minister for
per target. Finance to grant exemptions for
projects relating to expansion and
Inflation rehabilitation undertaken by
investors. This exemption is currently
The annual inflation rate has granted to investors who own TIC
continued to decline from 9.4 per Certificates
cent in April, 2013 to 6.3 per cent in
April, 2014. The targeted inflation Adjust PAYE threshold from 13
rate to end June 2014 is 6.0 percent to 12 percent. This measure
percent which is likely to be is intended to provide relief of tax
achieved. burden to employees

Resource envelope
The rate of presumptive tax will be
increased from 2% to 4 % for annual
Total resource envelop is projected
turnover which exceeds Tshs.
at USD 12,032. Domestic sources
4,000,000 but not exceeding Tshs.
will contribute USD 9,450 and
7,500,000 for record keeping
external sources USD 2,582.
businesses; and increase the current
flat rate from Tshs. 100,000 to
200,000 for non-record keeping
TAX PROPOSALS businesses.

Excise duty
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include soft drinks, alcohol, spirits
etc.;
Excise duty rate of 0.15 will be
removed on money transfers through (a) Excise duty on soft drinks was
banks and telecommunication. increased from shillings 91 per
litre to shillings 100 per litre;
Introduced excise duty of 10 percent
to be paid by banks and (b) Excise duty on locally produced
telecommunication companies and fruit juices increased from
various agencies for the fees and levy shillings 9 per litre to shillings
they collect on money transfer 10 per litre
services.
(c) Excise duty on imported fruit
Remove powers of the Minister for juices increased from shillings
Finance to grant exemption on excise 110 per litre to shillings 121
duty on petroleum products. per litre;
However, this measure will not
involve exemptions granted through (d) Beers made from local un-
Agreements signed between the malted cereals from shillings
Government and development 341 per litre to shillings 375
partners to finance development per litre;
projects such as roads and water
supply infrastructures. (e) Other beers from shillings 578
per litre to shillings 635 per
The threshold on the age of non- litre;
utility motor vehicles that are
currently being charged an excise (f) Wine produced with domestic
duty of 25 percent will be changed grapes content exceeding 75
from the current 10 years to 8 years. percent, from shillings 160 per
litre to shillings 176 per litre;
The age threshold was adjusted from
10 years to 8 years for non- (g) Wine produced with more than
passenger utility motor vehicles and 25 percent imported grapes
passenger carrying vehicles that are from shillings 1,775 per litre to
currently being charged 5 percent shillings 1,953 per litre;
excise duty.
(h) Spirits from shillings 2,631 per
Proposed excise duty rate of 15 litre to shillings 2,894 per litre;
percent on imported furniture under
HS Code 94.01. Excise duty of 25 percent will be
charged on cigarettes. Proposed
amendments to excise duty rates on
Increased by 10 percent the specific cigarettes as follows:
rates of excise duty on non-
petroleum products; these products (i) Cigarettes without filter tip and
containing domestic tobacco

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more than 75 percent from
shillings 9,031 to shillings ii) The United Nations and its
11,289 per thousand organizations, international and
cigarettes; other foreign Institutions
(j) Cigarettes with filter tip and dealing with technical
containing tobacco more than assistance but which do not
75 percent from shillings undertake any business
21,351 to shillings 26,689 per activities;
thousand cigarettes;
iii) Religious Institutions whose
(k) Other cigarettes not mentioned employees are solely employed
in (i) and (j) above from shillings to administer places of worship,
38,628 to shillings 48,285 per to give instructions or
thousand cigarettes; administer religious activities
only;
(l) Cut rag or cut filler from
shillings 19,510 per kilogram to iv) Charitable organizations which
shillings 24,388 per kilogram; do not perform any business
activities;
(m) The excise duty rate on cigar
remains at 30 per cent. v) Local Government Authorities;
and

Road and Fuel Tolls Act, vi) Education and training


CAP 220 institutions that offer free
services. However, this does
Remove powers of the Minister for not apply for institutions that
Finance in granting fuel levy provide business oriented
exemption, except for exemptions services.
granted through Agreements
signed between the Government
and development partners to The Export Levy Act, CAP
finance development projects such
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as roads and water supply
infrastructures etc.
Reduce export levy on raw hides
The Vocational Education and skins from 90 percent or Shs
900 per kilogram to 60 percent or
and Training Act, CAP 82
Shs 600 per kilogram whichever is
higher.
The following institutions were
included in the list of beneficiaries Tanzania Investment Act;
for exemptions from skills and
development levy:- CAP.38

i) The Diplomatic Missions;

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Cement will be removed from the list iii) Continue to grant duty
of deemed capital goods which enjoys remission to soap
tax exemptions under the Tanzania manufacturers using LABSA as
Investment Centre. raw materials from 10 percent
to 0 percent under HS Code
all tax exemptions have been 3402.11.00; HS Code
removed on investments granted to 3402.12.00 and HS Code
telecommunication operators under 3402.19.00 for the period of
the Tanzania Investment Centre for one year.
deemed capital goods such as
telecommunication towers and their iv) Increased duty rate from 10%
accessories, generators, tower to 25% on chemical based
fences, vehicles, base station (petroleum) aerosol spray
accessories, earthling, surge, and under HS Code 3808.91.39.
lightening protection system etc.
v) Reduced the duty rate on
Introduced a new definition for papers under HS Code
strategic investor by increasing the 48.05.11.00; HS Code
threshold of capital for foreign 4805.12.00; and HS Code
investors from US Dollars 20 Million 4805.30.00 from 25% to 10%.
to US Dollars 50 million as the lower
threshold capital that an investor is vi) Tanzania is to grant import
required. duty exemption on Electronic
Fiscal Devices (EFD) for a
Decisions made at the EAC period of one year.

Pre-budget Consultations by vii) Exemption of import duty


the Ministers of Finance granted on splints used in the
manufacturing of matches has
The following were agreed follows:- been eliminated;

i) Reduced import duty rate to viii) Continue to grant exemption of


10% for buses under HS Code import duty to Armed Forces
8702.10.99 for transportation Canteen Organisation for the
of more than 25 persons for period of one year.
the period of one year.
ix) Inputs used for manufacturing
ii) Extended the stay of of gas cylinders will be
application of CET rate of 35 exemption from import duty;
percent on wheat grain under and
HS Code 1001.90.10 and HS
Code 1001.99.90 and apply x) Machinery spares and inputs
CET rate of 10 percent for the used for the development and
period of one year. generation of wind and solar
energy have been exempted
from import duty.

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Administration of taxes
on imported petroleum
products

Payment of taxes on imported


petroleum products will be effected
immediately after assessment.

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Ernst & Young has taken every care to
ensure the accuracy of the contents herein;
the firm will not accept responsibility of any
damage or loss suffered by any one as a
consequence of any errors that may be
contained in this synopsis.

The synopsis should not be construed to


constitute tax advice. We therefore
recommend those with tax issues to consult
the firms tax department for appropriate
tax advice.

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