Uganda’s 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 Non-
tax revenues collected by various Ministries.
Taxes levied by the Local Government include Ground Rates, Trading and Operational
Licenses, Market dues, Parking fees and Building plans.
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 one’s 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.
Uganda Incentive Regime 2006/07 2
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).
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).
Total Amount Payable (TAP) = Import Duty + VAT + WHT + Excise Duty (where
applicable)
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.
Uganda Incentive Regime 2006/07 3
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).
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.( 5th 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.(2nd & 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.
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.
Uganda Incentive Regime 2006/07 4
3.3 Some of the tax incentives under EAC Customs General Exemption Regime
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 31st 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.
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.
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
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.
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.
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.
Withholding Tax
Certain payments are liable to withholding tax. A summary of the withholding tax rates
applicable to other payments is set out below.
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.
(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.
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 Company’s Income.
Depreciable Assets only (classes 1-4 & Farm works) (sixth schedule) under declining
balance method per annum:
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.
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).
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.
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 12
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.
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).
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, Reuter’s charges,
Mmanagement fees and Professional fees, Computer/software support, Iternet access,
Uganda Incentive Regime 2006/07 13
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,
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
1) Importer should be registered for VAT and henceforth filing monthly VAT Returns.
2) Should have a certificate of incorporation
3) Should have fulfilled the customs procedures concerning entering of goods.
4) 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.
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)
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.
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 16
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.
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.
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.
The equipment is not supposed to be transferred or sold without authority from the
Commissioner Customs.
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).
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 1st 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, d. Shell Uganda Ltd, g. M-oil (U) Ltd,
b. Petrocity, Kobil e. Gapco h. Total (U) Ltd
c. Petro f. Mogas 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.
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.
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.
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%
Contacts
For any inquiries, queries and complaints use the call center Toll-free help line.
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