SETTING UP BUSINESS IN UGANDA 2024

SETTING UP BUSINESS IN UGANDA

General Aspects

The republic of Uganda is located in the Eastern region of Africa, a member state of the East African Community (EAC), which is composed of six countries in the African Great Lakes region in Eastern Africa namely; Burundi, Kenya, Rwanda, South Sudan,

Tanzania, and Uganda. The country’s monetary unit is the Ugandan Shilling (UGX) with an approximated population of 46,572,531 people based on projections of the latest United Nations Data.

Legal Forms of Business Entities

Branch Office The branch or agency office is an affiliate of the head office and has no legal status from the head office. All activities are a representation of the operations of the head office.

Sole Proprietorships This is a business controlled and operated by one person, who engages in the business on their own account with unlimited liability.

A foreign business license must be obtained through the ministry of trade and commerce to commence operations representing the head office.

Sole proprietorship is suitable for businesses that require less capital and involve less risk on capital employed and work required. Profits from a sole entity are taxed as part of individual income except where the income lies under property/rent income.

Partnerships

A partnership is a form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates. Ownership of a partnership in Uganda may range from a minimum of 2 to a maximum of 20 members except for a professional partnership which may be constituted by a maximum of 50 members.

Partnerships in Uganda are categorized as either general or limited partnerships.

General Partnerships In a general partnership, every partner is an agent of the firm and binds the other partners. Therefore, all partners are also jointly and severally liable for the partnership debts.

Limited liability partnerships (“LLPs”).

In a Limited Liability Partnership, all partners have limited liability to the limit of their investment but can contribute to management activities of the business unlike a limited Partnership were only one of the Partners has unlimited liability and limited partners are not part of management.

A partnership is not a legal entity of its own and has no existence apart from its partners. Partnership property is held by the partners exclusively for purposes of the business.

A general partnership is also dissolved by the death or bankruptcy or retirement of one of the partners unless the partnership agreement prescribes otherwise

LLP must at least have a partner whom the law registers as a limited liability partner, failure to do so; all partners will be regarded as a general partnership and all its members, general partners.

Corporate structures – These are entities with separate legal existence from their owners. These are classified as either Private Limited Companies or Public Limited Companies.

Private Limited Companies A private company is one which; Restricts the right to transfer its shares, Limits the number of its members to fifty, not including persons who are in the employment of the company and prohibits any invitation to the public to subscribe for any shares or debentures of the company.

Public limited companies Public limited companies can offer their shares to the general public but also have limited liability. The shares can be acquired during an initial public offering or through trading on the stock exchange.

Organizational Questions

Where two or more members jointly hold one or more shares in such a company, they are treated as one member. Shareholders are also liable for the debt of the company to the limit of their investment.

All public limited companies in Uganda have their shares listed on the Uganda Securities Exchange (USE). Uganda currently has about 17 listed entities on the USE.

Company Register The process of incorporating a local company in Uganda is governed by the Companies Act 2012. The documentation submitted to the Companies Registry covers details like shareholders, directors and share capital. It is a mandatory requirement for companies both local and foreign to be registered in register of companies after incorporation. However, it is not mandatory for businesses like sole proprietorships and partnerships to be registered.

Trade Register Notification

A necessary search concerning any registered company can be made on the Uganda Registration Services Bureau website at www.ursb.go.ug

The Registrar General is charged with the responsibility of managing the Register of Companies in Uganda under the Ministry of Justice and Constitutional Affairs.

The Uganda Registration Services Bureau (URSB) is mandated to register all business entities and legal documents in Uganda which are required by law to be registered.

Bank Account To open up a bank account, a company needs a certificate of incorporation, particulars of directors and secretaries, annual returns, articles and memorandum of association, certified copy of directors’ resolution to open up a bank account, current trading license, tax identification number and a company letter head.

An individual needs a passport size photo, if Ugandan, a valid National ID (front & back), if nonUgandan, a valid passport and visa, if a refugee, a refugee ID issued from the Ministry of Internal Affairs.

It is mandatory under the Anti-Money Laundering Act 2013 to disclose sources of funding for both companies and individuals doing business in Uganda.

Trade Licence

Every person is required to obtain a trade license before commencing business in Uganda. The application for the trade license is submitted to the local authority where business is to be conducted together with the registration documents of the entity, the investment license (for a foreign investor), the certificate of tax registration, the tenancy agreement (where applicable) for the premises where the business will be operated from and a tax clearance certificate issued by Uganda Revenue Authority confirming that the applicant is tax compliant.

A trade license fee is payable depending on the nature of business to be undertaken and it’s renewed yearly.

Topic Feature Remarks

Investment License

Every foreign investor is required to obtain an investment license from the Uganda Investment Authority (UIA) before commencing business in Uganda. A foreign investor is a person who is not a citizen of Uganda, a company in which a person who is not a citizen of Uganda holds more than 50% of the shares, or a partnership in which the majority of the partners are non-citizens of Uganda. The application should contain the name and address of the applicant, proposed business activity, projected fixed capital investment costs over a period of 3 years and the number of jobs expected to be created by the project and it’s addressed to the Executive Director of the Uganda Investment Authority.

No fees are payable on application and the license will usually be issued within 3 (three) working days provided all the supporting documentation is in order.

Visa and Residence permit

Any person who wishes to travel to Uganda ought to use the e-Visa program to apply, pay a fee online and receive their electronic visa online before traveling. The e-Visa is an official document permitting entry into and travel within Uganda. Applicants receive their visas via email, after filling out the application form with the necessary information, and once the online credit card payment is completed. Nationals from the East African Community need a national identification card from their countries of origin since its part of the East African Community Common Market Protocol for Movement of Labour 2013.

The application process is governed by the Directorate of Citizenship and Immigration Control Department under the Ministry of Internal affairs in Uganda.

Employment

Topic Feature Remarks

Work Permit All foreign nationals intending to work in Uganda must ensure that they are in possession of the relevant work permit.

East Africa Community (EAC) nationals who obtain work of more than 90 days should apply for work permit within 15 days from date of concluding contract of employment. Special pass should be sought for employment of not more than 90 days.

Special pass will be issued to EAC nationals pending issuance of work permits.

Labor Law

Uganda has documented labor laws which outline the conditions of employment including; contract of service, termination of contract, termination notices, and protection of wages, hours of work, rest and holidays, employment of women, employment of children and care of employees.

The key labor laws in Uganda include; the Workers Compensation Act 2000, the Minimum Wages Act 2000, the Employment Act 2006, the Labor Union Arbitration and Settlement Act 2006 and the Occupational Safety Act 2006.

The employment laws in Uganda provide that the maximum normal working time for an employee below the threshold is 45 hours per week.

The statutory limitation of 45 hours per week means that the employee may not work more than 45 hours per week normal time.

Social System Uganda’s social system provides for benefits limited to; Age benefit, Withdrawal benefit, Invalidity benefit.

Public servants in Uganda don’t contribute to the security fund and are therefore only entitled to Age and Survivor benefits at the account of the Government of Uganda.

Emigration grant and Survivor’s benefit. These benefits are available to employees of the private sector who contribute to the fund. The total contribution to the fund is 15% of an individuals’ monthly basic pay. The employer is required to contribute 10% while 5% is deducted from the employee’s pay. However, the employer is not restricted from contributing the entire 15%.

New Legal Reforms

Topic Feature

Data Protection and Privacy Regulations, March 2021

Financial Intelligence Authority (FIA) and Anti-Money Laundering Act, 2013 (AMLA)

The President assented to the Data Protection and Privacy Act, 2019, on 28th February 2019. The commencement date is 1st March, 2019. The Act gives effect to Article 27(2) of the Constitution which provides for the protection of citizens’ rights to privacy. The Article provides that “No person shall be subjected to interference with the privacy of that person’s home, correspondence, communication or other property.”

Application

The Act applies to any person, institution or public body collecting, processing, holding or using personal data within Uganda; and outside Uganda for those who collect, process, hold, or use personal data relating to Ugandan citizens.

The Financial Intelligence Authority(FIA) is Uganda’s National center for the receipt of financial data, analysis and dissemination of financial intelligence to competent authorities. The Financial Intelligence Authority was established by the Anti-Money Laundering Act, 2013(AMLA) and has the mandate to combat money Laundering, countering Terrorism financing and countering Proliferation. Every accountable person is required by Regulation 45(1) of the Anti-Money Laundering Regulations, 2015 to submit to the Financial Intelligence Authority(FIA) a compliance report setting out the level of compliance with the Act and Regulations and the Internal Anti-Money Laundering and Combating Terrorist Financing Policy of the accountable person at the end of each calendar year.

Remarks

The objective of the Act is to protect the privacy of individuals by regulating the collection and processing of personal information in Uganda and outside Uganda if the information relates to Ugandan citizens; The Act gives individuals whose personal information has been requested, collected, collated, processed or stored powers to exercise control over their personal data including consent to the collection and processing, or to request for the correction and deletion of personal data.

Requirements

• Annual Compliance Report in word format which should be emailed to compliance@fia.go.ug.

• Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) attachments include; Copy of the AML/CFT policy and procedures; Copies of AML risk assessment of customers, products, methods of delivery and geographical location of customers;

• Copy of the independent audit report of the compliance program (2019) Suspicious transaction reports.

The National Social Security Fund (Amendment) Act, 2021

The National Social Security Fund Act, Cap. 222 was amended to;

• To establish a stakeholder board; to provide for mandatory contributions by all workers, regardless of the size of the enterprise or number of employees;

• To provide for voluntary contributions to the fund; to provide for midterm access to member’s contributions;

• To provide for a five term of office for the Managing Director and Deputy Managing Director;

Income Tax Act Amendments

1. New Rental Tax Rates for Individuals

Under the Rental tax bill, every landlord will pay rental tax at same rate of 30% which was formerly at 20%.

2. Exempt Income

Paragraph(z) in section 21 of the Exempt income derived from Agroprocessing has been revoked. Therefore, this implies that income derived from Agro processing is no longer exempt.

3. Excise Duty

Under the Traffic and Road Safety Act (Amendment) Bill, 2021, Motorists will pay an additional Ugx.100 in tax per litre of petrol and diesel. Over the Top service charge has been repealed and introduced an excise duty rate of 12%.

The NSSF Bill, which was first passed by the 10th Parliament on 17th February 2021, seeks to, among others, allow mid-term access of up to 20 percent to members who have reached the age of 45 years and above and who has made contributions to the fund under Section 7 for at least ten years.

Voluntary Disclosure Program

Digital Service Tax (DST)

Section 66(1a) of the Tax Procedures Code Act (TPCA) provides for preferential treatment for taxpayers who make a voluntary disclosure of non-compliance with tax laws.

Voluntary disclosure is a process where the taxpayer discloses information related to tax liabilities, or omissions his or her tax declarations to Uganda Revenue Authority (URA) without being prompted by any action or threat of action by URA.

Guide to Applying for a Voluntary Disclosure Certificate through the URA Portal:

1. Access the URA Portal at ( https://www.ura.go.ug ).

2. Download and Complete the VD Form:

3. Remit the Payment:

4. Await Confirmation.

Uganda Revenue Authority on 20th October 2023, published a public notice implementing the 5% digital services tax (DST) that was introduced by the Income Tax Amendment Act of 2023 effective 1 July 2023.

This clarifies that non-residents earning income from digital services provided to customers in Uganda must register through the Uganda Revenue Authority (URA) website.

This proposal puts individual and non-individual landlords on an equal footing, imposing an effective tax rate of 12 per cent on gross rental income. Companies earning rental income will claim gross rental income without carrying forward any excess expenditures and losses. Company rental income to be taxed at a flat rate of 30%.

Exempt income derived from operating in an industrial park or free zone has to include manufacturers chemicals for agricultural use, electrical equipment etc.

This tax will apply to airtime, value-added services, internet data excluding data for provision of medical services and the provision of education services.

For a Voluntary Disclosure (VD) to be valid, certain criteria must be met:

1. Full Disclosure: The taxpayer must provide comprehensive details of their non-compliance, including specific taxes involved, time periods, and the nature of the discrepancies.

2. Accurate Disclosure: Information must be truthful and complete. Halftruths or omissions will invalidate the disclosure.

3. Timeliness: Proactive engagement is key.

1. Non-residents who provide digital services to Ugandan customers, are obligated to register for Income Tax through the URA web portal.

2. Quarterly returns must be submitted within 15 days following the end of each quarter. These returns should declare the amount of revenue obtained from Ugandan sources.

Taxation

TTaxes are categorized into Direct and Indirect Taxes. Direct Taxes are charged according to status of residence and sources of income, i.e. business, employment or property, and where the final burden of the tax lies. All taxes in Uganda are charged under Authority of Acts of parliament which are administered by the Uganda Revenue Authority. Direct Taxes are imposed on income arising from business, employment, property, and the burden of the tax is borne by the individual or business entity. Examples of direct taxes include; Corporation tax. Individual Income Tax, e.g. Pay As You Earn, capital gains tax and rental tax.

Also, URA developed the Electronic Fiscal Receipting and Invoicing Solutions (EFRIS) project, which entails the e-invoicing and e-receipting system. This is an application system where a taxpayer is able to issue, receive and declare an invoice or receipt in a paperless manner using URA’s authentication facility and it is mandatory for all VAT-registered taxpayers effective July 1, 2020. In order to issue e-invoices and receipts, taxpayers must register with EFRIS via the URA web portal.

Corporation Tax A standard 30% income tax rate is imposed on corporations. This applies to both resident and non-resident corporations, with the exception of resident companies whose turnover does not exceed UGX 150 million, to whom presumptive tax applies. Presumptive taxation involves the use of indirect means to ascertain tax liability, which differ from the usual rules based on the taxpayer’s accounts.

Individual Income Tax

a) Resident Individuals

Monthly Chargeable Income

Not exceeding Ushs235,000

Exceeding UGX 235,000 not exceeding UGX 335,000

Exceeding UGX 335,000 but not exceeding UGX 410,000

Exceeding UGX 410,000

Remarks

The income from all businesses in Uganda is subject to a corporation tax. Sole proprietorships are however subject to Individual income tax while partnership, including a firm carrying on a trade or profession are charged corporation tax.

A non-resident company is only subject to Uganda income tax on income derived from sources in Uganda.

Rate of tax

NIL

10% of the amount by which chargeable income exceeds UGX. 235,000

UGX 10,000 plus 20% of the Amount by which chargeable income exceeds UGX 335,000.

UGX 25,000 plus 30% of the amount by which chargeable income exceeds UGX 410,000 and where the chargeable income of an individual exceeds UGX 10,000,000 an additional 10% charged on the amount by which chargeable income exceeds UGX 10,000,000.

b) Non-resident individuals

Not exceeding UGX 335,000

Exceeding UGX. 335,000 but not exceeding UGX 410,000

Exceeding UGX.410,000

UGX 33,500 plus 20% of the Amount by which chargeable income exceeds UGX. 335,000.

UGX 48,500 plus 30% of the amount by which chargeable income exceeds UGX 410,000 and where the chargeable income of an individual exceeds UGX 10,000,000 an additional 10% charged on the amount by which chargeable income exceeds UGX 10,000,000.

New Tax Reforms Feature Remarks

Pay As You Earn (PAYE) Previously, the monthly PAYE return only provided for a fixed rate of 30% (irrespective of the amount paid to the employee) for persons who earned taxable employment income from more than one employer (Secondary employment).

Effective 04 October 2022, under Schedule 1 of the PAYE return on the URA online portal, the tax rate for computation of PAYE for employees liable to “fixed rate” has been adjusted to include 40% of the taxable secondary employment income earned by employees.

Upon the implementation of this amendment, the PAYE return allows for both 30% and 40% fixed rates on taxable employment income earned from secondary employment, depending on the amount paid to the secondary employee. Where the employee’s employment income exceeds UGX 10 million, the fixed rate applicable is 40%. However, where the employee’s employment income is less than UGX 10 million, the fixed rate of 30% applies.

Value Added Tax (VAT) Under Schedule 3of the monthly VAT returns, a validation control has been added against the declared VAT Deferred at importation.

The return will only allow amounts that exist in ASYCUDA and are supported by fiscalised import receipts from EFRIS.

Indirect Taxes - These are taxes levied on consumption of goods and services collected by an Agent (Taxpayer). Notable indirect taxes include Value Added Taxes (VAT), excise duty, import duty.

VAT VAT is charged at the rate of 18% on the supply of goods and services (taxable supplies) made by a taxable person, other than exempt supplies; and imports other than exempt imports.

There are three categories of supplies that can be made by a VAT vendor: standard-rated, zero-rated and exempt supplies. Output tax must be levied on all supplies except exempt supplies.

Excise Duty This is a tax that is imposed on specified imported or locally manufactured goods, and services.

Essentially it is a tax on “luxury” items. The applicable rates may be specific or ad valorem.

The tax is imposed on the value of the import; and in the case of locally manufactured goods, the duty (local excise duty) is payable on the ex-factory price of the manufactured goods.

Customs Duty This is a tax levied on goods imported (import duty) or exported (export duty) from Uganda at specific or ad valorem rates.

A person who carries on business activities or intending to carry on business activities is required to apply to be registered for VAT, if the turnover of taxable supplies of the enterprise for three consecutive calendar months exceeds or is likely to exceed Shs12.5 million.

Exported locally manufactured goods are exempt from excise duty. Persons supplying excisable goods and services are required to register and file monthly

Returns to the tax authority by the 15th day of the month following the month in which delivery of the goods was made.

The East African Community Customs Management Act 2004 (EACCMA) is the legal framework for customs operations in Uganda and the region as a whole.

Other key issues in Taxation

Topic Features/ Remarks

E – Filing A taxpayer registered with URA for any tax type as the only source of income other than employment has an obligation to submit a return for the tax period defined by the respective tax law. URA has facilitated the taxpayer to fulfill this obligation by introducing electronic filing in of TAX.

Residency for tax purposes

A resident individual is a person who has a permanent home in Uganda; or is present in Uganda: for a period of 183 days or more in any twelve (12) months period that commences or ends during the year of income; or during the year of income and in each of the two preceding years of income, for periods averaging 122 days in each such year of income; or is an employee or official of the government of Uganda posted abroad during the year of income.

A resident company is one which:

(a) Is incorporated in Uganda under the laws of Uganda

(b) Is managed or controlled in Uganda at any time during the year of income.

(c) Undertakes a majority of its operations in Uganda during the year of income.

This guide has been prepared by DATIVA & ASSOCIATES, independent members of Antea

DATIVA & ASSOCIATES

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Email: info@antea-int.com www.antea-int.com

This publication is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, not Antea Alliance of Independent Firms neither its members accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or forany losses, however caused, sustained by any person that relies upon it. © 2024 ANTEA