ey.com/GlobalTaxGuides
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Principal Tax Contact
Muhammed Ssempijja +256 414-343-520
Mobile: +256 752-240-012 Email: muhammed.ssempijja@ug.ey.com
Global Compliance and Reporting
Allan Mugisha +256 414-343-520
Mobile: +256 702-403-551 Email: allan.mugisha@ug.ey.com
A. At a glance
Corporate Income Tax Rate (%) 30
Capital Gains Tax Rate (%) 30 (a) Branch Tax Rate (%) 30
Withholding Tax (%)
Dividends 15 (b)(c) Interest 15 (b)(d)
Royalties from Patents, Know-how, etc. 15 (e) Management Fees 15 (e) Reinsurance Premiums 10 (e)
Professional Fees
Residents 6 (f)
Nonresidents 15 (g)
Payments by Government Entities, etc. 6 (h) Payments for Natural Resources 15 (e)
Payments by Purchasers of Assets from Nonresidents 10 Payments by Purchasers of Businesses or Business Assets 6
Payments of Winnings from Sports or Pool Betting 15 Income Derived from Transmission of Messages by Equipment Located in Uganda 5 (e) Shipping Income 2 Branch Remittance Tax 15
Net Operating Losses (Years)
Carryback 0 (i) Carryforward Unlimited
(a) Applicable to capital gains on business assets, shares in private limited liabil ity companies and commercial buildings.
(b) Applicable to residents and nonresidents (see Section B for further details). (c) The rate is 10% for dividends paid by companies listed on the stock exchange to individuals.
(d) The rate for interest payments on government securities is 20% if their matu rity period does not exceed 10 years and 10% if their maturity period is at least 10 years.
(e) Applicable to nonresidents.
(f) This withholding tax is imposed on resident professionals who are not exempt from withholding tax.
(g) A 10% withholding tax is imposed on nonresident contractors who derive income from providing services to licensees in the mining and petroleum sectors.
(h) This withholding tax is imposed on payments in excess of UGX1 million to any person in Uganda who is not exempt from withholding tax for goods and services supplied to, or under a contract with, the government, a local author ity, an urban authority, a company controlled by the government of Uganda or any person designated in a notice by the Minister.
(i) In general, loss carrybacks are not allowed. However, for long-term construc tion contracts that result in a loss in the final year, a loss carryback for an unlimited number of years is allowed.
B. Taxes on corporate income and gains
Corporate income tax. Resident companies are subject to tax on their worldwide income, but tax credits are granted for taxes paid on foreign-source income (see Foreign tax relief). Nonresident companies are subject to tax on income derived from sources in Uganda.
A company is resident in Uganda if any of the following applies:
• It is incorporated in Uganda.
• The management and control of its affairs are exercised in Uganda during the tax year.
• During the tax year, it performs the majority of its operations in Uganda.
Rates of corporate tax. The regular corporate income tax rate is 30%.
Rental income earned in Uganda is taxed separately from other income and taxed at a rate of 30%. It is no longer consolidated with other income.
Capital gains. Capital gains on business assets, shares and com mercial buildings are subject to tax at a rate of 30%.
Administration. Companies must file provisional income tax re turns within six months after the beginning of the accounting period. This return includes an estimate of the income that will be earned by the company during the accounting period. The tax liability shown in the provisional return must be paid in two equal installments, which are due 6 months and 12 months after the beginning of the accounting period. A final tax return must be filed within six months after the end of the accounting period, and any balance of tax due must be paid when this return is filed. A taxpayer with an annual turnover of UGX500 million must sub mit audited financial statements prepared by an accountant reg istered by the Institute of Certified Public Accountants of Uganda with the taxpayer’s return.
Penalties are imposed if the final tax liability for the year exceeds the tax liability shown in the provisional return by more than 10%. However, the penalty for underestimating provisional tax does not apply to companies engaged in agricultural, plantation or horticul tural farming.
Effective from 1 July 2016, the Tax Procedure Code Act regulates all procedural aspects relating to income tax, value-added tax and excise duty, and any other taxes that could be added by the
Minister of Finance by statutory instrument. The provisions of the act replace the provisions in the various tax laws that dealt with procedures such as those for filing returns, objections, re covery, penal taxes and tax offenses.
The Government of Uganda introduced the Electronic Fiscal Receipting and Invoicing System (EFRIS), effective from 1 July 2020. Under EFRIS, it is mandatory for all value-added tax (VAT) persons to issue e-receipts or e-invoices to their customers in accordance with the Tax Procedures Code (E-Invoicing and E-Receipting) Regulations, 2020. A person purchasing goods or services from a designated EFRIS user will not be allowed an income tax deduction unless supported by an e-invoice/receipt (except for purchases from non-VAT registered persons).
Local authorities, government institutions and regulatory bodies may not issue a license or any form of authorization necessary for the purpose of conducting business in Uganda to any person without a Taxpayer Identification Number (TIN).
Dividends. Dividends paid to residents and nonresidents are sub ject to withholding tax at a general rate of 15%. However, the withholding tax does not apply if the recipient of the dividends is a resident company that controls at least 25% of the voting power in the payer. The withholding tax rate is 10% for dividends paid by companies listed on the stock exchange to resident individual shareholders. The withholding tax on dividends paid to nonresi dents and to resident individuals is considered a final tax.
Interest. Interest paid to residents and nonresidents is subject to a withholding tax rate of 15%. The withholding tax rate for interest payments on government securities is 20% if their maturity peri od does not exceed 10 years and 10% if their maturity period is at least 10 years. The withholding tax for interest paid on govern ment securities is considered a final tax. The withholding tax on interest paid by a resident person to another resident person does not apply if any of the following circumstances exist:
• The recipient is a financial institution (except with respect to interest from government securities).
• The interest is paid by a natural person to a resident.
• The interest is paid by a company to an associated company.
• The interest paid is exempt from tax in the hands of the recipi ent.
Interest paid by resident companies to nonresident financial insti tutions with respect to debentures is exempt from tax.
The withholding tax for interest paid on government securities is considered a final tax. Interest paid by resident companies to nonresident financial institutions with respect to debentures is exempt from tax.
Other withholding taxes. Royalties, rent, natural resource payments and management fees paid to nonresidents are subject to a 15% final withholding tax. Reinsurance premiums are subject to a 10% final withholding tax. A 10% withholding tax is imposed on non resident contractors who derive fees from the provision of services to licensees in the mining and petroleum sectors.
A resident person who purchases an asset from a nonresident per son must withhold a 10% tax from the gross payment for the asset.
A resident person who purchases a business or business asset must withhold a 6% tax from the gross payment for the business or a business asset.
A payment for agricultural supplies is exempt from withholding tax.
Foreign tax relief. A foreign tax credit is granted for foreign tax paid on foreign-source income taxable in Uganda. The credit is limited to the equivalent of the Uganda tax on such income.
C. Determination of trading income
General. Taxable income is the income reported in the companies’ financial statements, subject to certain adjustments. Expenses are deductible to the extent that they are incurred in the production of taxable income.
Deductible rental expenses. Effective from 1 July 2021, persons deriving rental income are allowed a standard deduction equal to 75% of the gross rental income, subject to verification by the tax authorities.
Inventories. For tax purposes, inventory is valued at the lower of cost or market value.
Provisions. Only financial institutions and insurance companies may deduct specific provisions for bad debts.
Bad trade debts may be deducted when they are written off if all reasonable steps have been taken to recover the debt without success.
Tax depreciation. Depreciation charged in companies’ financial statements is not deductible for tax purposes, but capital allow ances are granted at specified depreciation rates ranging from 20% to 40%.
Capital expenditure on buildings that are designated as industrial buildings, excluding the cost of the land, qualifies for an annual industrial building allowance of 5%. Commercial buildings con structed on or after 1 July 2001 qualify for a straight-line com mercial building deduction of 5%.
Wear-and-tear allowances (tax depreciation), calculated using the declining-balance method, are granted for plant and machinery at the rates indicated below.
Effective 1 July 2021, asset depreciation classes were reduced from four to three with depreciation rates adjusted for some classes as shown in the following table.
Class Assets Rate (%)
I Computers and data handling equipment 40
II Plant and machinery used in farming, Manufacturing and mining. 30
III Automobiles; buses, minibuses, goods vehicles, construction and earth moving equipment, specialized trucks, tractors,
Class Assets Rate (%)
trailers and trailer-mounted containers, rail cars, locomotives, and equipment, vessels, barges, tugs, and similar | water transportation equipment, aircraft, specialized public utility plant, equipment and machinery, office furniture, fixtures and equipment, and any depreciable asset not included in another class 20
The initial allowance is reinstated, effective from 1 July 2017, at a rate of 50% of the cost base, with respect to eligible property placed into service for the first time outside a radius of 50 kilo meters from the boundaries of Kampala.
The initial allowance is also reinstated, effective from 1 July 2017, at a rate of 20% of the cost base, with respect to new indus trial buildings placed into use for the first time during the year of income.
Effective from 1 July 2021, the wear-and-tear allowance of an asset that qualifies for an initial allowance should be deferred to the next year of income. A deduction for the depreciation of an industrial building that qualifies for initial allowance should be deferred to the next year of income.
Relief for losses. Losses may be carried forward for an indefinite period of time to offset future profits.
In general, loss carrybacks are not allowed. However, for longterm construction contracts that result in a loss in the final year, a loss carryback for an unlimited number of years is allowed.
Groups of companies. No provisions exist for filing consolidated returns or for relieving losses within a group.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax 18
Social security contributions to the National Social Security Fund (NSSF), on salaries; the contributions are not tax deductible; paid by Employer 10 Employee 5
E. Miscellaneous matters
Foreign-exchange controls. The foreign-exchange market is now fully liberalized. A company can freely transfer foreign exchange into and out of Uganda without restriction, provided that the transfer is through a bank and complies with anti-money launder ing regulations. A company can prepare financial statements in foreign currency if it obtains approval from the tax authorities.
Transfer pricing. Transfer-pricing regulations apply to a controlled transaction (transaction between associates) if a person who is party to the transaction is located in and is subject to tax in Uganda, and the other person who is party to the transaction is located in or outside Uganda. The minimum threshold for
transactions between associates who are both located in Uganda is UGX500 million (approximately USD130,000); no minimum threshold applies to cross-border transactions. The regulations require a person to record in writing sufficient information and analysis to verify that a controlled transaction is consistent with the arm’s-length principle.
For year of income, this documentation must be in place before the due date for the filing of the income tax return for that year.
Thin-capitalization rules. The Income Tax (Amendment) Act, 2018 repealed the thin-capitalization provisions and replaced them with new limitation of interest deductibility rules. With the exception of financial institutions and persons carrying on insurance business, the amount of deductible interest for all debts owed by a taxpayer that is a member of a group may not exceed 30% of the tax earnings before interest, tax, deprecia tion and amortization. The excess interest may be carried forward for not more than three years and will be treated as incurred during the next year of income.
F. Treaty withholding tax rates
The table below lists treaty withholding tax rates. With the excep tion of publicly listed companies, tax treaty provisions that lower Ugandan tax or provide exemptions from Ugandan tax for non resident persons apply only if the nonresident is a resident of the state that has a tax treaty with Uganda, receives the income in a capacity of a “beneficial owner,” has full and unrestricted ability to enjoy that income and to determine its future uses, and pos sesses economic substance in the country of residence.
Effective from 1 July 2021, A “beneficial owner” is defined as the following:
• A natural person who has final ownership or control of another person or a natural person on whose behalf a transaction is conducted including a natural person who exercises absolute control over a legal person.
• In relation to trust, it includes the settlor, the trustee, the protec tor, the beneficiaries, and any other natural person exercising absolute control of the trust.
• In relation to another legal person similar or trust, it means a natural person holding a position equivalent to any of the posi tions referred to the second bullet above.
Dividends Interest Royalties
% %
Denmark 10/15 (a) 10 10 India 10 10 10 Italy 15 15 10 Mauritius 10 10 10 Netherlands 0/5/15 (b) 10 10 Norway 10/15 (a) 10 10
South Africa 10/15 (a) 10 10
United Kingdom 15 15 15
Non-treaty jurisdictions 15 15 15
(a) The 10% rate applies if the recipient is a company resident in the other con tracting state that owns at least 25% of the capital of the payer. The 15% rate applies to other dividends.
(b) The 0% rate applies if the recipient holds at least 50% of the capital of the company paying the dividends. The 5% rate applies if the recipient holds less than 50% of the capital of the company paying the dividends. The 15% rate applies if the beneficial owner of the dividends is not a tax resident of the Netherlands.