Regulatory Framework

   Business Registration

In Uganda, a business can be set up by a sole trader / individual, in partnership, private or public limited liability companies.

Registering A Company
Companies are registered at the Uganda Registration Services Bureau (URSB). To register a Company, applicants must submit a draft Memorandum and Articles of Association to URBS. Once approved, a Certificate of Incorporation will be issued.

There is no minimum capital requirement to establish a Company. Stamp Duty of 0.5% is paid on the Nominal Value of the Company’s Share Capital. The overall cost of registering a company is about UShs165, 000 - excluding stamp duty. It takes only 4 working days to register a company. Diaspora can make use of Uganda Investment Authority’s free One Stop Shop facility to facilitate this process.

Registering your Investment in Uganda
It is mandatory for foreign investors to obtain an investment license from Uganda Investment Authority (UIA), before setting up a business here. . However, it is not mandatory for Ugandans to obtain an investment license from UIA. The license costs nothing and there are benefits as the UIA can facilitate business by using its established network of contacts.

Steps to register your investment with UIA

1. Register your company at the Uganda Registration Services Bureau to obtain a Certificate of Incorporation.
2. Apply for an investment license with UIA using Form 1; attach a Certificate of Incorporation plus a brief Business Plan. Normal processing time for an investment license is between 2-5 working days.
3. Secure secondary clearances. Certain sectors require secondary licenses e.g. for mining, petroleum, transport, banking, telecommunications. UIA will assist you to secure these licenses within reasonable time and also help you obtain suitable industrial land and work permits for your expatriate staff. Utilities like water, telephone, and electricity can easily be secured from relevant offices.

Taxation



Tax Registration


It is mandatory to register your business with Uganda Revenue Authority (URA), upon commencement of business. Unincorporated bodies and individuals are expected to file a Preliminary Enquiry Form with the nearest URA office.
For companies, the following are also required:
• Completed Internal Revenue Company application Form, IR (CO);
• Memorandum and Articles of Association;
• Names and addresses of Directors and Shareholders; and
• Copies of vending agreement (if an already established business has been purchased). Once the above process has been completed, and upon receipt of a file number, the investor can apply for a Tax Identification Number (TIN) from URA by completing TIN application forms

Structure



The Uganda Tax System can be summarised within Six (6) major Elements.
• Individual and Corporate income tax,
• Value added tax (VAT) on goods and services,
• Import and Excise duties, and
• Stamp duty.
• Pay As You Earn (PAYE).
• Rental Tax

Taxes are collected by self-assessment and by withholding tax on payments to residents and nonresidents. Penalties and interest are charged for non-compliance and late payment of taxes.

The Uganda Revenue Authority is the overall Government agency mandated to assess, collect specified tax revenue, administer and enforce laws relating to such revenue.

Corporate and Individual Income Tax



Tax rates are governed by the Income Tax Act, July 2012. The rates are subject to change on amendment of Tax legislation. All registered business organizations are under obligation to send a provisional return of income to the URA for any year of income.

Pay as You Earn (PAYE) Tax


An Employer is obliged to withhold and account for income tax on employees’ remuneration and benefits (the PAYE system).

Computation of PAYE


PAYE is calculated and remitted to the URA on a monthly basis. Computation is as follows:

The Income Tax Rates Applicable To Resident Individuals


Monthly Chargeable Income PAYE Monthly Tax Rates
Less or equal to 235,000 NIL
Exceeding Shs. 235,000 but not
exceeding Shs. 335,000
10% of the amount by which chargeable income exceeds Shs.235,000 per month.
Exceeding Shs. 335,000 but not exceeding Shs. 410,000 Shs. 10,000 + 20% of the amount by which chargeable income exceeding Shs. 335,000
More than Shs. 410,000 (a) UShs.25,000 + 30% of the amount by which chargeable income exceeding Shs. 410,000; and
(b) Where the chargeable income of an individual exceeds Ushs.10,000,000 (ten million) per month, an additional 10% charged on the amount by which chargeable income exceeds 10,000,000 per month.

Source:URA


The Income Tax Rates Applicable To Non-Resident Individuals

Monthly Chargeable Income PAYE Monthly Tax Rates
Not exceeding Ushs. 335,000 pm 10%
Exceeding Shs. 335,000 but not exceeding Shs. 410,000 pm 10% of the amount by which chargeable income exceeds Shs.235,000pm.
Exceeding Shs. 335,000 but not exceeding Shs. 410,000 Shs. 33,500 + 20% of the amount by which chargeable income exceeding Shs. 335,000
More than Shs. 410,000 (c) UShs.48,500 + 30% of the amount by which chargeable income exceeding Shs. 410,000; and (d) Where the chargeable income of an individual exceeds Ushs.10,000,000 pm, an additional 10% charged on the amount by which chargeable income exceeds 10,000,000 pm.

Source:URA


Tax on Rental Income
Individual Rental Income Tax Rate of Tax 20%. Computed at 80% of Gross Rent after allowing a threshold of Shs 2,820,000

Source:URA


Tax on Corporate Income
Corporate Income Tax Structure Rate of Tax
Resident Companies 30%
Non Resident Companies 30%
Mining Companies 25 – 45%

Source:URA


Withholding Tax Structure

Withholding taxes are a form of income tax deducted at source by one entity upon making a payment to another entity. In Uganda, there are three categories of withholding tax, the most significant of which is PAYE; others are withholding tax on payments and earnings other than employment earnings as well as withholding tax on imports.
This tax is deducted by receivers of services provided by contractors together with suppliers of goods and on goods imported at CIF. It is reimbursable at the end of the financial year on the presentation of the customs receipt. A summary of withholding taxes payable appears below:

Summary of Withholding Taxes in Uganda


Payment
Resident (%) Non Resident
Management and Professional Fees 6 15
Royalties 0 15
Rent or use of property 15 15
Dividends 15 15
Interest 15 15
Imported goods 6 6
Domestic local works 6 6
Natural resources payments 0 15
Pension/ Annuity 15 0

Source: URA


Other Taxes
Tax Taxation Rate
Tax on Commercial Transactions 6% of Gross Payment
Tax on Professional Services 6% of Gross Payment
Tax on Imports 6% of Custom of Gross Custom Value of Goods Imported
Dividends/Interest 15% of Gross Payment
Non Residents 15% of Gross Payment
Shipping & Aircrafts 2% of Gross Payment










Source: URA

Capital Allowances


If you buy an asset, for example, a car, tools, machinery or other equipment for use in your business, you cannot deduct your expenditure on that asset from your trading profits. Instead, you may be able to claim a capital allowance for that expenditure.

Capital Allowances are also available for certain building-related capital expenditure. The aim is to give tax relief for deduction in value of qualifying assets that you buy and own for business use.

Summary of Capital Deductions under the Income Tax 1997
   
Type of Allowance Rate and Conditions
Start-up Costs 25% on Actual cost per annum for 4 years
Depreciation Granted on Cost base incurred.

  • 40% - Class 1, Computers and Data handling equipment
  • 35% - Class 2, Light  automobiles, Construction and earth moving equipment
  • 30% - Class 3, Heavy automobiles.   Including specialised trucks and machinery used in farming manufacturing and mining.
  • 20% - Class 4, all other depreciable assets.
  • 20% Farm works
  • 20% Horticulture
  • Varies over useful life – Intangible Assets with ascertainable useful life.
Initial Allowance granted in first year of use 50% on cost base of plant & machinery. Industries located in prescribed areas: Kampala, Entebbe, Namanve, Jinja and Njeru.
Initial Allowance granted in first year of use 75% on cost base of plant & machinery. Industries located outside prescribed areas.
Initial Allowance granted in first year of use of an Industrial Building 20% on cost base of the industrial building.
Scientific Research 100% on actual cost of scientific research incurred.
Training Expenditure 100% on actual cost of training incurred.
Mineral Exploration 100% on actual expenditure cost incurred on Mineral testing and exploration.
Deductable annual Industrial Buildings Allowance 5% on cost base net of initial deduction on a straight line basis.
Source: URA

Value Added Tax (VAT)
VAT is governed by the Value Tax Act 1996. The VAT rate on goods and services is 18%. There are zero rated and exempt supplies.

Stamp Duty
Stamp Duty is an indirect tax levied on the commercial transactions listed below:

Schedule of Stamp Duty is an in

Transaction Stamp Duty
Company Incorporation or increase of share capital 0.5%of share capital
Transfer of stock or marketable securities 1%of the value of stock or securities
Transfer of immovable property 1%of property value
Lease 1% of value of lease
Debenture or mortgage 0.5% of amount of the debenture or mortgage
Source: URA

Excise Duty and Import Duty
Excise duty and import duty are levied on different categories of products. The applicable rates of duty per product are spelt out in the Finance Bill Harmonized Tariff Code.

 

Tax and Regulatory Institutional Arrangements In Uganda

  • Sector Tribunal Institutional Arrangements
  • Tax Tribunal, Electricity Tribunal, Insurance Tribunal
  • Sector Regulatory Authorities
  • Uganda Communication Commission
  • Civil Aviation Authority
  • Coffee Development Authority
  • Cotton Development Authority
  • Electricity Regulatory Authority
  • Uganda Investment Authority
  • National Information Technology Authority
  • Uganda Revenue Authority
  • National Forestry Authority
  • Retirement Benefits Authority
  • National Environment Management Authority
  • Dairy Development Authority.
  • The Judicial Institutional Structure for Commercial Justice – Commercial Court

 

Business Registration and Secondary Licensing Arrangements

It is a requirement for secondary licences to be obtained in specific sectors for example; Health, Mining, Agriculture, Fisheries, Environment and Education. These can be obtained from the sector ministries and agencies.
Tax Objections and Appeals
A taxpayer dissatisfied with a tax assessment can lodge an objection with the Commissioner of Income Tax who is required to review the assessment. If the taxpayer is not satisfied with the review, the investor can appeal to the Tax Appeals Tribunal. The Tribunal is a specialist tax tribunal that deals with disputes between the URA and taxpayers. In case one is not satisfied with the tribunal ruling, one can appeal to the High court.

Labour Regulations


Employment is governed by the Employment Act 2006. There is no minimum wage.

     Investment Incentive Regime

Uganda government offers a fair incentives package that provides generous capital recovery terms, especially if your project will entail significant investment in plant and machinery and you're likely to yield profits over the longer term. Information and the details can be obtained at Uganda Investment Authority.

Sector Specific Incentives

Sector specific incentives are available in the following sectors: Tourism, Agriculture, ICT (BPO), Renewable Energy (Solar and Rural Electrifications), Education, Health, etc. For further information please consult UIA.
A Diaspora incentives regime is being developed as part of the Diaspora Policy.
The UIA One-stop-shop

The Uganda Investment Authority One Stop Shop is a free service set up in partnership with Uganda Revenue Authority, Immigration Department, and Uganda Registration Bureau Service to facilitate investors who come via UIA with:

    • Company registration
    • Tax information, rights incentives and obligations, registration with Uganda Revenue Authority, clearance of machinery and equipment.
    • Immigration and  issue of work permits where required