Value-added tax (VAT)
VAT is governed by the VAT Act and administered by the URA. VAT is charged at the rate of 18% on the supply of most goods and services in the course of business in Uganda. Specified goods and services, as well as exports outside of Uganda, attract a zero rate of tax.
Some supplies are exempt from VAT, the main categories being government subsidies, some unprocessed foodstuffs, financial services, health and life insurance, agriculture insurance policies, re-insurance services, unimproved land, leases and sale of certain residential properties, betting and gaming, education, medical and health services, imported drugs and medicines, social welfare services, pesticides, and petroleum products subject to excise duty.
Zero rating is preferable to exemption because the VAT on costs incurred in making a zero-rated supply can be recovered while those incurred in making an exempt supply cannot be recovered.
The zero-rated supplies include the supply of goods and services exported from Uganda; the supply of drugs and medicines manufactured in Uganda; the supply of seeds, fertilisers, pesticides, and hoes; and the supply of leased aircraft, aircraft engines, spare engines, spare parts for aircraft, and aircraft maintenance equipment.
Besides the exempted and zero-rated supplies, there is a deemed VAT regime that applies to the upstream and midstream operations in the oil and gas sector, mining operations, as well as aid-funded projects. The tax payable on a taxable supply made by a supplier to a contractor executing an aid-funded project and by a contractor to a licensee to undertake mining or petroleum operations is deemed to have been paid by the supplier (in the case of the aid-funded projected) or the contractor (in the case of mining and petroleum operations) provided the supply is for use by the contractor solely and exclusively for the aid-funded project or the petroleum/mining operations.
The annual threshold for VAT registration is UGX 150 million. Persons who make supplies that are VATable and whose turnover exceeds UGX 150 million are required to register for VAT with the URA. VAT-registered persons are required to:
- Charge VAT whenever they make supplies that are VATable.
- File monthly returns before the 15th day of the month following the reporting month.
Credit for input tax
A person making exempt, zero-rated, and standard supplies can recover all the input VAT if the exempt supplies are less than 5% of the total supplies. However, if the exempt supplies are more than 5% but less than 95%, the person is required to recover only a portion of the VAT input tax corresponding to the percentage of the taxable supplies. If the exempt supplies exceed 95%, the person cannot recover any input VAT.
The VAT Act defines a supply of service to mean any supply that is not a supply of goods or money, including the performance of services for another person.
There is no definition of imported services in the local legislation. However, the tax authorities generally consider an imported service to be one provided by a person normally resident outside Uganda who is not required to register for VAT in Uganda. According to Regulation 14 of the VAT Regulations 1996, any person who imports a service into the country must account for VAT on such a service. The Regulations require the person importing the service to account for the VAT at the time when performance of the service is completed, when payment for the service is made, or when the invoice is received from the foreign supplier, whichever is earliest.
The tax on such imported services is computed at the rate of 18% of the cost of the service. VAT-registered companies are no longer required to prepare self-billed tax invoices, thus they are unable to claim the VAT paid as input tax; however, a contractor or licensee in the petroleum and mining industry is able to claim an input tax credit for the reverse-charge VAT paid on imported services. Also, persons providing business process outsourcing (BPO) services are allowed to claim credit for input tax for VAT paid on imported services. Further, if the importer of the services is not registered for VAT, the importer is required to calculate and pay the VAT to the URA.
Failure to pay VAT on non-exempt imported services is tantamount to lack of compliance with the law, and a penalty of 2% per month, compounded, may apply.
Interest payable on late payment of VAT is capped to a maximum of the aggregate of the principal tax and penal tax.
VAT representative for non-resident persons
The Tax Procedure Code Act now provides for a role of tax representative for a non-resident person being the individual controlling the person's affairs in Uganda, including a manager of a business of that person or any representative appointed in Uganda.
The VAT Act previously provided for the appointment of a VAT representative by a non-resident person who may have been required by the Commissioner to register for VAT in Uganda but had no fixed place of business. It also provided that if the non-resident person did not appoint the VAT representative within 30 days after being required to register for VAT, the Commissioner could appoint the representative for the non-resident person. I suggest we delete this paragraph.
A tax representative under the Tax Procedure Code Act is responsible for performing any duty obligation imposed by a tax law on the taxpayer, including submission of tax returns and payment of tax.
Many goods imported into Uganda are subject to customs duties. However, exemptions are available to various classes of plant and machinery imported into Uganda. The rates of duty are provided by the East African Community common external tariff code. Certain products imported from the East African Community and the Common Market for Eastern and Southern Africa (COMESA) region enjoy special custom duty rates. Imported items are classified according to the nomenclature established under the international convention on the harmonised commodity description and coding system. Duties range from 0% to 60%, depending on the item imported.
Excise duties are imposed on goods considered luxuriant. Examples include locally manufactured soft drinks, cigarettes, alcoholic drinks, and spirits. A schedule of some of the rates is provided below:
|Soft cap cigarettes:|
|Locally manufactured||UGX 55,000 per 1,000 sticks|
|Imported||UGX 75,000 per 1,000 sticks|
|Hinge lid cigarettes:|
|Locally manufactured||UGX 80,000 per 1,000 sticks|
|Imported||UGX 100,000 per 1,000 sticks|
|Cigars, cheroots, and cigarillos containing tobacco||200%|
|Smoking tobacco whether or not containing tobacco substitutes in any proportion||200%|
|Homogenised or reconstituted tobacco or other tobacco||200%|
|Beer made from malt||60% or UGX 1,860 per litre, whichever is higher|
|Beer made from local raw material and opaque beer||30% or UGX 650 per litre, whichever is higher|
|Beer produced from barley grown and malted in Uganda||30% or UGX 950 per litre, whichever is higher|
|Un-denatured spirits made from locally produced raw materials||60% or UGX 2,000 per litre, whichever is higher|
|Un-denatured spirits||100% or UGX 2,500 per litre, whichever is higher|
|Ready-to-drink spirits||80% or UGX 1,500 per litre, whichever is higher|
|Non-alcoholic beverages (excluding fruit or vegetable juices)||12% or UGX 200 per litre, whichever is higher|
|Fruit and vegetable juice (except juice made from at least 30% of pulp from fruit and vegetables grown in Uganda)||13% or UGX 300 per litre, whichever is higher|
|Powder for reconstitution to make juice or dilute-to-taste drinks, excluding pulp||15% of the value|
|Wine produced from local raw materials||20% or UGX 2,000 per litre, whichever is higher|
|Other wine||80% or UGX 8,000 per litre, whichever is higher|
|Air time applicable to mobile cellular, landline, and public pay phones||12% of the fee charged|
|Fuel and oils||Between UGX 200 and UGX 1,200 per litre, depending on the type of fuel/oil. Nil for gas oil and thermal power generation to the national grid.|
|Motor spirit (gasoline)||UGX 1,200 per litre|
|Gas oil (automotive, light, amber for high speed engine)||UGX 880 per litre|
|Motor vehicle lubricants||10%|
|Chewing gum, sweets, and chocolates||Nil|
|Specialised hospital furniture||Nil|
|Other goods and services||Excise duty|
|Banking fees||15% of the fees charged|
|Money transfers (other than transfers by banks)||15% of the fees charged|
|Over-the-top services||UGX 200 per user per day of access|
|Mobile money transactions of withdrawal of cash||0.5% of the value of the transaction|
|Cosmetics and perfumes (except creams used by persons with albinism in the treatment of their skin, which attract no excise duty)||10%|
|Incoming international calls (other than calls from the Republic of Kenya, the Republic of Rwanda, and the Republic of South Sudan)||USD 0.09 per minute|
|Cement||UGX 500 per 50 kgs|
|Cane or beet sugar and chemically pure sucrose in solid form||UGX 100 per kgs|
Property taxes are administered by the local authorities annually. They are based on the value of the property as assessed by the local authorities.
Stamp duty is charged on a number of transactions at varying rates. Stamp duty is charged at 1% of the total value for a number of instruments, including hire purchase agreements, composition deeds, leases, conveyance, transfers, share warrants, gifts, and agreements relating to deposit of title deeds.
Stamp duty of 0.5% is incurred on formation of a company, capital-raising activities (e.g. increase of share capital), debentures, equitable mortgages, and mortgage deeds.
Stamp duty of 1.5% applies on all transfers, including transfer of shares and property.
Stamp duty of 2% applies on exchange of property.
No stamp duty is charged on the increase of share capital where it is in fulfilment of a condition precedent for acquiring loan funds for a development project or where it is made on becoming public through the stock exchange.
Stamp duty of UGX 15,000 is also charged on a number of various other instruments.
Environmental levies are charged on every person who imports motor vehicles that are eight years old or older. Levies are also imposed on the importation of used household appliances. The levy on motor vehicles is 20% of the value of the vehicle as determined for customs duty purposes. Levies on electrical appliances range from UGX 20,000 to UGX 50,000 per item, depending on the nature of the item.
An employer is required to withhold tax on employment income from their employees and pay it to the tax authorities. The tax is normally borne by the employee. Where the employer fails to withhold tax as required, the employer becomes liable for the taxes but may recover the same from the employees.
Local service tax ranging between UGX 5,000 and UGX 100,000 per annum, subject to an individual’s employment income bracket, is payable to the local municipal councils of the individual’s area of residence. The tax is withheld and paid by the employer.
Social security contributions
An employer is required to make contributions to the National Social Security Fund for each employee, amounting to 10% of their gross pay.