Uganda

Amendments for the Financial Year 2024/25

Income tax

The following tax changes are contained in the 2024 Income Tax Amendment Act:

• Expansion of the definition of a retirement fund to include funds maintained for the provision of benefits to their members upon termination of employment or upon the occurrence of an event as determined by law or an arrangement agreed upon by the parties
• Exemption of certain incomes including the following income:

- derived by or from a private equity or venture capital fund regulated under the Capital Markets Authority Act

- from the disposal of government securities on the secondary market

- earned by strategic investors manufacturing electric vehicles, batteries, charging equipment and fabricators of electric vehicle bodies

- earned by an operator of a specialised hospital facility

• Introduction of the term "permanent establishment" to replace " a branch" and new profit attribution rules to replace the current computation of a branch's chargeable income
• Introduction of a 10% withholding tax on commissions paid to payment service providers
• Clarification that insurance or reinsurance premiums derived by a non resident in relation to a risk covered in Uganda is treated as Uganda sourced income.
• The list of listed institutions exempt from income tax was expanded to add the following:

         - African Reinsurance Corporation (Africa Re);

         - Independent Regulatory Board of the East African Power Pool;

         - Islamic Cooperation for the Development of the Private Sector

Value Added Tax

The following tax changes are contained in the 2024 Value Added Amendment Act:

• Provision of clarity on the person supposed to account for VAT on the proceeds on auctioned goods after the introduction of the VAT on auctioned goods in the 2023 VAT Amendment Act.
• Classifying the supply of goods and services to employees for no consideration as taxable supplies made by the employer for consideration.
• Increasing the required credit limit to carry forward the claim of input tax from UGX 5 million to UGX 10 million
• The list of Public International Organisations (entitled to certain VAT reliefs) is expanded  to include the following

         - African Reinsurance Corporation (Africa Re);

         - Independent Regulatory Board of the East African Power Pool;

         - Islamic Cooperation for the Development of the Private Sector

• The list of exempt supplies in the Second Schedule of the VAT Act was modified to remove the following item. These now attract VAT at 18%:

         - The supply of postage stamps.

• The list of exempt supplies in the Second Schedule of the VAT Act was modified to add the following items:

         - the supply of an electric vehicle locally manufactured or supply of frame and body of an electric vehicle locally fabricated;

        - the supply of electric vehicle charging equipment or supply of charging services of an electric vehicle;

       - the supply of cooking stoves, that use fuel ethanol, assembled in Uganda, up to 30 June 2028

       - hoes ( repealed as zero rated supplies)

       - pesticides ( repealed as zero rated supplies)

       - fertilizers, seeds and seedlings ( repealed as zero rated supplies)

Excise Duty Act

The following tax changes are contained in the Excise Duty (Amendment) Act, 2024:

• Introduction of the definitions to fruit juice, powder for reconstitution of beer, un-denatured spirits and vegetable juice.
• Increase of the excise duty on un-denatured spirits, other wines, gasoline, and gas oil.
• Decrease of excise duty on opaque beer, other locally produced alcoholic beverages and other locally produced non-alcoholic beverages.
• Introduction of excise duty on powder for reconstitution into beer and payment services.
• Exempting the construction materials for the manufacturer of electric vehicles and its particular parts and accessories from excise duty.
• Expansion of the description of excisable items of fruit and vegetable juice, un-denatured spirits, and fermented beverages made locally.
• Removing excise duty from the telecommunication services for international calls to Burundi and Tanzania

Stamp duty

The following tax change is contained in the Stamp Duty (Amendment) Act, 2024:

• Introducing a nil stamp duty from the nominal share capital held by a private equity or a venture capital fund under Capital Markets Authority
• Increase in the minimum requirement for locally sourced material for strategic investment projects from 50% to 80%.
• Changing the capacity to employ citizens for strategic investment projects from 100 citizens to at least 80% of the project employees earning at least 80% of the total wage bill.
• Removing the need for a hospital to be a national referral hospital to qualify as a strategic investment project for a hospital facility developer.
• Qualifying the manufacturer of electric vehicles and its particular parts and accessories as a strategic investment project subject to stipulated requirements.

Tax administration

The following tax changes are contained in the Tax Procedures Code (Amendment) Act, 2024:

• Increase in the tax amnesty period for the waiver of interest and penalties outstanding as at 30 June 2023 if principal tax is paid from 31 December 2023 to 31 December 2024.
• Introduction of the requirement for a taxpayer to notify the commissioner of the intention to destroy goods in order to claim a deduction (expense) for this destruction.

Amendments for the Financial Year 2023/24

Income tax

The following tax changes are contained in the 2023 Income Tax Amendment Act:

• Amendment to exempt the employment income of a Public Prosecutor in the Office of the Directorate of Public Prosecution (ODPP) from income tax. This change is meant to align the taxation of officers in the ODPP with other employees in the criminal justice system, where tax exemption is already provided for officers in the police and prisons.
• Amendment to exclude interest capping on debts owed by micro-deposit taking institutions and tier 4 micro-finance institutions. This amendment equalises the treatment of interest in the financial services sector.
• Amendment to repeal the 50% and 20% initial allowances granted to new eligible business assets and industrial buildings, respectively. The amendment is intended to increase revenue collection.
• Amendment to restrict full carryforward of tax losses to only seven years with a 50% cap to available losses carried forward after seven years.
• Amendment to introduce a 5% income tax on every non-resident person deriving income from digital services in Uganda.
• Incorporate a provision to extend a one-year income tax waiver for Bujagali Hydro Power Project (i.e. up to 30 June 2024).

Value-added tax (VAT)

The following changes were made through the VAT (Amendment) Act, 2023, effective 1 July 2023:

• Amendment to include a supply of auctioned goods by an auctioneer as a VATable supply. However, VAT on the auctioning services supplied by the auctioneer will be accounted for separately.
• Amendment to the place of supply rules applicable to non-resident suppliers of services to the effect that a supply is made in Uganda if the recipient of the supply is (i) not a taxable person, (ii) is not a person who makes supplies exceeding the annual VAT registration threshold of 150 million Ugandan shillings (UGX), or (iii) a government entity that is not registered for VAT.
• Amendment to expand the definition of electronic services to include advertising, streaming platforms and subscriptions, cab hailing services, cloud storage and data warehousing, access to databases, etc. 
• Amendment to restrict input tax claims on the following supplies:

• • A non-resident who provides services that are deemed to take place in Uganda, such as electronic services, will not be allowed an input VAT credit on purchases made in making such taxable supplies.
  • Payment for membership in a club, association, or society of a sporting, social, or recreational nature.
  • Restriction on claiming input VAT only on related business generating a taxable supply.
• Amendment to allow for the option for non-resident suppliers to file returns and pay tax in United States dollars (USD).
• The list of Public International Organisations (entitled to certain VAT reliefs) was expanded to add ZEP-RE(PTA Reinsurance Company).
• The list of exempt supplies in the Second Schedule of the VAT Act was modified to remove the following items. These now attract VAT at 18%:
  • The supply of diapers.
  • The supply of cotton seed cake.
  • The supply of all production inputs necessary for processing of hides and skins into finished leather products in Uganda and the supply of leather products wholly made in Uganda.
  • The supply of all production inputs into iron ore smelting into billets.
• The list of exempt supplies in the Second Schedule of the VAT Act was modified to add the following items: 
  • The supply of animal feeds and mixed components, such as eggshells, feed additives, wheat and maize bran, premixes, concentrates, and seed cake.
  • The supply of billets for further value addition in Uganda.

Excise duty

The following tax changes are contained in the Excise Duty (Amendment) Act, 2023:

• The Act was amended to mainly provide for equivalent tax treatment of Islamic financial business to conventional financial instruments, such as ledger, ATM fees, etc.
• Introduction of a definition for 'fruit juice' to mean unfermented liquid extracted from the edible part of a fresh fruit, whether the extracted liquid is diluted or not.
• Introduction of a definition of 'undenatured spirits' to mean spirits that are not mixed with any substance so as to render the spirit unfit for human consumption or capable of being rendered unfit for human consumption and includes neutral spirits or alcoholic beverages made from neutral spirits that are fit for human consumption.
• Introduction of a definition of 'vegetable juice' to mean unfermented liquid extracted from the edible part of a vegetable, whether the extracted liquid is diluted or not.
• Schedule 2 to the Excise Duty Act 2014 has been amended to vary excise duty rates in respect of a number of goods and services, such as opaque beer, undenatured spirits, fruit and vegetable juice, certain construction materials, and certain categories of non-alcoholic beverages. 

Stamp duty

The following tax change is contained in the Stamp Duty (Amendment) Act, 2023:

• The Act was amended to mainly provide for equivalent stamp duty treatment of instruments under Islamic financial business to conventional instruments under financial services, such as nil duty on nominal share capital or increase of it of a special purpose vehicle incorporated for an Islamic bond.

Effective 1 September 2023, there was an increase in the registration fees by 1.5% for any increase of share capital after the first registration of the company (this was previously 1.0%). Also the registration fees for registration of a company whose nominal share capital exceeds UGX 5 million has been increased by 1.5% of the nominal share capital (previously 1%). The stamp duty payable on both items remains 0.5% of the amount.

Tax administration

The following tax changes are contained in the Tax Procedures Code (Amendment) Act, 2023:

• Introduction of a TIN requirement to register an instrument required to pay stamp duty under the Stamp Duty Act, 2014.
• Clarification of order of payment rule to the effect that any payment against a tax liability will be applied first to the outstanding principal tax until it is fully paid up.
• Introduction of a requirement for the Minister of Finance to obtain Parliament's approval to remit unpaid tax by a person of hardship, impossibility, etc.
• Introduction of a waiver of outstanding interest and penalties as of 30 June 2023 if relevant principal tax is paid by 31 December 2023.
• Introduction of a limitation on presentation of additional information by taxpayers at objection of a tax decision or during alternative dispute resolution procedure proceedings.
• Introduction of new offences related to unauthorised interference with digital tax stamps and fixing tax stamps on wrong goods and brands.

The Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act, 2023

The Implementation Act gives force of law in Uganda to:

• The Convention on Mutual Administrative Assistance in Tax Matters.
• The Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information.
• The Standard for Automatic Exchange of Financial Account Information in tax and related matters.

Amendments for the Financial Year 2022/23

Income tax

Effective 1 July 2022, the following changes were made through the Income Tax (Amendment) Act 2022:

• Amendment of the definition of a 'beneficial owner' (after changes in 2019 and 2021) to include a natural person who ultimately owns or controls a customer and further defines who a beneficial owner is in relation to a legal person.
• Amendment of the definition of an 'exempt organisation' to include a non-profit research institution.
• Extension of the income tax exemption period for Bujagali Hydro Power Project by one year to 30 June 2023.
• The list of listed institutions exempt from income tax was expanded to add the International Development Law Organisation and replace the former name of Department for International Development (DFID) with Foreign Commonwealth and Development Office (FCDO).
• Revocation of the 2021 Amendment that allowed a standard deduction of 75% of the gross rental income derived by both individuals and entities. The new applicable rules and rates for individuals, non-individuals, and partnerships are as follows:

• • The deduction of expenses is capped at 50% of gross rent for companies and non-individuals, excluding partnerships. Any excess expenditures and losses are not eligible to be carried forward.
  • For individuals, the prior deduction for mortgage interest has been repealed, and no expenses can be deducted.
  • In addition, for individuals, the annual rental income in excess of UGX 2.82 million is subject to a flat tax rate of 12%. No tax is applicable to rental income less than UGX 2.82 million.
  • For partnerships, the rental income and expenditures derived are allocated to each partner based on their respective partnership share.
• Amendment for clarification to a provision for applicable penalties for failure to file a return or provide information by a licensee.
• Amendment to remove the 15% withholding tax (WHT) on payments for inbound transport services by non-resident service providers.

Value-added tax (VAT)

The following changes were made through the VAT (Amendment) Act, 2022, effective 1 July 2022:

• Amendment to repeal the provision enacted in 2021 that exempted imported services used in the provision of exempt supplies.
• The list of Public International Organisations (entitled to certain VAT reliefs) was expanded to add the International Development Law Organisation and replace the former name of Department for International Development (DFID) with Foreign Commonwealth and Development Office (FCDO).
• Amendment to extend the ability to account for VAT on a cash basis to suppliers providing goods or services to the government.
• The list of exempt supplies in the Second Schedule of the VAT Act was expanded/modified as follows: 

• • To include the supply of oxygen for medical use (under the category of dental, medical, and veterinary goods).
  • Under the exempt category, the existing exemption for the construction of a new hospital facility has been relaxed slightly by removing the requirement for the facility to be at a level of a national referral hospital.
  • To remove the supply of menstrual cups from the exemption list (now zero-rated).
• The list of zero-rated supplies in the Third Schedule of the VAT Act is expanded/modified as follows:
  • To expand the category of educational materials to include education materials manufactured in a partner state of the East African Community (EAC).
  • To include the supply of menstrual cups (under the existing category for the supply of sanitary towels and tampons).

Excise duty

The Excise Duty (Amendment) Bill 2022 proposes the following changes to the Excise Duty Act. To date, this Bill is yet to be assented to by the President:

• Introduction of the definition for 'fruit juice' to mean unfermented liquid extracted from the edible parts a fresh fruit whether the extracted liquid is diluted or not.
• Introduction of the definition for 'undenatured spirits' to mean spirits that are not mixed with any substance to render the spirit unfit for human consumption, including neutral spirits or alcoholic beverages made from neutral spirits that are fit for human consumption.
• Schedule 2 to the Excise Duty Act 2014 has been amended to vary excise duty rates in respect of a number of goods and services.

Stamp duty

The following changes/modifications were made through the Stamp Duty (Amendment) Act, 2022, effective 1 July 2022:

• Introduction of nil duty rate on the following instruments: 
  • Agreement relating to deposit of title-deeds, pawn pledge.
  • Agricultural Insurance Policy.
  • Security bond or mortgage deed executed by way of security for the due execution of an office, or to account for money or other property received by virtue of security bond or mortgage deed executed by a surety.
• The description of a trust under item 63 has been extended to include transfers from a holder of letters of administration or probate to a beneficiary.
• The minimum investment capital for new and existing manufacturers to qualify for the duty exemption for strategic investment projects in item 60A(f) has been reduced from 50 million to 35 million United States dollars (USD).

Tax administration

The Tax Procedures Code (Amendment) Act 2022 provides for the following changes:

• Alignment of tax agent registration to calendar year (from registration until 31 December).
• Introduction for a new requirement for persons in the extractive industry to disclose the names of the persons contracted in the course of performance of their business. Failure to comply attracts a penalty of UGX 20 million.
• Introduction of new offences (e.g. failure to activate or affix a tax stamp, forgery of a tax stamp, failure to use electronic receipting or invoicing, forgery of electronic receipts or invoice, failure to file information related to automatic exchange of information).
• Introduction of new penalties and enforcement measures for various offences (e.g. fines related to tax stamps, automatic exchange of information).