Foreign tax credit
A resident taxpayer is entitled to a foreign tax credit for any foreign income tax paid by the taxpayer in respect of foreign-source income included in the gross income of the taxpayer. The foreign tax credit allowed is subject to the income tax rate (i.e. 30%) in Uganda.
Tax holidays for exporters
A tax holiday of ten years is available to exporters who export at least 80% of their produce of finished goods, subject to certain conditions.
Scientific research expenditure, training expenditure, and mineral exploration expenditure
A 100% allowance is available for scientific research expenditure, training expenditure, and mineral exploration expenditure in the year of expenditure.
Incentives for the importation of plant and machinery
Plant and machinery is exempt from customs duty on importation. Additionally, a VAT deferral facility is available where VAT is deferred on importation of plant and machinery and subsequently waived upon approval by the relevant authorities.
A deduction of 2% of income tax payable is granted to any employer who can prove to the URA that at least 5% of their employees on a full-time basis are people with disabilities.
Certain income and bodies are exempt from tax. These include income derived from agro processing and from exportation of consumer and capital goods (subject to certain conditions), the income of Bujagali Hydro Power Project up to 30 June 2022, the income of a savings and credit co-operative society up to 30 June 2027, and bodies established by law for the purpose of regulating the conduct of professionals, such as the Uganda Law Society and Institute of Certified Public Accountants.
There is a new ten-year income tax exemption for developers and operators in industrial parks or free zones. The exemption applies to income derived by a person from letting or leasing facilities whose minimum capital investment is USD 50 million for foreigners or USD 10 million in the case of a citizen. The investment capital requirement for operators is USD 10 million for foreign operators and USD 1 million for Ugandan citizens.
There is also the introduction of an exemption for income of an operator within an industrial park or free zone, or an operator who owns a single factory or other business outside the industrial park of free zone, whose investment capital is at least USD 10 million for a foreigner or USD 2 million for a citizen. The exemption is limited to the following activities:
- Processing of agricultural goods.
- Manufacture or assembly medical appliances, building materials, automobiles, household appliances.
- Manufacture of furniture.
- Vocational or technical institutes.
- Logistics and warehousing, information technology, or commercial farming.
Other requirements are that 50% of raw materials should be locally sourced, subject to availability, and the operator should employ at least 60% citizens. This new exemption favours industrialisation using local materials.