Uganda

Payments to non-resident persons

According to Section 83(1) of the ITA, a tax is imposed on every non-resident person who derives any dividend, interest, royalty, rent, natural resource payment, or management charge from sources in Uganda. WHT at a rate 15% therefore applies on gross dividend payments, interest, management fees, and royalty payments in respect of non-treaty countries.

Rent for this purpose means a payment for the use of land and buildings. This means that a tenant paying rent to a non-resident landlord in respect of land and buildings in Uganda is required to deduct WHT on the gross payments at a rate of 15%.

However, Section 83(5) exempts interest paid by a resident company in respect of debentures that:

• were issued by the company outside Uganda for the purpose of raising a loan outside Uganda
• were widely issued for the purpose of raising funds for use by the company in a business carried on in Uganda or the interest is paid to a bank or a financial institution of a public character, and
• the interest is paid outside Uganda.

A ‘debenture’ is defined in the ITA as any form of debt, including debenture stock, mortgage stock, loan, loan stock, or any similar instrument acknowledging indebtedness, whether secured or unsecured. The term ‘widely issued’ is also specifically defined.

Also, the rate of WHT on interest derived by a non-resident person from government securities is 20%. However, interest paid on government securities with a maturity period of at least ten years is subject to a 10% WHT.

Payment of re-insurance premiums to non-resident persons is subject to WHT at a rate of 10%. The requirement to withhold tax does not apply to the African Reinsurance Corporation (Africa Re), ZEP -RE (PTA Reinsurance Company), Independent Regulatory Board of the East Africa Power Pool, or Islamic Cooperation for the Development of the Private Sector.

Payment of commissions to payment service providers is subject to WHT at a rate of 10%.

Non-resident air transport, shipping, and some telecommunications services

Non-resident ship operators, charterers, and air transport operators who derive income from carriage of passengers who embark, or cargo or mail that is embarked, in Uganda, as well as road transport operators who derive income from carriage of cargo or mail that is embarked in Uganda, are taxed at the rate of 2%.

A non-resident person who carries on the business of transmitting messages by cable, radio, optical fibre, or satellite communication and derives income through transmission of such messages by apparatus established in Uganda, whether or not such messages originated from Uganda, is taxed on one's gross income at a rate of 5%. Similarly, a non-resident person who derives income from providing direct-to-home pay television services to subscribers in Uganda is taxed on one's gross income at a rate of 5%.

Payments to resident persons

A rate of 15% also generally applies to payments of dividends and interest to resident persons, except in the following circumstances, where different rates apply:

• Dividends paid to a company controlling 25% or more of the voting powers in another resident company: 0%.
• Dividends paid by companies listed on the Ugandan Securities Exchange to individuals: 10%.
• Interest on government securities: 20% for maturity periods of less than ten years and 10% for maturity periods of ten years or more.
• Interest paid by a natural person, paid to a financial institution (other than from government securities), paid by a company to an associated company, and interest that is exempt in the hands of the recipient: 0%.
• A 10% WHT applies on all commissions paid by telecom service providers on airtime distribution and mobile money services. and is levied as a final tax on resident individuals.
• A 10% WHT applies on commissions paid to insurance and advertising agents.

There is no WHT on royalty payments to resident persons unless the payments are made by a government institution, local authority, company controlled by the government, or a ‘designated payer’.

Double taxation agreements (DTAs)

A taxpayer may benefit from the provisions of a DTA that Uganda has with another country.

According to Section 88(2) of the ITA, the terms of the international agreement to which Uganda is a party prevails over the provisions of the ITA in case the terms of the international agreement are inconsistent with the provisions of the Act. The URA can also facilitate the automatic exchange of information where such is provided for under an international agreement. 

According to Section 88(5) of the ITA, except for a public listed company, where an international agreement provides that income derived from sources in Uganda is exempt from Ugandan tax or the application if the treaty results in a reduction in Uganda tax, the benefit of that exemption or reduction shall not be available to any person who:

• receives the income in a capacity that is other than that of a beneficial owner, within the meaning accorded to that term by the relevant international agreement, and who does not have full and unrestricted ability to enjoy that income and to determine its future uses, and
• does not possess economic substance in the country of residence.

Please find below a table showing the countries with which Uganda has DTAs and the applicable WHT rates on various categories of income.

Note

1. With respect to the Uganda/Denmark DTA, the rates applicable on dividends are:
   • 10% if the beneficiary holds at least 25% of the capital of the company paying the dividends.
   • 15% in all other cases.
2. With respect to the Uganda/Netherlands DTA, the rate applicable on dividends is 15%, except where the investment is new or is an expansion of the current investment made after the DTA entered into force (10 September 2006).
   
   For new investments and expansions of current investment, the rates are:
   • 0% if the beneficiary holds at least 50% of the shares in the company paying the dividends.
   • 5% if the beneficiary holds less than 50% of the shares in the company making the payment.
3. With respect to the Uganda/Norway DTA, the rates applicable on dividends are:
   • 10% if the beneficiary is a company that directly holds at least 25% of the capital of the company paying the dividend.
   • 15% in all other cases.
4. With respect to the Uganda/South Africa DTA, the rates applicable on dividends are:
   • 10% if the beneficiary holds at least 25% of the capital of the company paying the dividends.
   • 15% in all other cases.