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Africa Tax Landscape

Uganda

30 Dec 2022

Uganda's tax landscape overview highlights the country's tax landscape together with other regulatory considerations of setting up an entity in Uganda.

Doing business in country

Overview of tax system (residence versus source)

Both. For a Resident person, the worldwide sources of his/her income are charged to tax. Whereas for a Non-resident person, only income sourced from Uganda is taxed.

Type of companies that can be set up (e.g., Close corporation, Partnership etc.,)
  • Sole Proprietorship, Partnership, Limited Liability Partnership(LLP)
  • Private Limited Liability Company(Ltd)
  • Public Liability Company(PLC)
  • Private/Public Company Limited by Guarantee(Ltd/Gte)
  • Unlimited Liability Company(ULtd) Incorporated Trustee - (Not for Profit Organisation)
Requirements for locals to own shares/stake in the company

Amount of Share Capital: A private company limited by shares (LTD.) must have a minimum issued share capital of 100,000, while a publicly quoted company (PLC) must have 2,000,000 minimum issued share capital. 

Implications of physical presence versus online presence

The Nigerian Finance Act 2019 amended Section 13(2) of the Companies Income Tax Act (""CITA"") by introducing a new paragraph (c) which subjects digital and online transactions of non-resident companies to companies' income tax in Nigeria.

Digital companies providing services and goods without a physical presence in Nigeria were not liable to previously pay income tax in Nigeria. The Finance Act, which came into force on 13th January 2020, introduced the concept of "significant economic presence" ("SEP'') as a new basis for the taxation of digital and online transactions by non-resident companies.

Invariably both physical and online presence companies are subject to almost the same taxes in Nigeria.

Process of opening a bank account

There are existing forms to be filled which vary from bank to bank.

Corporate income tax

Viable option from a tax perspective (branch versus subsidiary)

As per section 7 of the Income Tax Act(ITA), the applicable tax rate for both Branch and Subsidiary is the same which is 30%.In addition to the above, as per section 82 of the ITA, A tax shall be charged for each year of income and is imposed on every non-resident company carrying on a business in Uganda through a branch which has repatriated income for the year of income and the tax rate is 15%.

As per section 83 of the ITA, tax is imposed on every non-resident person who derives any dividend, interest, royalty, rent, natural resource payment, or management charges from the source in Uganda. the dividend tax rate is dependent on the DTAA with the respective resident country of the shareholders.

Process of registering and setting up a branch or subsidiary

As per section 4 of the Tax Procedures Code(TPC) Act, the following is the requirement and process of registration:

  1. A person liable to pay tax under a tax law shall apply to the commissioner for registration in the prescribed manner
  2. The application shall be accompanied by the prescribed evidence of the person's identity
  3. The application form should be filed by selecting the type of entity as a branch or a subsidiary.
  4. Upon registration, the commissioner shall issue every person a unique Tax Identification Number (TIN).
Lodging of tax returns with the local Revenue Authority

i.e. for a December year-end taxpayer, tax returns must be filed on or before six months after the period end.

Corporate tax rate for branches and subsidiaries

As per section 92A of the ITA, every taxpayer shall furnish a return of income for each year of income not later than six months after the end of the year.
As per section 111(1) and (2) of the ITA, A provisional taxpayer other than an individual is liable to pay two instalments of provisional tax, on or before the last day of the sixth and twelve months of the year of Income.

These payments should be based on the estimated chargeable income declared in the provisional return in a prescribed form. The estimated chargeable income declared must be 90% accurate as compared to the final chargeable income declared in the final income tax return by the taxpayer to avoid an underestimation penalty.

Tax rules on repatriation of after-tax profits for branch and subsidiary

The Income tax rate appliable to companies(including branch and subsidiary), other than mining companies is 30%.

Withholding taxes applicable

Yes, As per section 120 of the ITA, Any person making a payment of the kind referred to in section 83 (Includes international payments in nature of dividend, interest, royalty, rent, natural resource payment, management charges paid from sources in Uganda) shall withhold from the payment the tax levied under based on the DTAA with the recipient's country.

Capital gains tax implications

Yes, as per section 50 of the ITA, a gain on the disposal of assets is subject to tax. The cost base of the assets is calculated on the basis that each item of cost or expenses included in the cost base shall be determined according to the following formula - CB x CPID/CPIA. Where CB is the amount of item of cost or expense incurred determined in accordance with section 52 (2)
CPID is the consumer price index number published for the calender month of sale and CPIA is the consumer price index number published for the month immediately prior to the date on which the relevant item of cost or expense was incurred.


Consumer price Indices are issued by the Uganda Bureau of Statistics (UBOS) on a monthly basis based on the prevailing inflation in the country.
The rebasing of the indexation by UBOS must be taken into consideration in computing the capital gain tax.

Value-Added Tax (VAT)

VAT rate applied

As per the Value Added Tax (Rate of Tax) Order, 2005, VAT is chargeable at 18% of the taxable value of the transaction.

Imposition of VAT

As per section 4 of the VAT Act, VAT shall be charged on:

  1. Every taxable supply made by a taxable person.
  2. Every import of goods other than an exempt import; and
  3. The supply of imported services, other than an exempt service, by any person.
System of submitting VAT returns (manual versus automated)

The filing of the return is done online.

What are the export requirements that must be adhered to?

Export of goods

A registered taxpayer shall obtain and should be able to show as proof of export for every export transaction the following:

  1.  Copy of the bill of entry or export certified by the custom authority
  2. A copy of the invoice issued to the foreign purchaser with the tax shown at zero rate
  3. Evidence sufficient to satisfy the Commissioner General that the goods have been exported, in the form of an order form, or signed contract with a foreign purchaser, or transport documentation which identifies the goods such as :
    i) Transit order or consignment note
    ii) Bill of lading for goods exported by water
    iii) Copy of airway bills for goods exported by air
    iv) Copy of transport documents for goods exported by road

Export of services

Where services are supplied by a registered taxpayer to a person outside Uganda, the Following evidence can be retained:

  1. A contract with a foreign purchaser clearly specifying the place of use or consumption of services to be outside Uganda or;
  2. That the services are provided for a building or premises outside Uganda.
VAT registration requirements

As per section 7 of the VAT Act, A person who is not already a registered person shall apply to be registered in accordance with Section 8 if –
(a) within twenty days of the end of any period of three calendar months, if during that period the person made taxable supplies, the value of which exclusive of any tax exceeded one-quarter of the annual registration threshold i.e Uganda shillings 37,500,000; or
(b) at the beginning of any period of three calendar months where there are reasonable grounds to expect that the total value exclusive of any tax of taxable supplies to be made by the person during that period will exceed one-quarter of the annual registration threshold i.e Uganda Shillings 37,500,000.
(c) at the beginning of any tax period of more than three calendar months where there are reasonable grounds to expect that the total value exclusive of any tax of taxable supplies to be made by the person will exceed the annual threshold i.e Uganda Shillings 150,000,000.

VAT on electronic services

Yes, there is VAT on electronic services chargeable at a rate of 18%.
Where the recipient of the electronic services is VAT registered, the reverse charge shall apply i.e. the recipient shall remit the VAT on that transaction.


Where the recipient of the electronic services is not VAT registered, the supply of electronic services is deemed to take place in Uganda and the non-resident supplier of the services is obliged to register and charge VAT if they meet the threshold. The non-resident supplier is required to pay and file VAT returns every quarter by the 15th of the month following the quarter.

VAT registration requirements for the registration of a Group/Branch

Same as answer no 5 above.

VAT refunds for non-residents

Only the Diplomats are eligible for a refund as per section 45 of the VAT Act.

Recordkeeping requirements

As per the VAT regulations, 1996, A registered person shall keep records and accounts of all supplies received or made by that person in the course of business, including zero-rated and exempt supplies.

All the records shall be kept by the taxpayer for a period of six years and shall be available to the commissioner General for audit or inspection if required.

                                                                                        

Employees Tax

Tax year for Individuals

12 months.

Is employees’ tax is collected from employers via payroll?

Yes, as per section 116 of the ITA, Every employer shall withhold tax from a payment of employment income to an employee as prescribed by the regulation made under section 164.

Hence the employee's tax is collected from the employers via payroll.

Collection of Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL)

Not applicable.

Should employers register and file returns with both the Revenue Authorities?

Yes, employers need to register for PAYE tax head with URA and file the PAYE return on a monthly basis as per section 123 of the ITA of Uganda.

When is the monthly submission and payment of the EMP201 tax return due for each month following the collection?

As per section 123 of the ITA, A taxpayer shall submit a return of employment income showing tax withheld.


Every employer has to withhold tax from the payment of employment income to an employee, and the same should be paid within 15 days after the end of the month in which the payment is made.

Submission of the employee's tax reconciliation return?

In Nigeria, annual returns are to be filed on or before 31 January of the following year.

Method of calculating individuals tax

Yes, the income tax for individuals is calculated based on the threshold rates based on the level of income provided in the Income-tax Act of Uganda. The rates were not changed since 2012.

Labour law registration requirements for employers

No.

System of submitting employees' tax returns (manual versus automated)

The filing of the return is done online.

Transfer pricing

Transfer pricing documentation guidelines or regulations

As per regulations 8 (1) to (2) of the Income-tax (Transfer Pricing) Regulations, 2011, A person shall record, in writing, sufficient information and analysis to verify that the controlled transactions are consistent with the arm’s length Principle and the documentation for the year of income shall be in place prior to the due date for filing the return of tax return for that year.


The transfer pricing regulations are applied in a manner consistent with the arm's length principle in article 9 of the OECD model tax convention on income and capital.

Transfer pricing documentation materiality limits or thresholds in relation to transactions or revenue

Yes, transactions below N300 million in any particular year: the MNE are not required to prepare TP Documentation except if it is specifically requested by the tax authority.

Worldwide turnover below E750 million or N160 billion: the MNE is not required to file CbC Notification. However, all AEs are expected to file TP returns (Declaration & Disclosure).

Statutory deadline for submitting transfer pricing documentation

The transfer pricing documentation is to be submitted to the Commissioner within 30 days of the request.

Penalties imposed for non-submission and/or incomplete documentation.

If TP Documentation is not submitted within 21 days of a written request, an administrative penalty will apply.

N10 million or 1% of the total value of controlled transactions whichever is higher plus N10,000 for every day in which the failure continues.

International tax

Tax nexus (Permanent Establishment)

Where a person carries on the Installation/ supervisory or consultancy services through employees or carries on a business through an agent other than a general agent, for a period aggregating more than ninety days in any twelve-month period, a branch is created.

Effective Management

As per Section 10 of the ITA, A Company is a resident company for the year of income if it -
(a) is incorporated or formed under the laws of Uganda
(b) has its management and control exercised in Uganda at any time during the year of income or,
(c ) undertakes the majority of its operations in Uganda during the year of income.


As per section 14 of the ITA, A person is a non-resident person for the year of income if the person is not a resident person for that year.
Hence, based on the above provisions, the management risk can be identified.

Controlled Foreign Company

Uganda does not have controlled foreign company regulations.

Exchange control

There are no exchange control regulations that need to be complied with by Non-resident companies at the time of Investing and withdrawing money in Uganda as far as the realised exchange gain/loss is declared appropriately.

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