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Taxation in Uganda
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Taxation in Uganda
 
 
 

General

Uganda's principal taxes are income tax, both personal and business, and value added tax (VAT). Compared to other sub-Saharan African nations, which collect, on average, about 23% of gross domestic product (GDP) in revenue, Uganda's taxes are low, consisting of 11.9% of GDP in the 2008-2009 fiscal year.

The collection and administration of taxes falls under the responsibility of the Uganda Revenue Authority (URA). Ugandan tax statutes are like those of UK. The tax authorities have the power to interpret the statutes and can require the recalculation of taxable income based upon substance.

Personal Taxation

Residents of Uganda are required to pay personal income tax on their worldwide income. Additionally, non-residents of Uganda whose income comes from sources in Uganda are required to pay the tax. For the purposes of the tax, people are considered residents of Uganda if they have a permanent home in the country, if they are a Ugandan employee or official posted abroad, if they are present in Uganda for 183 days out of the tax year or if they are present in Uganda for an average of 122 days per year for three consecutive years.

Business Taxation

Uganda also levies income tax on the worldwide income of resident businesses. As with personal income taxes, non-resident companies are taxed only on income sourced in Uganda. The tax rate for all businesses other than mining companies is 30%. Income tax for mining companies is calculated using a formula and is dependent upon the chargeable income and gross revenue of the company, but the tax rate must be at least 25% and at most 45%.

Uganda has determined special tax rates for small businesses with annual sales between five million and 50 million Ugandan shillings. These special rates are determined based upon the gross income of the business.

Value Added Tax (VAT)

VAT is required on every taxable supply made by a taxable person, every imported good and the supply of any imported services by any person. Taxable supplies are goods or services made under the business activity of a taxable person. Taxable persons are people who make, or expect to make, taxable supplies valued at one-quarter of the annual registration threshold during three calendar months of the year. Taxable persons must register. As of July 2010, the annual registration threshold is 50 million Ugandan shillings. The standard rate for VAT in Uganda is 18%.

Capital Gains

Capital gains derived from the disposal of assets held by a company are taxable. The gain is the excess of proceeds over the cost of the assets and related expenses and is taxed at the company tax rate as part of business income. The taxpayer can elect to claim inflation relief for assets acquired before 31 March 1998. In the case of an involuntary disposal, there is no gain or loss where the proceeds are re-invested in similar assets within one year.

Capital gains realised by non-residents are considered as income and taxed at the standard progressive income tax rates. When computing taxable capital gains, acquisition costs and improvement costs are deductible from the property value at the time of the sale or sales price of the property.

Withholding Tax

Any dividend or interest paid to a resident individual or companies is subject to a withholding tax of 15% which is calculated on the gross amount of the payment. The withholding tax is a final tax for resident individuals. For resident companies, such tax on interest is offset against the final tax liability and on dividend it is the final tax.

Payments for goods and services by government institutions or any person designated in a notice issued by the minister amounting to one million Ugandan shillings or more is subject to a withholding tax deduction of 4%. All imports, apart from importation of raw materials, are also subject to a withholding tax of 4%. Such tax is credited to the taxpayer as income tax paid.

Any management of professional fee, royalty, dividend, interest, natural resource payments, contract payments and payments to sportsmen and entertainers paid to non-residents is subject to a withholding tax of 15% which is calculated on the gross amount of the payment.

Double Taxation Treaties

Uganda has double taxation agreements with UK and South Africa. The treaties with Kenya and Tanzania are in the final stages of approval. A protocol with India, Mauritius and Italy are in the final stages of agreement. A resident taxpayer is entitled to credit for any foreign income tax paid by a taxpayer in respect of foreign – source income included in the gross income of the taxpayer. The amount of the foreign tax credit shall not exceed the Uganda income tax payable on the taxpayer’s foreign – source income.

Administration and Compliance

The normal tax year runs from 1 July to 30 June. It is possible to have a different tax year with the approval of the tax authorities.

 

 
 

 



 


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