Updated on June 28, 2022
The Uganda Revenue Authority (URA) administers the VAT Act, which governs the tax (URA). In the process of doing business in Uganda, the majority of products and services are subject to an 18% VAT tax. Exports outside of Uganda and certain products and services are taxed at zero percent.
VAT is exempt from some supplies that include feasibility studies, locally produced raw materials subject to investment thresholds and industry, liquefied petroleum gas (LPG), agricultural insurance policies and reinsurance services; unimproved land; leases and sales of certain residential properties; wagering; education; medical and health services; imported drugs; pharmaceuticals; imported medicines; and medical supplies.
Due to the fact that the VAT paid on costs associated with creating an exempt supply cannot be recovered, zero rating is preferred above exemption in this situation.
Supplying goods and services exported from Uganda; the supply of drugs and medicines manufactured in Uganda; the supply of seeds, fertilisers and pesticides; and the supply of leased aircraft engines, spare engines for aircraft, and aircraft maintenance equipment and repair services are all zero-rated supplies under the zero-rate regime.
There is a presumed VAT regime that applies to upstream and midstream oil and gas operations, mining operations, and aid-funded projects outside the exempted and zero-rated supply. For aid-funded projects and mining and petroleum operations, a supplier’s tax is deemed paid by the supplier or the contractor, provided the supply is used solely and exclusively for that project or operation.
The VAT registration threshold is UGX 150 million per year. A person must register for VAT with the URA if they produce taxable supplies and their annual revenue exceeds UGX 150 million. A VAT-registered individual must:
Charge VAT on all supplies that are Vatable.
Before the 15th day of the month following the reporting month, submit your monthly returns.
A tax credit can only be claimed on expenditures for which an electronic invoice or receipt is provided.
Remote service providers, such as those that offer e-commerce, must register for VAT and file quarterly VAT reports in Uganda.
Credit for input tax
If the exempt supplies make up less than 5% of the total supply, the individual manufacturing the zero-rated or standard goods can claim the entire input VAT. If the exempt supplies are greater than 5% but less than 95%, the individual is only obligated to recover a portion of the VAT input tax. Any input VAT paid on exempt supplies exceeding 95% are not eligible for a refund.
Input tax credits must be used by the taxable person within six months after the invoice date.
This includes the performance of services for another person, which the VAT Act defines as being a provision of service.
Imported services are not defined in local legislation. Tax authorities typically define an imported service as one that is offered by a person who is not required to register for VAT in Uganda. Individuals bringing in services from outside the nation are required by Regulation 14 of the VAT Regulations 1996 to submit a VAT return. According to the rules, the person importing the service must account for VAT at the earliest of the following three points: when the service is performed, when payment is made, or when the invoice from the foreign provider is received.. However, if an imported service is to be employed in the performance of an exempt supply, it is exempt from VAT.
Imported services are subject to an 18% tax, which is based on the service’s price. A contractor or licensee in the petroleum and mining industry is entitled to claim an input tax credit for the reverse-charge VAT paid on imported services, despite the fact that VAT-registered enterprises are no longer required to file self-billed tax invoices. BPO service providers can also claim input tax credits for VAT paid on imported goods and supplies. In addition, the importer of the services must calculate and pay the VAT to the URA if the importer is not registered for VAT.
An additional 2 percent per month compounding penalty is possible for failing to pay VAT on non-exempt imported services.
The total of the primary tax plus the penalty tax is the maximum amount of interest that may be charged on late VAT payments.
VAT representative for non-resident persons
The Tax Procedure Code Act currently specifies that a non-resident person’s representative in Uganda, including a management of a firm or any representative nominated in Uganda, can serve as a tax representative.
It is the duty of a tax representative under the Tax Procedure Code to undertake all duties prescribed by law, including filing returns and paying taxes, on behalf of a taxpayer.
Customs taxes are levied on a wide range of imported items in Uganda. However, there are exclusions for specific types of machinery and plant that can be brought into Uganda. The tariff code for the East African Community provides the rates of duty. To qualify for preferential custom duty rates, certain items imported from East African Community and the Common Market for Eastern and Southern Africa (COMESA) area must meet certain requirements. The nomenclature defined by the international agreement on the harmonised commodity description and coding system is used to classify imported goods. Depending on the imported goods, taxes might range from 0% to 60%.
Excise taxes are levied on luxury products. Locally produced soft drinks, cigarettes, alcoholic beverages, and spirits are only a few examples. The following is a breakdown of some of the rates:
|Soft cap cigarettes:|
|Locally manufactured||UGX 55,000 per 1,000 sticks|
|Imported||UGX 75,000 per 1,000 sticks|
|Hinge lid cigarettes:|
|Locally manufactured||UGX 80,000 per 1,000 sticks|
|Imported||UGX 100,000 per 1,000 sticks|
|Cigars, cheroots, and cigarillos containing tobacco||200%|
|Smoking tobacco whether or not containing tobacco substitutes in any proportion||200%|
|Homogenised or reconstituted tobacco or other tobacco||200%|
|Beer made from malt||60% or UGX 2,050 per litre, whichever is higher|
|Opaque beer||20% or UGX 230 per litre, whichever is higher|
|Beer produced from barley grown and malted in Uganda||30% or UGX 950 per litre, whichever is higher|
|Any other alcoholic beverage locally produced||20% or UGX 230 per litre, whichever is higher|
|Un-denatured spirits made from locally produced raw materials||60% or UGX 1,500 per litre, whichever is higher|
|Un-denatured spirits made from imported raw materials||100% or UGX 2,500 per litre, whichever is higher|
|Ready-to-drink spirits||80% or UGX 1,700 per litre, whichever is higher|
|Non-alcoholic beverages (excluding fruit or vegetable juices)||12% or UGX 250 per litre, whichever is higher|
|Fruit and vegetable juice (except juice made from at least 30% of pulp from fruit and vegetables grown in Uganda)||12% or UGX 250 per litre, whichever is higher|
|Any other non-alcoholic beverage locally produced other than the beverage referred to in item 5(a) made from fermented sugary tea solution with a combination of yeast and bacteria||12% or Shs. 250 per litre; whichever is higher|
|Any other fermented beverages made from imported cider, perry, mead, spears or near beer||60% or Shs. 950 per litre; whichever is higher|
|Any other fermented beverages made from locally grown cider, perry, mead, spears or near beer||30% or Shs. 550 per litre; whichever is higher|
|Powder for reconstitution to make juice or dilute-to-taste drinks, excluding pulp||15% of the value|
|Wine produced from local raw materials||20% or UGX 2,000 per litre, whichever is higher|
|Other wine||80% or UGX 8,000 per litre, whichever is higher|
|Fuel and oils||Between UGX 200 and UGX 1,450 per litre, depending on the type of fuel/oil. Nil for gas oil and thermal power generation to the national grid and aviation fuel imported by registered airlines or companies|
|Motor spirit (gasoline)||UGX 1,450 per litre|
|Gas oil (automotive, light, amber for high speed engine)||UGX 1,130 per litre|
|Motor vehicle lubricants except aircraft lubricant||15%|
|Plastic product and plastic granules||2.5% or USD 70 per ton, whichever is higher|
|Chewing gum, sweets, and chocolates||Nil|
|UGX 200 per litre|
|Specialised hospital furniture||Nil|
|Construction materials of a manufacturer, other than one referred to in item 21, whose investment capital is at least USD 50 million, or any other manufacturer who makes an additional investment of USD 50 million.||Nil|
Money transfers (other than transfers by banks)
|Other goods and services||Excise duty|
|Air time applicable to mobile cellular, landline, and public pay phones||12% of the fee charged|
|Internet data except data for the provision of medical and education services||12% of the fee charged|
|Valued added services||12% of the fee charged|
|Banking fees such as ledger fees, ATM fees, withdrawal fees except loan related charges periodically charged by financial institutions||15% of the fees charged|
|15% of the fees charged|
|Mobile money transactions of withdrawal of cash||0.5% of the value of the transaction|
|Incoming international calls (other than calls from the Republic of Kenya, the Republic of Rwanda, and the Republic of South Sudan)||0.09 United States dollars (USD) per minute|
|Cosmetics and perfumes (except creams used by persons with albinism in the treatment of their skin, which attract no excise duty)||10%|
|Cement||UGX 500 per 50 kgs|
|Cane or beet sugar and chemically pure sucrose in solid form||UGX 100 per kg|
|Mineral water, bottled water and other water purposely for drinking||10%|
The local government collects property taxes on a yearly basis. They’re based on the local government’s estimation of the property’s value.
The stamp duty rate varies according on the kind of transaction. Taxes are levied on many documents, including hire purchase agreements (composition deeds), rental agreements (lease agreements), conveyances (conveyances), share warrants (gifts), and deeds to deposit (title deeds).
Company creation and capital-raising operations are subject to 0.5 percent stamp duty (e.g. increase of share capital).
All transactions, including the transfer of shares and property, are subject to a stamp duty of 1.5%.
When selling or buying a house, a 2 percent stamp duty is due.
As part of a condition antecedent for receiving loan money, or in order to become public on the stock exchange, an increase in share capital is not subject to stamp duty.
Stamp tax of UGX 15,000 is also imposed on a variety of other instruments, including letters of credit, the memorandum of incorporation of a firm, and more.
Debentures, equitable mortgages, and additional costs on mortgaged property and loan instruments are exempt from stamp duty.
If a foreigner or a citizen invests at least USD 50 million in the establishment of industrial parks or free zones, there is no stamp duty on building materials.
Importers who bring in automobiles that are at least eight years old are assessed environmental fees. Imports of second-hand home appliances are also subject to fees. Vehicles are subject to a tax equal to 20% of the customs duty-determined value of the vehicle. According on the nature of the goods, electrical equipment might be taxed anywhere from 10,000 to 50,000 Ugandan shillings (USD).
Employers are legally compelled to deduct taxes from their employees’ wages and pay them to the government. The employee is often responsible for paying the tax. Withholding tax is a legal obligation for employers who fail to do so, although they may be able to reclaim it from their employees.
An annual local service tax of up to UGX 100,000 per individual is due to the local municipal councils of the individual’s residence based on the individual’s work income band. Employers withhold and pay the tax.
Social security contributions
The National Social Security Fund requires employers to contribute 10% of their employees’ gross salaries to the fund. Employees are required to contribute 5% of their salary. But the National Social Security Fund Amendment Act, 2021 provides for further voluntary payments to the fund. Anyone, regardless of employment status, can join and make voluntary contributions to the trust fund.