A Review of Aspects of Tax Amendment Laws of 2024

A Review of Aspects of Tax Amendment Laws of 2024

On 15th July 2024, the President of Uganda assented to the proposed amendments to the Excise Duty Act, 2014, the Value Added Tax Act, Cap 349, the Stamp Duty Act, 2014, the Tax Procedures Code Act, 2014, and the Income tax Act, Cap 340. Below is a highlight of the said amendments to the tax laws:

The Income Tax (Amendment) Act 2024

The amendment commenced on 1st July 2024. The specific changes effected by the Act are as follows:

Amendments to the capital gains tax regime

In relation to the capital gains tax regime, the amendment includes the following:

• The Act repeals Section 54(1)(e) which previously provided for the non-recognition of capital gains arising from the sale of investment interest of a registered venture capital fund if at least fifty percent of the proceeds on sale is reinvested within the year of income. 

• The Act repeals Section 54(1a) which previously provided for non-recognition of a gain or loss equivalent to the percentage of reinvested proceeds of a registered venture capital fund.

Amendments to the withholding tax regime

• The Act provides for withholding tax of 10% of the commission paid to a payment service provider. This provision applies to banking agents or any other agent offering financial services.

Expansion of the definition of Retirement Fund

• The definition of “Retirement Fund” has been expanded to include the provision of benefits for members of the fund in the event of termination of service or upon the occurrence of an event specified in the written law, agreement or arrangement.

Expansion of the income tax exemption regime

• The income derived from or by a private equity or venture capital fund regulated under the Capital Markets Authority Act, Cap 84 and the disposal of government securities on the secondary market have been exempted from income tax. 

• Further, the Act expands the list of exempt income of qualifying investments by operators and other persons conducting business in industrial parks or free zones to include manufacturers of electric vehicles, electric batteries or electric vehicle charging equipment or fabricates of the frame and body of an electric vehicle; and operators of a specialized hospital.

Sources of income

The following are added to income sourced in Uganda for purposes of taxation: 

• annuity paid by a non-resident person as expenditure of a business carried on by the non-resident person through a permanent establishment in Uganda; and

•  income derived from the payment of insurance premium, if the premium relates to the insurance or reinsurance of a risk in Uganda.

Entities considered to have a permanent establishment 

The Act makes changes to various aspects of entities that are deemed to have a permanent establishment in Uganda for taxation purposes. Some of these include the following: 

• The Act substitutes “Branch” with “permanent establishment” under Part IX of the Act.

• The Act considers a permanent establishment as a separate entity from the non-resident. 

• The Act treats the existence of a fixed place of abord where an entity wholly or partially conducts certain activities as comprising a permanent establishment. This includes: a place of management; branch; office; factory; workshop; warehouse (in relation to a person providing storage facilities to others); a mine, oil well, quarry or other place of exploration or exploitation of natural resources; farm or other place for agricultural activities; sales outlet; construction sites, consultancy service, among others. The Act also provides for circumstances where these may not amount to a permanent establishment.

• The Act provides that the income of a non-resident person attributable to activities of a permanent establishment shall be taxed in Uganda including: (a) the income derived from the sale of goods or merchandise in Uganda of the same or similar kind as those sold through the permanent establishment; or (b) the income of other business activities carried on in Uganda that are of the same or similar kind as those carried out through the permanent establishment.

• The Act allows expenses which are incurred for the purposes of the business of the permanent establishment as deductions.

• The Act excludes charges / payments by a permanent establishment to the head office from the gross income of a permanent establishment by way of royalties, fees or other similar payments in return for the use of patents or other rights; Commission, for specific services performed or for management; and interest on moneys lent to the permanent establishment, except, in case of a financial institution

Amendment of Listed Institutions 

The Act amends the First Schedule to add the following to the listed institutions under the Act: (i) the African Reinsurance Corporation (Africa Re); (ii) the Independent Regulatory Board of East African Power Pool; and (iii) the Islamic Cooperation for the Development of the Private Sector.

The Value Added Tax (Amendment) Act 2024

The amendment commenced on 1st July 2024. The specific changes effected by the Act are as follows:

Supplies through an auction

The Act introduces VAT on proceeds of an auction. The supply of goods through auction by an auctioneer in the course of auctioning goods is treated as a supply of goods by the recipient of the proceeds of the auction.  

Supply of goods and services by an employer to an employee

The supply of goods and services by an employer who is a taxable person, to an employee at no consideration is now regarded as supply for consideration as part of the employer’s business activities and subject to VAT. 

Expansion of Listed Institutions

The Act amends the First Schedule to include the African Reinsurance Corporation (Africa Re), the Independent Regulatory Board of East African Power Pool and the Islamic Cooperation for the Development of the Private Sector. 

Changes to exempt supplies 

The Act provides the following additions to the Second Schedule of the Value Added Tax Act which provides for exempt supplies: 

• the supply of an electric vehicle locally manufactured or supply of frame and body of an electric vehicle locally fabricated;
• the supply of electric vehicle charging equipment or supply of charging services of an electric vehicle; and
• the supply of cook stoves, that use fuel ethanol, assembled in Uganda up to 30th June 2028.

In relation to exemptions relating to the supply of any goods and services to contractors and subcontractors of hydro-electric power, solar power, geothermal power or bio gas and wind projects, this is limited to supplies that are not used for personal and domestic use.

The Act exempts a foreigner whose minimum investment capital is ten million United States Dollars or a citizen whose minimum investment capital is three hundred thousand United States Dollars or one hundred fifty thousand United States Dollars for a citizen whose instrument is placed upcountry who uses at least seventy percent of the raw material and manufactures electric vehicles, electric battery or electric charging equipment or fabricates the frame and body of an electric vehicle.

The Act removes the following from the list of exempt supplies: (i) supply of postage stamps; and (ii) the supply of software and equipment installation services to manufacturers.

The Tax Procedures Code (Amendment) Act, 2024

The amendment commenced on 1st July 2024. The specific changes effected by the amendment are as follows:

Deduction or credit for destroyed goods

The Act requires that a tax payer seeking to claim a deduction of or credit for goods destroyed as a result of damage of trading stock, expiry of trading stock, damage of manufactured stock, expiry of manufactured stock and obsolete stock should inform the Commissioner General, Uganda Revenue Authority in writing before destroying the goods. 

Waiver of interest and penalty on payment of principal tax

The Act waives any interest and penalty outstanding as at 30th June, 2023 where the taxpayer pays the principal tax by 31st December, 2024. In case of part payment of the principal tax outstanding as at 30th June, 2023 by 31st December, 2024, the payment of interest and penalty shall be waived on a pro rata basis.

The Stamp Duty (Amendment) Act, 2024

The amendment commenced on 1st July 2024. The specific changes effected by the amendment are as follows:

Changes to the stamp duty exemption regime 

The following changes have been effected to the stamp duty regime:

• The nominal share capital or any increase of shares, acquired by an investor in a private equity or venture capital fund or by a private equity or venture capital fund regulated under the Capital Markets Authority Act Cap 84 attracts nil stamp duty.

• A transfer of shares or other securities, to or by an investor in a private equity or venture capital fund regulated under the Capital Markets Authority Act, Cap. 84, or of shares or other securities to or by a private equity or venture capital fund regulated under the Capital Markets Authority Act Cap 84 attracts nil stamp duty.

• With respect to instruments related to strategic investment projects that attract nil stamp duty, the Act revises the requirements for exemption from stamp duty of various instruments by investors in strategic investment projects. The new requirements foe eligibility are: (i) employment of at least eighty percent of its employees being citizens earning an aggregate wage of at least eighty percent of the total wage bill; and (ii) capacity to use at least eighty percent of the locally produced raw materials, subject to availability.

• The requirement for hospital facility developers to have the capability to develop hospitals at the level of a national referral hospital in order to be exempt from stamp duty has been removed.

• The Act provides for exemption a manufacturer of an electric vehicle, electric battery or electric vehicle charging equipment or fabricator of the frame and body of an electric vehicle who meets the following requirements exempt from paying stamp duty on certain instruments:

(i) has a minimum investment capital of ten million United States Dollars in case of a foreigner, or three hundred thousand United States Dollars in case of a citizen or one hundred fifty thousand United States Dollars in case of a citizen who invests upcountry;

(ii) has the capacity to use at least eighty percent of the locally produced raw materials, subject to availability;

(iii) employs at least eighty percent of its employees being citizens earning an aggregate wage of at least eighty percent of the total wage bill; and

(iv) provides for substitution of at least thirty percent of the value of imported products—

The exemption applies to the following instruments: (i) debenture; whether a mortgage debenture or not, being of a marketable security; (ii)  further charge; any instrument imposing a further charge on a mortgaged property; (iii) lease of land; (iv) increase of share capital; and (v) transfer of land.

The Excise Duty (Amendment) Act, 2024

The amendment commenced on 1st July 2024. The specific changes effected by the amendment are as follows:

Addition of Definitions

The Act provides for the following definitions:

“Fruit juice” to mean unfermented liquid extracted from the edible part of fresh fruit, whether the extracted liquid is diluted or not;

“Powder for reconstitution into beer” means a powder, crystal or other dry substance which, after being mixed with water or other non-alcoholic beverage, ferments to become or otherwise becomes an alcoholic beverage;

“un-denatured spirits” means spirits that are not mixed with any substance to render the spirit unfit for human consumption or capable of being rendered unfit for human consumption, and includes neutral spirits or alcoholic beverages made from neutral spirits that are fit for human consumption;

“Vegetable juice” means unfermented liquid extracted from the edible part of vegetables, whether the extracted liquid is diluted or not,

Variation of Excise Duty

The Act varies excise duty on certain excisable goods stipulated under the Excise Duty Act, 2014 as follows: 

	Item	New duty
1.	Opaque beer.	10% or shs 150 per  litre whichever is higher.
2.	any other alcoholic beverage locally produced.	10% or shs 150 per litre whichever is higher.
3.	Powder for reconstitution into beer.	shs 2500 per kg.
4.	Un-denatured spirits of alcoholic strength by volume of 80% or more made from imported raw materials.	100% or shs. 2500 per litre whichever is higher.
5.	any other un-denatured spirits— (i) that are locally produced, of alcoholic strength by volume of less than 80%.	80% or shs. 1700 per litre whichever is higher.
	(ii) that are imported, of alcoholic strength by volume of less than 80%.	80% or shs. 1700 per litre whichever is higher.
6.	Other wines.	100% or shs 10,000 per litre whichever is higher
7.	fruit juice and vegetable juice, except juice made from at least 30% pulp or at least 30% juice by weight or volume of the total composition of the drink from fruits and vegetables locally grown.	10% or shs. 250 per litre, whichever is higher.
8.	any other non-alcoholic beverage locally produced other than a beverage referred to in paragraph (a) made out of fermented sugary tea solution with a combination of yeast and bacteria.	10% or shs 150 per litre whichever is higher.
10.	Mineral water, bottled water and other water purposely for drinking.	10% or shs 50 per litre whichever is higher.
11.	Motor spirit (gasoline).	shs 1550 per litre
12.	Gas oil (automotive, light, amber for high-speed engine).	shs 1230 per litre
13.	Payment service of withdrawals of cash provided through a payment system but does not include withdrawal services provided by a financial institution or a micro finance deposit taking institution and through banking agent.	0.5% of the value of the transaction.
14.	any other fermented beverages including cider, perry, mead or near beer produced from locally grown or  produced raw materials.	30% or shs 550 per litre whichever is higher.
15.	construction materials of a manufacturer of an electric vehicle, electric batteries or electric vehicle charging equipment or fabricators of frames and bodies of electric vehicles whose investment capital is, at least thirty-five million United States Dollars in case of a foreigner or five million United States Dollars in the case of a citizen.	Nil.

Exemptions to payment of duty

Excise duty on incoming international calls from Burundi and the United Republic of Tanzania have been excluded from paying excise duty under paragraph 13 (g) of part 1 of the second schedule.