On the 31st of March 2020, the Ministry of Finance, Planning and Economic Development proposed certain tax law amendments for the July 2020 – June 2021 financial year in Uganda.
Whereas certain amendments relating to value added tax and stamp duty laws were assented to by the President on 30th June 2020, further changes in this case to the income tax, excise duty, tax code procedures and value added tax laws that were assented to by the President on the 24th of November 2020.
Below is a highlight of the said various amendments to the tax laws in 2020:
The Value Added Tax (Amendment) (No.1) Act of 2020
This amendment act commenced on 1st July 2020. The specific changes effected by this act are as follows:
Claim of input VAT incurred prior to VAT registration for manufacturers
Previously, the Value Added Tax Act (as amended) Cap 349 provided for claims for input VAT incurred for not more than six months before the date of registration. By virtue of the amendment, the Value Added Tax Act now provides for an extension of the time frame particularly for manufacturers to allow them claim for input VAT incurred for not more than twelve months before the date of registration.
Input VAT from a supplier using e-invoicing
The act provides that a taxable person who is allowed a tax credit on purchase of goods and services from a supplier who is designated to use the e-invoicing system, shall only claim a tax credit on expenses supported by e-invoices or e-receipts.
Inclusion of the Islamic Development Bank as a Public International Organisation
The act includes the Islamic Development Bank in the First Schedule to the Value Added Tax Act which provides for public international organisations that are entitled to a refund of VAT incurred by such entities.
Exempt supplies
The act provides the following additions to the Second Schedule of the Value Added Tax Act which provides for supplies that are exempt from VAT:
- trailer for agricultural purposes;
- combine harvesters;
- tractor mounted hay mowers, slashers, rakes & tedders; crop sprayers; hay & straw balers; tractor mounted hole diggers/ borers; tractor mounted; scrapers, leveling blades & dam scoops; root or tuber harvesting machinery; tractor mounted loaders; irrigation equipment; drinkers & feeders for all farm animals; tuber harvesting machinery;
- supply of services to conduct a feasibility study and design; the supply of locally produced materials for the construction of a factory or a warehouse and the supply of locally produced raw materials and inputs or machinery or equipment, to an operator within an industrial park, free zone or any other person carrying on business outside the industrial park or free zone and whose investment capital is at least ten million United States Dollars in the case of a foreigner, three hundred thousand United States Dollars in the case of a citizen, or one hundred fifty thousand in case of a citizen whose investment is placed upcountry; who uses at least seventy percent of locally sourced raw materials, subject to their availability and at least seventy percent of the employees are citizens earning an aggregate wage of at least seventy percent of the total wage bill; and who-
- processes agricultural goods;
- manufactures or assembles medical appliances, medical sundries or pharmaceuticals, building materials, automobile, house hold appliances;
- manufactures furniture, pulp, paper, printing and publishing of instructional materials;
- establishes or operates vocational or technical institutes;
- carries on business in logistics and warehousing, information technology or commercial farming; or
- the manufacture of tyres, footwear, mattress or toothpaste;
- supply of cotton seed cake;
- the supply of the following services: (i) software and equipment installation services to manufactures; (ii) services incidental to tele-medical services; and (iii) royalties paid in respect of agricultural technologies;
- the supply of accommodation in tourist hotels and lodges located up-country; the supply of liquefied gas;
- the supply of processed milk;
- the supply of locally developed computer software, its maintenance and software licenses; and
- the supply of services to conduct a feasibility study, design and construction; the supply of locally produced construction materials for construction of premises, infrastructure and machinery and equipment or furnishings and fittings which are not available in the local market to a hotel or tourism facility developer whose investment capital is eight million United States Dollars with a room capacity exceeding 30 rooms; or to meetings, incentives, conferences and exhibitions facility developer whose investment capital is not less than one million United States Dollars.
The Value Added Tax (Amendment) (No.2) Act, 2020
This amendment act commenced on 1st April 2020. The specific changes effected by this act are as follows:
Exempt supplies
The act provides the following additions to the Second Schedule of the Value Added Tax Act which provides for supplies exempt from VAT:
- disposable medical face masks or reusable face masks made of fabric; medical boots; medical impermeable aprons/ coverall suits; bouffant non-woven surgical cap; protective goggles with indirect side ventilation; infrared thermometers; motorized fumigation pumps; oxygen cylinders; body bags; biohazard bags; container, used sharps, leak proof; disinfectants or sanitisers; medical plastics or rubber gloves; gas masks with medical parts; disposable hair nets; paper bed-sheets;
- the supply of raw materials and inputs for the manufacture of: disposable medical face masks or reusable face masks made of fabric; medical boots; medical impermeable aprons/ coverall suits; cap, surgical, bouffant, non- woven; goggles, protective, indirect side ventilation; infra-red thermometers; motorized fumigation pumps; oxygen cylinders; body bags; biohazard bags; container, used sharps, leak proof; disinfectants; medical plastics or rubber gloves; gas masks with medical parts; disposable hair nets; and paper bed-sheets.
- supply of services to conduct a feasibility study and design; the supply of locally produced materials for the con- struction of a factory or a warehouse and the supply of locally produced raw materials and inputs or machinery or equipment, to an operator within an industrial park, free zone or any other person carrying on business outside the industrial park or free zone and whose investment capital is at least ten million United States Dollars in the case of a foreigner, three hundred thousand United States Dollars in the case of a citizen, or one hundred fifty thousand in case of a citizen whose investment is placed upcountry; who uses at least seventy percent of locally sourced raw materials, subject to their availability and at least seventy percent of the employees are citizens earning an aggregate wage of at least seventy percent of the total wage bill; and who-
- processes agricultural goods;
- manufactures or assembles medical appliances, medical sundries or pharmaceuticals, building materials, automobile, house hold appliances;
- manufactures furniture, pulp, paper, printing and publishing of instructional materials;
- establishes or operates vocational or technical institutes;
- carries on business in logistics and warehousing, information technology or commercial farming;
- the manufacture of tyres, footwear, mattress or toothpaste; or
- manufactures chemicals for agricultural and industrial use, textiles, glassware, leather products, industrial
- machinery and electrical equipment, sanitary pads and diapers.
- The supply of services to conduct a feasibility study design and construction; the supply of locally produced materials for construction of premises, infrastructure, machinery and equipment or furnishings and fittings which are not manufactured on the local market to a hotel or tourism facility developer whose investment capital is ten million United States Dollars or to meetings, incentives, conferences and exhibition facility developer whose investment capital is not less than Three Hundred Thousand United States
- The supply of accommodation in tourist lodges and hotels inside a radius of 50 kilometers from the boundaries of Kampala from 1st July, 2020 to 30th June
The Stamp Duty (Amendment) Act, 2020
This amendment act commenced on 1st July 2020 and effects the following changes:
Stamp Duty on Professional Licenses
This act provides for the payment of stamp duty on professional licenses / certificates which is UGX. 100,000/=.
Requirements for exemption of instruments related to strategic investment projects
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 free zones and industrial areas. The new requirements are:
- a minimum investment capital of ten million United states Dollars in the case of a foreigner or three hundred thousand United States Dollars in the case of a citizen; or one hundred fifty thousand United States Dollars for a citizen whose investment is placed upcountry;
- in addition to the business activities already stipulated under the Stamp Duty Act, the following business activities are inclusive: (i) processing of tyres, footwear, mattress or toothpaste; and
- employment of at least seventy percent of its employees being citizens earning an aggregate wage of at least seventy percent of the total wage
Stamp Duty on instruments
The act provides for a series of instruments that shall attract nil stamp duty. The instruments are:
- a debenture whether a mortgage debenture or not, being of a marketable security;
- an equitable mortgage;
- a further charge – any instrument imposing a further charge on mortgaged property; and
- an instrument for any
The Excise Duty (Amendment) Act, 2020
This amendment act commences on publication in the official Gazette and effects the following changes:
Variation of Excise Duty
This act varies excise duty on certain excisable goods stipulated under the Excise Duty Act, 2014 as follows:
| Item | Excise Duty | |
| 1. | Malt beer | 60% or Shs 2050 per litre, whichever is higher |
| 2. | Un denatured spirits made from locally produced raw materials | 60% or Shs 1500 per litre whichever is higher |
| 3. | Ready to drink spirits | 80% or Shs 1700 whichever is higher |
| 4. | Fruit juice and vegetable juice, except juice made from at least 30% of pulp from fruit and vegetables grown in Uganda | 12% or Shs 250 per litre whichever is higher |
| 5. | Non-alcoholic beverages not including fruit or vegetable juices | 12% or Shs 250 per litre, whichever is higher |
| 6. | Fuel | |
| a) Motor spirit (gasoline) | Shs 1350 per litre | |
| b) Gas oil (automotive, light, amber for high speed engine) | Shs 1030 per litre | |
| c) Gas oil for power generation to the national grid | Nil | |
| 7. | plastics under its HS codes 3923.21.00 and3923.29.00 except vacuum packaging bags for food, juices, tea and coffee, Sacks and bags for direct use in the manufacture of sanitary pads | 120% or Shs. 10,000 per kilogram of the plastic bags |
| 8. | Lubricants under HS codes 2710.19.51, 2710.19.52,3403.19.00 and 3403.99.00 including motor vehicle lubricants, except aircraft lubricants | 15% |
New Investor Requirements
The act amends the requirements of investors under item 21(c) of the Second Schedule of the Excise Duty Act in relation to construction materials of a factory or warehouse exclusive of those available on the local market, locally produced raw materials and inputs to an operator within the industrial park, free zone, single factory or other business outside the industrial park or free zone under the Second Schedule. The new requirements are:
- a minimum investment capital of ten million United states Dollars in the case of a foreigner or three hundred thou- sand US Dollars in the case of a citizen; or one hundred fifty thousand United States Dollars for a citizen whose investment is placed upcountry;
- processes tyres, footwear, mattress or toothpaste; and
- employs at least seventy percent of its employees being citizens earning an aggregate wage of at least seventy percent of the total wage bill.
The Tax Procedures Code (Amendment) Act, 2020
This amendment act commenced on 1st April 2020 and effects the following changes:
Deferment of payment of tax until 31st December, 2020
The act requires that a person registered as a tax payer and who was liable to pay tax on or after 1st April 2020 and before 30th June 2020 shall have his or her liability to pay tax deferred until 31st December 2020. This shall only apply to a person who is a registered tax payer involved in the business of education, tourism, manufacturing, horticulture or floriculture.
A person registered as a tax payer under section 4(1) of the Tax Procedures Code Act, 2014 and who was liable to withhold tax under the Act or after 1st April, 2020 and before 30th June 2020 shall have his or her liability to pay the tax withheld deferred until 31st December 2020. No interest or penalty shall accumulate on the outstanding amount of tax during the period referred to.
Additionally, any interest and penalty outstanding as at 30th June 2020 shall be waived.
The Income Tax (Amendment) Act, 2020
The amendment act commenced on 1st July 2020 and effects the following changes:
Income Tax Exemptions
The following exemptions are provided:
- The act exempts the incomes of the Deposit Protection Fund and the Islamic Development
- The act also exempts the income of an operator in an industrial park or free zone or the income of any other person carrying on business outside the industrial park or free zone and the investment capital of that operator or that other person, over a period of at least ten years from the date of commencement of business, is at least ten million United States Dollars, in the case of a foreigner or three hundred thousand United States Dollars, in the case of a citizen, or one hundred fifty thousand United States Dollars, for a citizen whose investment is placed upcountry, or in the case of an existing operator or other person carrying on business outside the industrial park or free zone, from the date on which the operator makes an addi- tional investment equivalent to ten million United States Dollars in the case of a foreigner or three hundred thousand United States Dollars in the case of a citizen, or one hundred fifty thousand United States Dollars, for a citizen whose investment is placed upcountry who, subject to availability, uses at least seventy percent of locally sourced raw materials and employs at least seventy percent of its employees being citizens earning an aggregate wage of at least seventy percent of the total wage bill and—
- processes agricultural goods;
- manufactures or assembles medical appliances, medical sundries or pharmaceuticals, building materials, automobile, house hold appliances;
- manufactures furniture, pulp, paper, printing and publishing of instructional materials;
- establishes or operates vocational or technical institutes;
- carries on business in logistics and ware housing, information technology or commercial farming; or manufactures tyres, footwear, mattress or
- An operator in an industrial park or free zone or any other person carrying on business outside the industrial park or free zone who carries on any of the businesses who seeks to benefit from the income tax exemption provided for under section 21 (1) (ae) and (af) of the act shall declare in their tax return for a year of income the qualifying income and related ex- The act provides for the formula for the calculations for the qualifying income.
Deductions for expenses supported by e-invoices
The act allows the deduction of expenses of a person who purchases goods or services from a supplier who is designated to use the e-invoicing system if the expenses are supported by e-invoices or e-receipts.
Amendments to the withholding tax regime
In relation to withholding tax, the act includes the following:
- An insurance service provider who makes a payment of a commission to an insurance agent shall withhold tax on the gross amount of the payment at a rate of 10%.
- A person who makes payment for a commission to an advertising agent shall withhold tax on the gross amount of the payment at a rate of 10%.
- A withholding agent who makes a payment subject to withholding tax under the act shall furnish a return of withholding tax for every month in the Form specified by the Commissioner not later than fifteen days after the end of every month to which withholding tax
- A taxpayer who provides a passenger transport service or a freight transport service shall be required to obtain a tax clearance certificate from the Commissioner in accordance with section 43 of the Tax Procedure Act, 2014 before renewal of operational
Introduction of new tax regime for small businesses
The Act provides for the following income tax rates for small businesses:
| Gross turnover Tax rates | Gross turnover Tax rates | Gross turnover Tax rates |
| Where the gross turnover of the taxpayer does not exceed ten million shillings per annum | Nil | Nil |
| Where the gross turnover of the taxpayer exceeds ten million shillings but does not exceed thirty million shillings per annum | Eighty thousand shillings | 0.4 % of the annual turnover in excess of ten million shillings |
| Where the gross turnover of the taxpayer exceeds thirty million shillings but does not exceed fifty million shillings per annum | Two hundred thousand shillings | Eight thousand shillings plus 0.5% of the annual turnover in excess of thirty million shillings |
| Where the gross turnover of the taxpayer exceeds fifty million shillings but does not exceed eighty million shillings per annum | Four hundred thousand shillings | One hundred and eighty thousand plus 0.6% of the annual turnover in excess of fifty million shillings |
| Where the gross turnover of the taxpayer exceeds eighty million shillings but does not exceed one hundred and fifty million shillings per annum | Nine hundred thousand shillings | Three hundred and sixty thousand shillings plus 0.7% of the annual a turnover in excess of eighty million shillings. |
