Uganda Tax System In A Nutshell

(Written Exclusively For Bloomberg BNA, Tax Planning International, European Tax Service, Volume 16, Number 7, July 2014)

This is the ninth in a series of white papers on the tax systems in the African continent. In this article, we focus on Uganda, providing a glimpse into the country's corporate and individual tax systems and a brief overview of the international tax treaty network in place besides touching upon the allowable tax deductions and incentives and value added tax (VAT).

1. Background

   The Ugandan tax system is residence-based, with a standard corporate tax rate of 30 percent. Capital gains are aggregated with business income and taxed at the standard corporate income tax rate.

   VAT at a standard rate of 18 percent is imposed on imported goods and the local supply of goods and services.

   Withholding tax is deducted at source on specified payments both to residents and non-residents. Withholding tax is generally an advance tax in the case of residents and a final tax in the case of non-residents.

2. Corporate income tax

   In Uganda, every corporate entity (excluding exempt entities) that has chargeable income for the year of income is subject to corporate income tax.

   Uganda tax residents are subject to income tax on their world-wide income, whereas non-residents are subject to tax on income from a source in Uganda. A company is a Ugandan tax resident if it is incorporated or formed under the laws of Uganda, has its management and control exercised in Uganda or undertakes the majority of its operations in Uganda during the year of income.

   Tax exempt entities include religious, charitable or educational institutions of a public character, trade unions, employees' associations, association of employers, and certain associations established for the purpose of promoting farming, mining, tourism, manufacturing, or commerce and industry and amateur sporting associations.

   1. Concept of "permanent establishment" (PE)

      The Ugandan Income Tax Act, Cap. 340 (ITA) does not define a PE, but defines a branch as a place where a person is:

      carrying on business through an agent, other than a general agent of independent status acting in the ordinary course of business as such; using, or installing substantial equipment or machinery for at least 90 days; or engaged in a construction, assembly, or installation project for at least 90 days, including a place where a person is conducting supervisory activities in relation to such a project. B. Corporate tax rates

      The basic rate of corporate income tax in Uganda...