UGANDA TAX AMENDMENTS, 2022

INCOME TAX

A “beneficial owner” has been entirely redefined to mean a natural person who ultimately owns or controls a customer or the natural person on whose behalf a transaction is conducted, including a person who exercises ultimate control over a legal person or arrangement. The definition has been broadened to cover legal persons, trusts, and other legal arrangements similar to trusts.

“Research institutions/ organizations” whose object is not for profit have been included under exempt organizations for purposes of tax.

RENTAL INCOME

Expenditures incurred by individuals in production of rental income are no longer allowable deductions. This now means that the gross rental income of an individual is considered as chargeable income

The deductible expenses and losses allowable to non-individual taxpayers earning rental income shall be capped to 50% of their rental income in that year of income. Any excess shall be carried forward to the subsequent year;

The deduction of interest expense incurred on a mortgage from financial institutions and applied towards the acquisition or construction of premises from which rental income was generated by individuals is repealed.

The tax rate chargeable on an individual’s rental income is 12% of the gross rental income down from 30% which was previously charged on chargeable income.

INCOME TAX EXEMPTIONS

The exemption of Bujagali Hydro Power Project’s income from taxation has been extended from 30th June 2022 to 30th June 2027;

The income of a manufacturer who meets a minimum investment threshold of USD 35 million (foreigners) and USD 5 million (citizens) for a period of at least 10 years since commencement of business, sources at least 50% of their raw materials locally and employs at least 100 citizens, is exempted from income tax.

Exemption from income tax for a hospital facility developer whose investment capital is, for a period of at least ten years from the date of commencement of business, USD 5 million.

Guidance for base period in formula for computing value of investment to be considered for tax incentives.

UGANDAN-SOURCE SERVICE CONTRACT

Income derived from the carriage of passengers, or cargo or mail not embarked in Uganda does not amount to income derived from Ugandan-source service contract

Definition of the “business asset” for purposes of WHT

A business asset is defined to mean land, the whole or any part of it which is held for use in any business except land held as a trading stock.

Compliant taxpayers are exemption from 6% WHT on sale of business assets.

MINING & PETROLEUM INDUSTRY

The due date of payment of mining or petroleum revenue and other taxes has been changed from seven days after the due date of filing returns to the actual due date of filing the returns.

Amortization of an intangible asset at a rate of 100% if the cost of acquiring it is treated as a petroleum exploration expenditure; and

Penal tax of at least USD 50,000 but not exceeding USD 500,000 to be paid by a licensee who fails to furnish a return or to provide any other document within the prescribed timeline.

Extension of list of listed institutions

International Development Law Organization (IDLO) and Foreign, Commonwealth and Development Office (FCDO) (formerly Department for International Development (DFID)) have both been added to institutions whose income is exempt from tax as listed under the First Schedule to the Income Tax Act.

VALUE ADDED TAX (“VAT”)

The definition of an exempt imported has been amended to exclude imported services supplied as part of the provision of an exempt supply in Uganda

More entities have been added to enjoy the tax benefits under the First Schedule i.e.

− International Development Law Organization
− Foreign Commonwealth and Development Office (formerly Department for International Development)

The following have been added as exempt supplies to the Second Schedule:

− Oxygen cylinders or oxygen for medical use;
− The supply of assistive devices for persons with disability
− the supply of airport user services charge by Civil Aviation Authority;

The following supplies are no longer exempted under the Second Schedule:

− The supply of menstrual cups
− Supply of cotton seed cake

The definition of the “supply of educational materials” under the Second Schedule has been broadened to include those materials manufactured from within the EAC that enjoy zero-rated tax benefit

The supplies of menstrual cups, sanitary towels, tampons and inputs for their manufacture are now zero rated.

STAMP DUTY

The following are no longer subject to stamp duty:

− Agreements relating to deposits of title-deeds and pawn pledges
− Instruments relating to security bonds or mortgage deeds

Stamp duty is now imposed on:

− Instruments executed in relation to Trusts concerning any property made by any writing including a transfer from a holder of letters of administration or Probate orders to a beneficiary
− The minimum investment capital thresholds required for manufacturers to qualify for stamp duty exemption on instruments executed under strategic investment projects has been reduced from USD 50 million to USD 35 million.

EXCISE DUTY

− Introduction of the definitions of “fruit juice”, “un-denatured spirits”, and “vegetable juice” as technical terms under Section 2

− Rates on locally produced alcoholic and non-alcoholic beverages have been revised from 12% to 100% or Ugx. 2,500 per liter whichever is higher

− Inclusion of incoming international calls from Tanzania among the exempted calls on which no duty is charged