The tax system in this African nation depends on location; native residents and non-residents with locally sourced income. An ex-pat who operates a business or is employed or is involved in trading has to pay taxes, provided he or she derives income from within the country. A person who is liable to pay taxes is obliged to apply to the Uganda Revenue Authority for registration.
Types of Taxes
The Ugandan Income Tax Act Cap 340 (ITA) levies income tax on the income of corporations, partnerships, trusts, and persons living or conducting business in the state. There are numerous types of taxes under the tax act.
Stamp duty
This applies to varying duty rates, which are dependent on the form of the transaction.
Corporate income tax
All corporations are charged a fixed 30% tax rate for income earned. It includes both resident and non-resident organizations. A business is said to be a resident in Uganda if it was legally set up and registered according to Ugandan law, it possesses management and control of its affairs carried out in the nation, or almost of its operations are conducted within the territory during the taxation year. Residents’ establishments are normally levied on their global income while non-resident businesses pay tax only on income sourced locally. Aside from the 30% corporate tax, a withholding tax rate of 15% is paid by a branch of a foreign company on the revenue repatriated to the head office.
Capital gains
Capital gains come from the removal of a business asset, such as stock investments, land, buildings, etc. When such types of assets are sold, exchanged, redeemed, distributed, or transferred by the taxpayer by way of gift, destroyed, or lost, the earnings thus obtained are categorized as capital gains. A capital gain is the total sale price minus the original cost of the asset. They are levied at the fixed corporate tax rate of 30%.
Branch tax
The fixed CTR of 30% applies to the branch of a foreign firm. Such a branch is charged an additional 15% tax on its gross revenue returned to its country of origin. Companies from countries with double taxation treaties with Uganda only pay the tax rates as cited in the treaties.
Individual income tax
The rates vary from 10% to 40%, depending on the income class. A taxpayer pays tax on the income earned from employment or a business transaction. When calculating a business income, it is permissible to deduct expenses and losses incurred in the production of income.
Turnover taxes
Small business taxpayers are charged income tax. This is a final tax, thus individuals do not file tax returns. The rates solely depend on a business’s turnover.
Withholding tax
There are two types of withholding tax namely: WHT on passive income and service fees.
Passive income
When a citizen pays another citizen in respect of certain types of interest payments, rents, royalties, or dividends, he or she has to withhold tax at 15% of the total amount of the interest paid. It applies to non-residents too but doesn’t include income earned from activities of a Ugandan branch of the non-resident.
Service fees
Levied on every non-resident who obtains professional/management fees from sources in Uganda. It is held at the rate of 5% on the total amount (resident to another resident) and 15% for a non-resident. WHT on payments to non-residents may be reduced or eliminated by an applicable DTT.
Other types of taxes
These are known as indirect taxes. They are usually charged on income earned from the sale of goods or provisions of certain services.
Value-added tax (VAT)
The present VAT rate is 18% of the total income received. Some goods and services are exempt from VAT or zero-rated. Exemptions include livestock, unprocessed foods, agricultural products, and financial services, amongst others. Zero-rated goods or services attract a zero (0%) VAT rate.
Excise tax
Goods and services that are charged are listed under the Second Schedule of the Excise Duty Act, 2014. An individual providing a service that attracts an excise tax is charged duty on that service, and the liability begins on the date of such provision.
