On 13 June 2019, Matia Kasaija, the Uganda’s Ministry of Finance (MoF) presented the Budget for 2019/20 to the Parliament of the Republic of Uganda. On that day, Income Tax (Amendment) Act, 2019 was also enacted which was presented in the parliament on 28 March 2019. The amendments regarding income tax act are as follows:
New Definition of “beneficial owner” and “citizen”
The Income Tax Act, in this Act referred to as the principal Act, is amended in section 2 by:
- new definition of “beneficial owner” means a natural person who owns or has a controlling interest over a legal person other than an individual and who exercises control over the management and policies of a legal person or legal arrangement, directly or indirectly whether through ownership or voting securities, by contract or otherwise;
- new definition of “citizen” means (i) a natural person who is a citizen of a Partner State of East African Community, (ii) a company or a body of persons incorporated under the laws of a Partner State of the East African Community in which at least fifty-one percent of the shares are held by a person who is a citizen of a Partner State of East African Community.
Tax exemption for investors
Tax reform measure introduces a reduction in the minimum investment to USD 50 million from USD 100 million for industrial park developers. The measures also proposes to decline the minimum investment threshold to USD 10 million from USD 15 million for foreign investors and to USD 2 million from USD 5 million for domestic investors in relation to the tax holiday for industrial park and free zone operators and other businesses outside industrial parks and free zones, as well as an addition of the holiday period from 5 years to 10 years.
The conditions that at least 50% of raw materials are locally sourced, at least 60% of employees are citizens, and the business:
- 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; or
- carries on business in logistics and ware housing, information technology or commercial farming.
Exclusion of financial institutions and insurance companies from interest provisions
The introduction of exclusion for financial institutions and insurance companies from the 30% of Earnings before interest, tax, depreciation and amortization (EBITDA) interest deduction restriction for related party debt, which was introduced in 1 July 2018.
Withholding tax for certain case
- 6% withholding tax of on purchase of a business or business asset by a resident person;
- reduced 10% withholding tax rate (currently 20%) on government securities with a maturity period at least 10 years;
- 1% withholding tax introduced has been repealed on the agricultural sector from 1 July 2018
Moreover, the measure introduces a tax exemption on interest from infrastructure bonds with a maturity of at least 10 years.
Effective date
The measure is effective as of 1 July 2019.
