On 30 June 2019, Ugandan Parliament has passed Income Tax Amendment Act 2019. The act contains a number of measures including definition of beneficial owner to reduce the threshold required for exemption; to provide for withholding tax by a seller of a business or business asset to provide for an offence and a penalty for failure to obtain a taxpayer identification number from a licensee and for related matters. The key measures are discussed below:
Income 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.
Amended withholding tax rates:
- 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- 1% withholding tax introduced has been repealed on the agricultural sector from 1 July 2018
The Act is effective from 1 July 2019.
