By Dennis Katungi
Quite often, I come across misinformation if not complete untruths regarding the incentives regime that government has put in place for investors in Uganda. These incentives include land allocations, tax exemptions, deferrals, abatements or tax credits etc, all established to fuel investment and continued growth in the economy.
It is not true that foreigners are favoured to the detriment of Ugandans. This is one of the untruths I want to unravel in this article.
Government provides a raft of incentives to both domestic and foreign investors and has done so over the years in order to boost investments in Uganda.
According to Uganda Revenue Authority (URA), the incentives regime is structurally embedded in the country’s tax laws, making them non-discriminatory and accessible to all investors (local or international) depending on the sector and level of investment.
Seek the knowledge and information first if you are the prospective investor and you will be liberated from distortions. It is the reason URA introduced a ‘Tax Incentives Guide for Investors’. The Guide is a consolidation of all the tax incentives under International Trade (Customs) and Domestic Taxes and it is updated annually in line with Government’s fiscal policies.
It outlines incentives enjoyed in relation to taxes, taking into consideration sectors such as agriculture, manufacturing, transport, oil & gas, education and sports, energy, mining, tourism, health and medical, etc. This regime takes into account things such as international payment of interest on debentures issued out of Uganda, scientific research, depreciation allowance; carry forward losses & collective investment schemes as well as business process outsourcing.
For example, in the agricultural sector, ploughs, harrows, seeders, planters, fertilizer distributers, hoes, fertilizers, veterinary chemicals (acaricides) & a lot more are tax empted when imported by farmers under the 5th schedule of East Africa Customs Management Act 2004.
Agricultural tractors, heat insulated milk tanks, aluminium cans, insulated milk tankers as well as many items used in the horticultural and floriculture industry, which qualify under the 5th schedule are tax exempt.
In the manufacturing sector, raw materials used in the production of goods meant for export, as well as plant & equipment have a duty drawback incentive. Wires used in manufacturing of tyres, treads or remolds have duty remission at 0%. Raw materials and inputs used in the assembly of transformers and switch gears, materials used in the manufacture of sanitary towels and tampons, inputs used for the production of solar panels all have remission of duty to 0%.
The comprehensive list is available at URA, UIA and all their platforms online. It includes inputs used in the production of gas cylinders, dry cell batteries etc.
When you move to the transport sector, you learn that there’s duty free import of aircrafts and aircraft accessories, engine parts, air navigation instruments, radio and radar apparatus, equipment for servicing and maintenance of aircrafts and a lot more --- commercial vehicles of gross weight 20 tonnes and above, road tractors for semi trailers, buses for transporting more than 25 persons, ships, vessels, cable ships, floating factories, ferry boats and their parts & a lot more.
I was surprised to hear Hon. Mukitale Birahwa lambasting government on radio for taxing water going vessels so heavily that people can’t consider investing in safe water transport! This was in the light of the recent tragic accident on Lake Victoria. What a load of nonsense! Vessels, ferries, ships, boats of 25 tonnes and above are totally tax exempt under the 5th schedule. If MPs mislead the public, who is to inform?
In the guide, you will find exemptions in oil & gas, education & sports, energy, hotel and tourism, security, health & medical, construction and other sectors.
It goes ahead to explain double taxation agreements of investors from countries with active double taxation agreements with Uganda such as United Kingdom, Denmark, Norway, South Africa, India, Italy, Netherlands and Mauritius. It outlines that withholding tax rates are applicable to dividends, interests, management fees and royalties at 10% except UK at 15%. On Business Process Outsourcing (BPO), it clearly states that tax credits are on imported services and that BPO services can claim VAT on imported services.
On the issue of land allocations, there is standard criteria for all. Applications for land are made on form UIA2, detailing project proposal, amount of money in US Dollars to be invested, documented evidence of the investor’s ability to raise funds to implement the project, expected impact of the project on the economy in terms of job creation, export revenue projected, benefits to the community, impact of the project on the environment and so forth.
Land is only allocated to entities recognized under the Companies Act of Uganda. There is normally an initial lease offer of 5 years within which an investor ought to have undertaken substantial development on the land. The lease can then be extended to 49 years depending on Uganda Investment Authority Board being satisfied with project progress. Foreigners can only purchase Lease-hold land.
There are weaknesses of course. Government initiative was to ease access to serviced land for investors by providing industrial & business parks across the country with the view of creating employment and promoting use of local materials. Investment by Government into requisite infrastructure has not been commensurate. This has hindered the utilization of these parks which has affected the full potential of land incentives being realized as envisaged. The lack of a comprehensive long term strategy explains the challenges faced by UIA in attracting adequate financing and the low progress in the development of the parks. Without a master plan for the parks, UIA may not be able to assess its performance, risks and associated benefits of the industrial parks strategy or indeed source funding.
The Writer is Director, Communications & Media Relations, Uganda Media Centre
Twitter - @Dennis_Katungi