In move to stimulate economic activities in key sectors such as industrial agricultural investors, manufacturing, and technology, government has extended tax incentives to attract investment in the given sectors. The revelation was made on September 4, 2024 during the conference on tax incentive, tax policies and tax administration for Uganda investors at Hotel Africana in Kampala.
According the Prime Minister Robinah Nabbanja, who officiated the event, the gathering was a confirmation of Government’s commitment to partnering with all stakeholders to foster a conducive environment for investment and economic growth in Uganda.
In her opening remarks, Nabbanja said that tax incentives play a pivotal role especially with regard to attracting investments into key sectors, like manufacturing sector, fostering industrialisation, and creating jobs.
“This sector is now a major contributor to our GDP, providing employment to thousands of Ugandans and reducing our reliance on imports. Similarly, the agricultural sector has benefited from tax incentives aimed at promoting value addition and export promotion,” Nabbanja noted. However, the prime minister also stated that they are aware of the need to strike a balance.
“While tax incentives are essential, we must ensure they are effectively targeted, transparent, and provide value for money. To this end, the government is committed to continuously reviewing and refining our tax incentive framework to maximize its effectiveness and minimize revenue losses,” added Nabbanja.
Nevertheless, Nabbanja vowed to ensure that the incentives are strategically focused to maximise the desired outcome of effectively contributing to the anticipated economic gains industrial agricultural investors inclusive.
“We must also be mindful of the need to safeguard our revenue base, as over-reliance on tax incentives can lead to revenue foregone and could thus adversely impact Government’s ability to finance critical public services,” Nabbanja reiterated.
Hon. Nabbanja mentioned that the Ugandan investors are the engine of our economy, and it is through partnerships between the government and the investors that the country can achieve our development goals. In addition, she reaffirmed the NRM Government’s commitment to working with all stakeholders to create a tax system that supports sustainable economic growth and development.
Available Tax incentives
Income Tax Exemptions: Companies exporting at least 80% of their production are exempt from income tax on profits derived from exports. Income from agricultural activities, especially in value addition, may be exempt from tax or offered reduced rates.
Investments in certain sectors, such as agro-processing, information technology, and certain manufacturing activities, may qualify for income tax exemptions.
Tax Holidays: Investors in industrial and commercial buildings can benefit from a 25% tax deduction on the cost of construction for four years. Hotels and Tourism, Investments in the construction of hotels, hospitals, and other facilities in certain regions can enjoy tax holidays for up to 10 years.
Capital Deductions: Industrial Buildings Allowance: Investors in industrial buildings can claim an initial allowance of 20% of the cost in the first year, followed by annual deductions. Wear and Tear Allowance, businesses can claim deductions for the depreciation of assets such as machinery, vehicles, and equipment. The rates vary depending on the asset type, typically ranging from 20% to 40%.
Customs Duty Exemptions: Certain capital goods, such as machinery and equipment used in manufacturing, agriculture, and health sectors, may be exempt from import duties. Raw Materials: Inputs and raw materials used in export-oriented production can be imported duty-free.
VAT Exemptions and Refunds: Agricultural equipment, health services, and education materials, are exempt from Value Added Tax (VAT).
VAT Refunds: Investors involved in certain activities, particularly in export production, can apply for VAT refunds on inputs used in their production processes.
Free Zone Incentives: Businesses operating within designated Special Economic Zones (SEZs) enjoy various tax incentives. Companies licensed to operate in Free Zones can benefit from corporate tax exemptions, zero-rated VAT, and customs duty exemptions on imported inputs and raw materials.
Tax Credits: Businesses can claim a tax credit for any foreign taxes paid on income earned abroad, reducing their overall tax liability in Uganda.
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Mining: The mining sector enjoys specific incentives, including accelerated depreciation on mining equipment and tax holidays. Renewable Energy, Investments in renewable energy projects may qualify for tax exemptions or reduced tax rates.
Background
Uganda has witnessed substantial improvements in infrastructure, healthcare, education, and overall human capital development over the years. These advancements have laid a strong foundation for sustained economic growth, and the private sector has been a key partner in this journey.
The government continues to review and update these incentives to ensure they align with the country’s economic goals while safeguarding revenue collection.
