Should You Set Up a Business in Uganda?
Uganda is a small, landlocked country in the eastern part of Central Africa, defined as one of the most populous in the world. Despite a lack of access to the sea, the southern part of the country contains a significant portion of Lake Victoria, shared with Kenya and Tanzania, and Uganda is seen as part of the “Great Lakes region” of Africa. In addition, Uganda is located along the Nile Basin, which creates a relatively comfortable climate range all year round.
Uganda is extremely rich in natural resources such as gold, copper, cobalt, tin, and tungsten , with a very fertile soil for cultivation. It also has large reserves of unexploited minerals. Due to these statistics, Uganda is considered to have very high potential for development and economic growth. However, political instability and economic mismanagement following Independence in 1962, have caused an economic retreat, leaving Uganda as one of the poorest countries in the world.
In 1987 the Ugandan government conducted negotiations with the World Bank and IMF, to formulate an organized plan of action for economic rehabilitation. This policy bore fruit and led to:
- A significant drop in inflation
- Reduction in external debt
- Huge increase in investment
- Increased agricultural output and exports (mainly coffee, cotton, tea, cereals, honey, fish and meat).
Uganda’s Taxation System
The Ugandan Income Tax system is based on personalized tax and applies to companies, and to individuals within the framework of the Ugandan Income Tax Act (C 340). Taxation applies to both Ugandans earning in Uganda and anywhere in the world, as well as non-residents who are earning income in Uganda.
A company based in Uganda will be considered a resident if:
- It is incorporated under Ugandan law
- It was under effective management in Uganda during the any part of a fiscal year (even if only for a short period of time)
- The majority of its operations are conducted in Uganda
Tax rates in Uganda (Uganda resident companies):
- Corporate Tax: 30%
- Dividends: 15% (deducted at source)
- Interest (does not include government securities): 15% (deducted at source)
- Interest on government securities 20% (deducted at source)
- Royalties: 0%
The Ugandan government encourages foreign investment. Foreign investors are allowed to engage in any kind of business activity after being licensed by the Uganda Investment Authority. However, because Uganda does not currently have a Tax Treaty with Israel, there may be situations in which tax shall be deducted both by Israel and Uganda. Hence it is important to carefully consider the possibility of establishing a company in Uganda.
Doron Tikotzky Kantor Gutman Cederboum recommends that all Israelis wishing to work within the constellation of Uganda’s business environment, seek tax advice in relation to how it can impact their activities in Uganda.
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