doing business in Uganda

country profile international treaties and memberships government  Executive: The president is both the head of state and head of government. international  African Continental Free Trade Area Agreement structure The president is directly elected by absolute majority popular vote, in two and regional  African Development Bank Group rounds if needed, for a five-year term with no limits to the number of organisations  African Union subsequent terms. The prime minister is appointed by the president. Cabinet and customs  Common Market for Eastern and Southern Africa (“COMESA”) is appointed by the president. unions  East African Community (“EAC”)  Legislative: Uganda has a unicameral parliament.  East African Development Bank  Judicial: The highest court is the Supreme Court. The subordinate courts are  Group of 77 the Court of Appeal (which also sits as the Constitutional Court), High Court  Intergovernmental Authority on Development (includes 12 High Court Circuits and eight High Court Divisions), Industrial  International Monetary Fund Court, Chief Magistrate Grade One and Grade Two Courts throughout the  Islamic Development Bank country, Qadhis courts, and family and children's courts.  Organisation of African, Caribbean and Pacific States  Next presidential and parliamentary elections: January 2021.  Southern African Customs Union economic  Nominal GDP (USD billions): 37.73  Southern African Development Community Free Trade Protocol data  GDP per capita (USD): 915.35  United Nations  Inflation rate (% change): 4.18  World Bank Group  Government revenue (% of GDP): 12.91  World Customs Organization  Government gross debt (% of GDP): 46.05  Uganda receives preferential treatment under the agreements listed here: http://ptadb.wto.org/Country.aspx?code=800 *Source: IMF (November 2020) bilateral  Uganda has bilateral investment treaties with Denmark, France, Germany,

investment the Netherlands, Switzerland and the United Kingdom.  Uganda’s economy is agriculture-based, with coffee as a major export treaties  Treaties have been signed with the Belgium-Luxembourg Economic Union, commodity. Uganda also has small deposits of copper, gold, and other China, Cuba, Egypt, Eritrea, Nigeria, South Africa, the United Arab Emirates minerals. and Zimbabwe but these have not yet entered into force.  Uganda also has some industrial activity, mainly dominated by manufacturing, but also including mining and quarrying. The main industries include sugar investment-  African Growth and Opportunity Act processing, brewing, tobacco, cotton textiles, cement and steel production. related  Cotonou Agreement  Uganda’s main export partners are Kenya, the United Arab Emirates, agreements /  Multilateral Investment Guarantee Agency Democratic Republic of the Congo, Rwanda and Italy. The main export institutions  World Trade Organization commodities include coffee, fish and fish products, tea, cotton, flowers, horticultural products and gold. dispute  Convention on the Settlement of Investment Disputes (“ICSID Convention”)  Uganda’s main import partners are China, India, the United Arab Emirates, resolution  Permanent Court of Arbitration Kenya, Japan, Saudi Arabia, Indonesia and South Africa. The main import  United Nations Commission on International Trade Law (UNCITRAL) commodities include capital equipment, vehicles, petroleum, medical supplies  United Nations Convention on the Recognition and Enforcement of Foreign and cereals. Arbitral Award (“New York Convention”)

risk ratings  World Economic Forum global competitiveness index (2019): 115/141 intellectual  A comprehensive list of IP-related treaties signed by Uganda is available at:  World Bank ease of doing business (2020): 116/190 property (“IP”) http://www.wipo.int/wipolex/en/profile.jsp?code=UG  Corruption perception index (2019): 137/180 treaties  See the trade marks section below for further detail.

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doing business in Uganda

legal regime employment applicable  Uganda's legal system is primarily based on statute, supplemented by immigration  Foreign employees require a special pass or a work permit in order to be legal regime common law, customary law and aspects of Islamic law. employed in Uganda.  The Judicature Act (Cap.13) prescribes the laws applicable in Uganda as the  A special pass is a short term work facility granted to foreign employees written law, and in so far as not covered by written law, the common law and whose term of employment is for a maximum aggregate period of five months, doctrines of equity, any established and current custom or usage. Where no whereas a work permit is granted to foreign employees whose term of express rule is applicable, the High Court may act in accordance with the employment is for six months to three years. principles of justice, equity and good conscience.  As a prerequisite for obtaining the work facilities, the company seeking to dispute  Uganda's Investment Code Act, 2019 lays out the procedure for the settlement employ a foreign employee must go through a profiling process and obtain a resolution of investment disputes through the following four channels: code number from the Directorate of Citizenship and Immigration Control (“DCIC”). Thereafter, the company can submit the application for the  direct negotiations for an amicable settlement in accordance with the Arbitration and Conciliation Act (Cap 4); respective work facility online, using the code number issued by the DCIC.  the ICSID Convention, within the framework of bilateral or multilateral  There are no restrictions on the number of work permits available to a agreements on investor protection, to which both Uganda and the home company. country of the company are signatories;  In practice, the DCIC approves applications for work facilities as long as the employer provides the required documentation and pays the prescribed fees  an application to the High Court; or for the respective work facilities, and successfully demonstrates that expatriate  any other international machinery. staff will contribute skills and knowledge to the company’s business that are  The Arbitration and Conciliation Act allows international arbitration not readily available from local Ugandan employees. conventions to be applied to domestic and international trade disputes.  The DCIC also sets out different specified requirements for the different  Uganda has adopted the New York Convention and the ICSID Convention. sectors of employment. land  Foreign investors are only allowed to enter into long-term leases for a local  In terms of Uganda’s employment legislation, an employee may be seconded acquisition, maximum period of 99 years. employment to Uganda, as it is not a legal requirement for either local or foreign employees planning and  Advocates / solicitors and estate agents can assist in locating and leasing vs to be employed by a local entity. use suitable and available land. secondment  However, in terms of Uganda’s immigration legislation, employment by a local  An application can also be made to the Uganda Investment Authority (“UIA”) entity is a prerequisite for applying for a work permit. for allocation of land for investment purposes. fixed-term  Fixed-term contracts of employment that are either defined by time or purpose competition  There is currently no operational competition law in Uganda. contracts and are allowed in terms of the Employment Act. The use of fixed-term contracts of  There are, however, specific laws regulating competition in particular industries. temporary employment should, however, be approached with circumspection as there  The Competition and Consumer Protection Bill was approved by the Cabinet of employment are risks associated with such contracts. Uganda in November 2015, but the Bill has not yet been brought into force by services  The use of temporary employment services (private employment agencies) is Parliament. provided for, provided the agency is registered and licensed under the  Uganda is a member of the regional competition bodies, COMESA and the Employment Regulations. EAC. Activities in Uganda should be conducted with these regional competition bodies in mind. payment in  It is not a legal requirement for remuneration to be paid in local currency. local currency restraint of  Restraint of trade agreements are prima facie valid and enforceable in trade Uganda, subject to the requirement that they must be reasonable. agreements

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doing business in Uganda

foreign investment regime industry-  Industry-specific licences may also be required. investment  The Investment Code Act governs investment in Uganda. specific regime  The UIA serves as a one-stop centre for business registration and licensing. licences  The Uganda Registration Services Bureau (“URSB”) is mandated to register incentives  Incentives include: all business entities in Uganda, which are required to be registered under the  various incentives promoting farming activities; relevant laws.  tax holidays granted to industrial park or free zone developers or operators, depending on the amount of capital invested; and registration /  Foreign companies intending to operate a business in Uganda must apply for licensing an investment licence, issued under the Investment Code Act, with the UIA.  incentives available within the EAC, including duty drawback schemes requirements  Investors in the energy-generation, mining, banking, air-transport, and no requirement for import or export licences within the region. pharmaceuticals production, education, health, telecommunications, and oil exchange  Uganda does not impose any exchange control restrictions, however, in terms and gas industries must obtain a “secondary licence” from the ministry / control of the Foreign Exchange Act every payment made in foreign currency to or from department / agency regulating such industry, prior to applying for an regulation Uganda between residents and non-residents, or between non-residents, must investment licence. be made through a commercial bank.

non-industry The following general non-industry specific registrations / licences may also be types of  Sole proprietorship; specific required: entities  partnership; registrations / available for  public company (joint stock company); licences foreign  limited liability company; Uganda  All taxpayers (including company directors) must register with the URA and investment  company limited by guarantee; Revenue obtain a tax identification number (“TIN”), which is used for all types of taxes.  joint venture; Authority  If an enterprise’s expected annual turnover exceeds the value-added tax  public-private venture; and (“URA”) (“VAT”) registration threshold (see ‘tax’ below), it should also specifically  registered branch of a foreign company. register for VAT purposes. private limited liability company Ministry of  Prior to submitting an application for a trading licence as set out below, foreign minimum  A minimum of two shareholders is required. Whilst the Companies Act Trade, investors are required to obtain permission from, and register with, the MITC number of permits the establishment of single member companies, in practice this Industries and to trade in Uganda. shareholders appears to be available only to individuals. Cooperatives  There is generally no requirement for local shareholding, but certain local (“MITC”) content requirements exist in the petroleum industry. (Kampala  Businesses operating in Uganda must hold a valid trading licence from the Capital City relevant municipal licensing authority (in Kampala, the KCCA). A separate minimum  There are no minimum capital requirements in Uganda, except for financial Authority trading licence is to be obtained in respect of each branch / store of an entity. share capital institutions, insurance companies and companies in the business of gaming, (“KCCA”) betting and lotteries.  However, the Investment Code Act provides that the Minister will determine National  Every employer employing five or more employees must register with the the minimum capital requirements for a foreign investor, but this is yet to be Social Security NSSF within 21 days of becoming liable to register as a contributing employer. announced. Fund (“NSSF”)  In addition, each employee is required to have his/her own social security  In practice, a company limited by shares will generally only be registered if it member number under which contributions are made. has authorised share capital of at least UGX1-million.

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doing business in Uganda

directors  A private company must have a minimum of one director. There is no withholding WHT rate tax (“WHT”) requirement to have any Ugandan resident directors, except for financial payment to Residents non-residents* institutions regulated by the Bank of Uganda and insurance companies. rates branch profits N/A 15% company  Every company must appoint a company secretary (firm or individual), resident dividends 0% (if at least 25% 15% secretary in Uganda. voting rights)  The sole director of the company may not be the company secretary. 15% auditor  A private company must appoint an auditor who is a member of the Institute of interest 15% 15% Certified Public Accountants of Uganda or one of the other professional bodies referred to in the Ugandan Accountants Act (Cap 266). 10% / 20% (on 10% / 20% (on government securities) government securities) registered  Every company must have a registered office and a postal address in Uganda royalties N/A 15% address to which all communications and notices may be addressed and which must constitute the address for service of legal proceedings on the company. management, 6% (unless listed as 15% consulting and exempt entity)  A company may have its registered address at the offices of its company technical service fees secretary, lawyers, accountants or a third party. * The withholding tax rate may be reduced in terms of a relevant double tax shelf  There are no shelf companies available for purchase in Uganda. agreement. companies double tax  DTAs are in force with Denmark, India, Italy, Mauritius, the Netherlands, registration  Companies are registered with the URSB and it takes approximately one week agreements Norway, South Africa, the United Kingdom and Zambia. process to complete registration once all of the required documents have been (“DTAs”) submitted. losses  Losses may be carried forward indefinitely. tax  Losses on foreign-source income cannot be set off against domestic income. tax system  Uganda has a residence-based tax system in terms of which residents are subject to tax on their world-wide income, whereas non-residents are subject transfer  In terms of Ugandan’s transfer pricing rules, transactions between associates to tax only on their Ugandan-sourced income. pricing (related parties) must be entered into on an arm’s length basis.  Two persons are treated as associates of each other where any person acts, Corporate  A company is resident in Uganda if it: or is likely to act, in accordance with the directions, requests, suggestions or residence  is incorporated or formed under the laws of Uganda; wishes of another person, whether or not these are communicated to the first-  has management and control exercised in Uganda at any time during the mentioned person. year of income; or  A company is an associate of another person if that person, either alone or  undertakes the majority of its operations in Uganda during the year of together with an associate or associates, controls 50% or more of the voting income. power in the company, either directly or through one or more interposed companies, partnerships or trusts. corporate tax  Resident companies and permanent establishments of foreign companies are rate subject to corporate income tax at the rate of 30%. limitations on  Interest in respect of all debts owed by a taxpayer who is a member of a group  Tax payable by small businesses (whose annual turnover or income does not interest can be claimed as a deduction limited to 30% of the taxable earnings before exceed UGX150-million) is calculated with reference to turnover. deductibility interest, tax, depreciation and amortisation (EBITDA). The restriction does not apply to financial institutions and insurance companies. capital gains  Capital gains on the disposal of assets are included in ordinary taxable income  A taxpayer whose interest exceeds the limit may carry forward the excess tax (“CGT”) and are subject to corporate income tax at the standard rate of 30%. interest for not more than three years.

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doing business in Uganda

employee The income tax rates applicable to resident individuals are: trade marks taxes international  African Regional Intellectual Property Organization (Banjul Protocol) annual chargeable income (UGX) tax rate conventions,  Agreement on Trade-Related Aspects of Intellectual Property Rights up to 2 820 000 0% treaties and  Paris Convention for the Protection of Industrial Property 2 820 001 – 4 020 000 10% arrangements  Nairobi Treaty  World Intellectual Property Organization 4 020 001 – 4 920 000 20%  World Trade Organization 4 920 001 – 120 000 000 30% above 120 000 000 40% *Note social  Both employees and employers employing five or more employees must make security monthly social security contributions to the NSSF. Although Uganda is a member of the Paris Convention, it is not a signatory to the contributions  The employer contribution rate is 10% of the employee’s monthly wage, Madrid Protocol, therefore there is no provision in Uganda’s legislation relating to whereas the employee contribution rate is 5%. international arrangements for trade marks. As such, it should not be possible to  Subject to the approval of the NSSF, expatriates are not obliged to contribute claim convention priority. However, the registry is, in practice, accepting priority to NSSF if they are not ordinarily resident in Uganda and are to be employed claims, although the effectiveness and validity of a priority claim is unclear. in Uganda for a continuous period of not more than three years or such longer period as is allowed by the NSSF. classification  The International Classification of Goods and Services (Nice Classification) applies. payroll taxes  There is no payroll tax in Uganda.  A separate application is required for each class of goods and/or services.  However, all employees in gainful employment are liable to pay a local service  The register is divided into part A and part B, per legislation. tax ranging from UGX5 000 to UGX100 000 per year, depending on the monthly income earned by such employee. categories of  Provision is made for: trade marks  service marks; stamp duty  Stamp duty is levied under the Stamp Duty Act, 2014 on a wide range of  certification marks; instruments and documents, either ad valorem at rates ranging from 0.5% to  defensive marks; and 2% or at a flat rate of between UGX10 000 and UGX100 000, depending on  series marks. the nature of the instrument.  Stamp duty at a rate of 1.5% is payable on the total value of the transfer of filing  Signed Power of Attorney; shares in a Ugandan company and immovable property. requirements  at least four prints of the mark, except for word marks in ordinary type; value added  for device marks, 12 prints and a printing block of the trade marks; and tax (“VAT”)  priority document (if applicable), with verified English translation. taxable  VAT is levied on the supply of goods and services in Uganda and on the procedure  Applications are examined as to inherent registrability and conflict with prior supplies importation of goods and services. existing registrations / applications. On acceptance, a publication notice is issued and applications are advertised for a period of 60 days. VAT rate  18% oppositions  Opposition may be lodged within the 60 days following the date of registration  A person whose taxable turnover during any period of three calendar months advertisement of the trade mark application. Extension of the opposition threshold exceeds or is expected to exceed a quarter of the annual registration period is possible at the discretion of the registrar. threshold of UGX150-million must register for VAT purposes. duration and  A trade mark registration is effective for an initial period of seven years from reverse VAT  Resident companies are required to account for output VAT in respect of renewal the date of application and, thereafter, renewable for further periods of 10 on imported imported services rendered by non-resident companies in terms of a reverse years. services charge mechanism. Such VAT is generally not allowed as an input credit.

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doing business in Uganda

For more information or assistance please contact:

Celia Becker Executive | Africa regulatory and business intelligence [email protected] cell: +27 82 886 8744

This document contains general information and no information provided herein may in any way be construed as legal advice from ENSafrica, any of its personnel and/or its correspondent firms. Professional advice must be sought from ENSafrica before any action is taken based on the information provided herein. This document is the property of ENSafrica and consent must be obtained from ENSafrica before the information provided herein is reproduced and/or distributed in any way.

LAST UPDATED NOVEMBER 2020

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