Uganda Personal Income Tax

Residents are subject to tax on worldwide income. Nonresidents are taxable on Ugandan-source income only.

Individuals are considered resident in Uganda for tax purposes if they meet at least one of the following conditions:

  • They maintain a permanent home in Uganda.
  • They are present for 183 or more days in the tax year. The tax year runs from 1 July to 30 June.
  • They are present for an average of 122 days in the tax year and the two preceding tax years.
  • They are employees or officials of the government of Uganda posted abroad during the tax year.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Employment income includes wages, sal­aries, vacation pay, sick pay, payment in lieu of vacation, directors’ fees, commissions, bonuses, gratuities, and entertainment or other allowances received for employment. Employment income also includes most benefits in kind, including employer-provided car, housing and stock options. Travel allow ances are taxable if they are deemed to be excessive.

Education cash allowances provided by the employer to all of the employer’s local and expatriate staff are taxable for income tax purposes and social taxes. However, the allowances are not sub­ject to social taxes if the employer pays directly the school fees to the school or college, or reimburses the actual fees paid by the employee.

A nonresident is subject to income tax on employment earnings if his or her employer is resident in Uganda or has a permanent establishment in Uganda. Income derived from services performed outside Uganda is exempt from tax.

Self-employment and business income. Business income includes the following:

  • Trading profits
  • Gains from disposals of business assets, shares of profits or partnership interests
  • Professional and management fees
  • Insurance compensation and legal damages for loss of profits

Investment income. Dividends received by residents and nonresi­dents are subject to final withholding tax at a rate of 15%. Roy­alties are aggregated with other income and are taxed at the rates set forth in Rates. Income received by residents from the rental of immovable property is taxed separately at a rate of 20% on net income in excess of UGX2,820,000. Net income is defined as 80% of gross rent received. A final withholding tax is levied on interest income received by residents at a rate of 15%.

Nonresidents are subject to withholding tax at a rate of 15% on investment income, income from the rental of real property, management fees, consultancy fees and any payments for ser­vices performed in Uganda.

Capital gains. Capital gains derived from the disposal of business assets are subject to tax at a rate of 30%.

Deductions

Personal deductions. No personal deductions are allowed.

Business deductions. Expenses are deductible to the extent they are incurred in the production of income. Identified bad debts incurred in the production of taxable income are also deductible.

Plant and machinery qualify for an annual capital allowance deduction. Certain plant and machinery also qualified an initial allowance of either 50% or 75%. However, the initial allowance was repealed effective from 1 July 2014. The amount of the initial allowance was subtracted from the depreciable cost of an asset. The balance is subject to a depreciation (wear-and-tear) allow­ance at the applicable rate.

Capital allowances for industrial buildings and certain commer­cial buildings are permitted on a straight-line basis over 20 years. In addition, industrial buildings qualified for an initial allowance of 20% if their construction began on or after 1 July 2000. However, the initial allowance was repealed, effective from 1 July 2014. Plant and machinery is eligible for a wear-and-tear allow­ance using the declining-balance method at rates ranging from 20% to 40%.

Rates. The resident individual tax rates are set forth in the follow­ing table. These rates apply to employment income and taxable business income.

Annual taxable income:

Exceeding Not exceeding Tax on lower amount Rate on excess
UGX UGX UGX %
0 2820000 0 0
2820000 4020000 0 10
4020000 4920000 120000 20
4920000 120000000 300000 30
120000000 34824000 40

For nonresidents, taxable income, including investment income, is taxed at the rates in the following table.

Annual taxable income Tax on lower amount Rate on excess
Exceeding Not exceeding    
UGX UGX UGX %
0 4,020,000 0 10
4,020,000 4,920,000 402,000 20
4,920,000 120,000,000 582,000 30
120,000,000 35,106,000 40

The amount of tax payable is reduced by tax withheld.

Income derived by resident individuals from the rental of real property is taxed at a rate of 20% on chargeable income in excess of UGX2,820,000.

Relief for losses. Losses may be carried forward indefinitely to be offset against future profits. In general, losses may not be carried back. However, with respect to long-term construction contracts, a loss in the final year of the contract can be carried backward to offset reported tax profits of previous years.

Other taxes

Uganda imposes a value-added tax (VAT) on the sale or import of taxable goods and services. The standard VAT rate is 18%. Certain goods and services are zero-rated, and others are exempt.

Uganda charges import duty on most imports except exempt imports. A traveler is allowed duty-free imports of up to USD500.

Effective from 1 February 2005, the East African Community Customs Union (EACCU) consisting of Kenya, Tanzania and Uganda, became operational. In 2008, Burundi and Rwanda were admitted to the EACCU. The EACCU provides for the duty-free movement of goods among member states and a common exter­nal tariff (CET) on goods from third countries. The CET is gener­ally imposed at a rate of 0% to 25% on goods imported from third countries into Uganda. However, sensitive products are subject to a duty rate exceeding 25%. Eligible goods from Common Market of East and Southern Africa (COMESA) and Southern African Development Community (SADC) countries continued to attract preferential treatment for 2009 and 2010. The import duty rate on goods imported into Uganda from Kenya was progressively reduced by two percentage points per year, from an initial 10% in 2005 to 0% in 2010. The EACCU also provides various tax incentives for producers of goods for export.

Uganda charges excise duty on certain items, including spirits, beer, soft drinks, cigarettes and mobile phone airtime.

Estate and gift tax is not levied in Uganda. Net worth tax is not levied in Uganda.

Social security

The National Social Security Fund (NSSF) is a statutory savings program to provide employees with retirement benefits. Employ­ees contribute 5% of their total monetary remuneration, and employers contribute an amount equal to 10% of each employee’s total monetary remuneration.

Tax filing and payment procedures

Tax is withheld from employees under the Pay-As-You-Earn (PAYE) system.

The tax year runs from 1 July to 30 June. Individuals with account­ing periods coinciding with the tax year must file provisional re turns no later than 30 September of the tax year. Individuals with other accounting periods must file provisional returns within three months after the beginning of the accounting period that ends within the tax year.

Individuals must file their final tax returns within six months after the end of the accounting year. An assessment is made based on the return, with a credit given for taxes withheld at source and for provisional taxes paid.

Nonresidents who trade in Uganda through permanent establish­ments are subject to the same filing requirements as residents.

Double tax relief and tax treaties

Residents may deduct foreign taxes paid from Ugandan income tax payable on foreign-source income. Uganda has entered into double tax treaties with the following countries.

Belgium                      Mauritius                          South Africa

Denmark                    Netherlands                       United Kingdom

India                           Norway                             Zambia

Italy

Certain treaties are in the final discussion phase including trea­ties with China, Egypt, Seychelles, Sudan and the United Arab Emirates.

Temporary permits

All foreign visitors must obtain valid entry visas to enter Uganda, with the exception of nationals of member countries of the COMESA or the East African Community (EAC), and nationals of the following countries.

Antigua                      Grenada                            Singapore

Bahamas                     Italy*                                 Solomon Islands

Barbados                    Jamaica                             St. Vincent and

Belize                         Lesotho                             the Grenadines

Cyprus                       Malta                                 Tonga

Fiji                              Sierra Leone                      Vanuatu

Gambia

* Diplomatic passport holders only.

Dependents’ passes are issued to family members and relatives of foreign nationals with valid permits. These passes are linked to the principal’s permit and are canceled on expiration or cancella­tion of the principal’s permit.

Students’ passes are issued to foreign students who wish to study in Uganda. All EAC nationals studying or seeking to study in Uganda must obtain student passes from designated immigration offices. These passes are issued at no cost.

Special passes are issued to foreign nationals wishing to work in Uganda on a short-term assignment (three to five months). A special pass is valid for three months and may be extended once.

Visitors’ passes are issued on entry into Uganda. They are valid for three months and may be extended for up to six months.

Transit passes are normally valid for seven days.

Prohibited immigrant passes are issued to foreign nationals who, under normal circumstances, would not be granted visas. They are granted only in special cases and are valid for seven days.

When applying for passes, applicants must have valid passports or equivalent travel documents. No quota system exists for immi­gration purposes in Uganda.

Work permits and self-employment

Only special passes and work permits allow foreign nationals to undertake employment in Uganda.

Temporary work permits, called special passes, are valid for three months and may be extended for up to a maximum of one year. They are issued on submission of work permit applications.

A work permit or entry permit is issued for up to three years and may be renewed every three years. Work permits are divided into seven classes (Classes A through G), which are summarized below.

Class A permits are issued to foreign diplomats, United Nations staff and foreigners recruited to work in Uganda government service. They require the submission of the following documents:

  • Copies of passport (bio-data page)
  • Recent passport-size photograph
  • Cover letter from the embassy (diplomatic note)
  • Letter from the Ministry of Foreign Affairs of Uganda

Class B work permits are issued to investors in agro-business and require the submission of the following documents:

  • Registration certificate (certificate of incorporation)
  • Company Form 7
  • Memorandum and articles of association
  • Analysis of the viability of the proposed venture
  • Photocopies of the applicant’s passport
  • Photographs
  • Land title
  • Cover letter (possibly from a local authority)
  • Clearance from the Ministry of Trade and Industry
  • Clearance from Interpol
  • Copy of nonrefundable prepayment receipt or a copy of identi­fication from nationals of Burundi, Kenya and Rwanda
  • Copy of security bond
  • Income tax clearance

Class C work permits are issued to investors prospecting for, or mining, minerals and require the documents listed below:

  • Photocopies of the applicant’s passport
  • License issued by the Ministry of Natural Resources
  • Memorandum and Articles of Association
  • Analysis of the viability of the project
  • Registration certificate
  • Copy of nonrefundable payment receipt
  • Copy of Uganda Investment Authority license
  • Security bond
  • Recent passport-size photograph
  • Support letter from Ministry of Energy, Minerals and Natural Resources
  • Police clearance from Interpol or home country

Class D work permits pertain to general business or the retail trade. In addition to the documents listed for Class B permits, excluding the analysis of viability, the application for a Class D work permit requires bank statements.

Class E permits are issued to manufacturers. In addition to the documents required to obtain Class B permits, excluding the analysis of viability, applicants for Class E permits must produce an investment license.

Class F permits, which are issued to practicing professionals (for example, lawyers and accountants), require the submission of the following:

  • Qualifications and references or résumés
  • Copy of the passport (bio-data page)
  • Copy of a recent passport-size photograph
  • Clearance letter from Interpol or home country
  • Registration certificate with relevant professional body in Uganda
  • Cover letter from the organization
  • Copy of nonrefundable prepayment receipt or a copy of identi­fication from nationals of Burundi, Kenya and Rwanda
  • Security bond

Class G has two subclassifications of work permits, which are Class G1 and Class G2. They are issued to employees. Applicants for Class G1 permits (missionaries, volunteers and workers for non-governmental organizations) are required to produce the fol­lowing documents:

  • Certified copy of qualifications
  • Appointment letter from the organization
  • Copy of the passport (bio-data page)
  • Copy of a recent passport-size photograph
  • Cover letter from the organization
  • Clearance letter from the Interpol or home country
  • An employment contract

Applicants for Class G2 (expatriates) are required to produce the following documents:

  • Appointment letter from the organization
  • Copy of the passport (bio-data page)
  • Certified copy of qualifications
  • Copy of a recent passport-size photograph
  • Cover letter from the organization
  • Clearance letter from Interpol or home country
  • Income tax clearance for the organization
  • Copy of nonrefundable prepayment receipt

The flow of the immigration process is adjusted, effective from 1 July 2016. The following is the flow of the process:

  • The company must register and obtain an organization code so that all assignees apply under the company’s account (the requirements for obtaining an organization code are filling out an Imm001 form and then attaching the company documenta­tion under each class on a CD, which is shared with the immi­gration department).
  • After the company obtains an organization code, the applicant must fill out the permit application form online.
  • The applicant is then prompted to upload the required docu­ments as per the type of permit.
  • The application is then submitted, and follow-ups can be made based on the application identification, passport number and date of birth.
  • An approval letter is sent by email or downloaded through the Uganda electronic visa/permit website. This letter establishes that the applicant is eligible for the approved visa or permit, but it does not establish that the application is definitely approved.
  • The final approval is issued at the selected point of entry (in the case of a visa) or at the immigration office headquarters where the visa or permit sticker is printed and pasted on the passport.

Payment of the government fees is due after approval has been received.

After all documents are received, it takes from two weeks to one month to process a work permit and other papers.

As a result of the introduction of the organization code, nonresi­dents seeking permits are not required to present company docu­mentation (for example, articles and memorandum of associa­tion), because they are applying for a permit under an organiza­tion’s account that was issued an organization code on presenta­tion of the necessary documentation.

Foreign nationals may change employers after they have obtained work permits. However, they must apply for new work permits under their new employers.

An investment license, issued by the Uganda Investment Au thority, is required for all foreign business operations in Uganda. In vestment incentives, including tax holidays, are avail­able to businesses that satisfy certain conditions and bring spe­cific amounts of capital into Uganda.

Residence permits

Certificates of residence allow foreign nationals to work and live in Uganda. The duration for the certificates can be 5 years, 10 years or a lifetime.

Foreign nationals seeking certificates of residence must submit medical reports, must be at least 50 years of age and must have resided in Uganda for at least 15 consecutive years. Marriage to a Ugandan and having been a former citizen are additional con­siderations.

Family and personal considerations

Family members. Dependents of expatriates with work permits may obtain long-term permits called dependents’ passes. The length of validity of these passes depends on the duration of the expatriate’s work permit.

Working spouses of work permit holders do not automatically receive the same type of pass or permit as the principal permit holder. Appli cations must be filed independently.

Driver’s permits. Uganda has driver’s license reciprocity with British Commonwealth countries only. Foreign nationals from a British Commonwealth country may drive legally in Uganda with their home country driver’s licenses for three months. Thereafter, the foreign national can apply to the Uganda Revenue Authority for a Conversion Permit, which allows the national to obtain a Ugandan driver’s permit with classes equivalent to those in his or her home country permit.

To obtain a local driver’s license in Uganda, an applicant must obtain a provisional driver’s license after paying a general fee. This enables the applicant to go to a driving school and to per­form a driving test, after which he or she is issued a driving permit. No written or physical examination is required. However, a medical examination is now required before an applicant can take a driving test.