Overview of The Mining Sector

What is mining?

Mining is the process of extracting useful minerals from the surface of the earth, including the seas. The term minerals is defined in the Mining Act, 2003 as “any substance, whether in solid, liquid or gaseous form occurring naturally in or on the earth, formed by or subject to a geological process; but does not include petroleum”

What are some of the minerals that are extracted in Uganda?

  • Precious metals, namely gold, silver, platinum, iridium, osmium, palladium, ruthenium, rhodium, or any other rare earth elements
  • Precious stones, namely agate, amber, amethyst, cat’s eye, chrysotile, diamond, emerald, garnet, opal, ruby, sapphire, turquoise and all other substances of a similar nature to any of them
  • Base Metals , these include all metals except precious metals
  • Industrial minerals, namely barite, rock, clay, dolomite, feldspar, granite, gravel, gypsum, laterite, limestone, mica, magnesite, marble, phosphate rock, sand, sandstone, slate and talc, which are commercially mined by a person for use in Uganda or industrially processed into finished or semi-finished products.

 

Who are the key players in the mining sector?

 

  • Mineral extractors- These are into extraction of minerals.
  • Mineral traders/ dealers- These sell and buy minerals.

How do I register my mining business?

Persons in the mining business in Uganda are required to be registered with;

  • Uganda Registration Services Bureau (URSB) for Company registration
  • Directorate of Geological Survey and Mines (DGSM) for a mining license or mineral trading license.
  • Uganda Revenue Authority (URA) for taxes

 

What do I need to register for taxes?

Click here for details on requirements for registration

How do I register for taxes?

  • You’re required to visit the URA portal on ura.go.ug
  • Click here to register as an individual
  • Click here to register as a non-individual

 

What are my rights and obligations as a taxpayer?

As a taxpayer you are entitled to your rights. Equally there are obligations you must fulfill.

Click here for your rights and obligations as a taxpayer.

 

What kind of business records do I have to keep for tax purposes?

It is very important for you to keep complete and proper records of all your business transactions for at least five years after the end of the tax period to which they relate for future reference.

These include;

  • Income statement (List of Receipts and Payments),
  • balance sheet,
  • payroll,
  • import schedules,
  • contracts,
  • bank statements,
  • appointment letters,
  • bills (e.g. utility bills),
  • stock records,
  • Asset registers and many other records and/or documents relevant to your business such as receipt books, invoices, debtors and creditors

Click here for information on business record keeping.

 

What are the tax types applicable to the mining sector?

 

Corporation Tax

This is income tax for a company and rate is 30% of the entity’s chargeable income (gross income less allowable deductions).

 

Withholding Tax

Withholding tax (WHT) is income tax that is withheld at source by one person (withholding agent) upon making payment to another person (payee).

 

Please note

The tax withheld is credited/ reduced on the tax payable in the final income tax return.

Click here for information on Withholding tax.

 

Is withholding tax charged on services fees to non-resident contractors?

10% WHT is chargeable on services fees to non-resident contractors.

 

Is withholding tax charged on payment for supply of goods and services by resident contractors to a licensee?

6% WHT is charged on payments to resident contractors for supply of goods and services to a licensee.

 

Is withholding tax charged on service payments to non-resident service providers   irrespective of Double Tax Agreements?

 

A flat rate of 10% WHT is imposed irrespective of Double Tax Agreements on service payments to Non-resident service providers.

 

 

Pay As You Earn (PAYE)

 

Persons in the mining business with employees earning a monthly salary more than 235,000 Uganda shillings are required to register for Pay as You Earn (PAYE), withhold and remit tax to URA.

Click here for the PAYE rates

 

Value Added Tax (VAT)

VAT is a consumption tax charged at a rate of 18% on all supplies made by taxable persons i.e. persons registered or required to register for VAT purposes. The threshold for VAT registration is an annual turnover of over 150 million, or 37.5 million in the first 3 consecutive months.

All minerals mined and sold locally in Uganda extract VAT at 18% except for;

Supply of all production inputs into limestone mining and processing into clinker in Uganda and the supply of clinker for further value addition Uganda.

A licensee (who is granted a mining right) may register for VAT.

Click here to register for VAT

 

Capital Gains Tax

 

Persons in the mining business should declare capital gains from transfer of licenses and pay the capital gains tax due.

 

 

Stamp duty (Non-Tax Revenue)

Stamp duty is a rate charged by the government on certain legal documents, usually involving the transfer of property or other assets.

Stamp duty is payable on performance and environmental rehabilitation for holders of exploration licenses and mining leases.

 

Royalties (Non-Tax Revenue)

A royalty is an amount paid by a third party to an owner of a product or patent for the use of that product or patent. 

Royalties are assessed by the Commissioner Directorate of Geological Survey and Mines (DGSM) on a holder of a mineral right and are collected by URA.

 

What are the tax implications as a result of the type of mining license held?

 

Type of mining license

Domestic Taxes application and Non- Tax Revenue (NTR)

Prospecting Licenses (PL)

PAYE, WHT, VAT & Corporation (but no chargeable income, purely prospecting expenditure)

Exploration Licenses (EL)

PAYE, WHT, VAT & Corporation (but no chargeable income, purely prospecting expenditure) and NTR (stamp duty)

Retention License (RL)

PAYE, WHT, VAT & Corporation (but no chargeable income, purely prospecting expenditure) and NTR (stamp duty)

Location License (LL)

PAYE, WHT, VAT & Corporation

Mining Lease (ML)

PAYE, WHT, VAT & Corporation and NTR For example; royalty , stamp duty

Mineral Dealer’s License (MDL)

PAYE, WHT, VAT & Corporation

 

How do I file returns for my mining business?

Click here for information on how to file your returns.

 

How do I pay taxes to URA?

After filing a return, you’re required to pay taxes due using available payment platforms e.g. banks, mobile money, VISA, Mastercard etc.

Please note: the due date for payment of tax is the same as that of return filing.

Click here to register a payment

 

How can I be tax complaint as a mining business owner?

  • Indicate correct ISIC code at registration.
  • Submit correct addresses and contact information. For communication purposes with URA.
  • Register for the correct tax types. All licensed companies at least should register for PAYE or WHT
  • All licensed companies should be active thereby not filing or filing nil returns.
  • All licensed companies should timely file returns.
  • Avoid under declaration of revenues from mining operations.
  • Disclose mineral buyers and suppliers.
  • Avoid mispricing of minerals leading to under declaration of revenue
  • Avoid smuggling of minerals through the porous borders.
  • Avoid under declaration of revenues, production and overstatement of costs.
  • Declare income earned from minerals extracted from further processing of tailings/sale of tailings
  •  

Are persons in the mining business entitled to any tax incentives?

Yes. There are incentives available to persons in the mining business- both local and foreign and they include:

Tax incentives under Domestic Taxes

Corporation Tax

Beneficiary

Incentives to mineral right holder

Capital gains on sale of shares or disposal of a mining license, etc.

  • Accelerated depreciation (100%) on depreciable assets during exploration.

 

  • Provision on rehabilitation expenditure is allowed as a deduction.

Income of person derived from the exportation of finished consumer and capital goods for a period of ten years or at least 80% exported on application to the Commissioner General.

 

 

Exemption from Income Tax

Value Added Tax

Beneficiary

Incentives to mineral right holder

Supply of all production inputs into limestone mining and processing into clinker in Uganda and the supply of clinker for further value addition Uganda.

VAT on supplies is deemed paid.

 

 

 

Purchases made on exported sales

Refund of VAT on purchases made on exported sales where proper VAT returns are filed.

VAT on imported services

VAT on imported services is allowed as input tax (Revise charge) This improves cash flows

VAT on imported goods for exclusive use in the mining operations.

VAT exempt at importation

Withholding Tax

Beneficiary

Incentives to mineral right holder

Compliant license holders.

Exemption from WHT (6%)

Pay As You Earn

Beneficiary

Incentives to mineral right holder

All proper verifiable cash contributions made

Allowed as deductions for Income Tax

Expatriate employees

PAYE Tax certificates for may be generate for mining companies to minimise double taxation in the employee’s countries of residence.

Royalties

Beneficiary

Incentives to mineral right holder

Royalty payments on mineral production

Royalty payments on mineral production are recovery for Income Tax in the year of income 

Stamp duty

Beneficiary

Incentives to mineral right holder

Stamp duty paid

Stamp duty paid is deductible for income tax in the year of income it is paid.

 

International Trade Tax Incentives:

Item 30, part b of the 5th schedule to the East African Customs Management Act provides for the following exemption:

 

Beneficiary

Condition

“Machinery and spare parts used in mining

Imported by licensed mining companies.”

 

VAT Deferment on Plant and Machinery

On condition;

(a) Must be registered for VAT,

(b) Plant/ Machinery for own use to produce a Vatable supply,

(c) the Value of the VAT to be deferred should be at least $4000,

(d) Filing of VAT returns.

 

Packaging Materials

Packing material of any kind designed for packaging goods for export. – clearly marked

 

Manufacturing under Bond Facility

“Manufacturing under Bond” means a facility extended to manufacturers to import plant, machinery, equipment and raw materials tax free, for exclusive use in the manufacture of goods for export.

 

Goods Carrying Vehicles:

Goods carrying vehicle with gross vehicle weight exceeding 5 tonnes but not exceeding 20 tonnes.

Motor Vehicles for transport of goods/ Commercial Vehicles

Of gross weight 20 tonnes and above. Import duty is 0% instead of 25% for one year.

 

Tractor Heads/ Prime Movers/Road Tractors

For the transport of Minerals. Import duty is applicable at a rate of 0% instead of 10% for one year

 

Natural Resource Management Unit

That handles domestic tax related issue of the extractive’s issues.

 

 

 

In case of further enguiries, you can visit the nearest URA office for assistance or call the toll-free line 0800117000/0800217000 or WhatsApp: 077214000

 

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