S/N

TAX INCENTIVE

DESCRIPTION

APPLICABLE TAX LAW

1

Import duty exemption on Equipment and inputs used in oil and gas

Equipment, inputs and goods for direct and exclusive use in oil and gas or geothermal exploration and development, except motor vehicles

The 5^th Schedule of the East African Community Customs Management Act (EACCMA), upon recommendation by the Competent Authority

2

Reduced WHT rate on non-resident contractor payments.

WHT on non-resident contractors providing services in the oil and gas is reduced to;

1)   10% on gross payment for upstream field services;

2)   5% for the EACOP project for provision of professional and other services.

NB. In other businesses, WHT on non-resident service fees payments is at the rate of 15%

The Income Tax Act and per the Agreed Fiscal Regime under the HGA, contained in the EACOP (Special Provisions) Bill.

3

Exemption from 6% local WHT

Tax complaint taxpayers may be exempted from 6% WHT

The ITA Section 119(5)(f)

4

Deemed VAT provisions

In order to incentivize the oil and Gas sector, the VAT deeming position was introduced in Uganda in effective July 2015.

Under this provision of the VATA, VAT charged by the contractor to the Licensee is deemed paid and therefore the contractor is not required to pay this VAT to URA.

The VAT Act Section 24(5).

5

VAT Cash refunds

Contractors who purchase supplies incur input VAT. This has to be refunded efficiently by URA to ease taxpayers’ cashflows.

VAT Act Section 42(1): Refund of overpaid tax

6

Credit for VAT input tax on imported services

Generally imported services other than exempt services made by a person are charged to VAT at the rate of 18%. However, for Licensees and contractors in oil and gas a credit for input tax is allowed on import of services. The effect is that the licensee or contractor ultimately pays Zero VAT on imported services.

VAT Act Section 28(1)(b): credit for input tax is allowed on all imports of services made by a contractor or licensee during the tax period.

7

Uncapped carry forward losses for contractor and subcontractor

Section 89GA (2) and (3) of the ITA

Section 38 of the ITA for other businesses

8

Accelerated capital deductions 

Sections 89GB, 89GC and 89GD

SN

TAX INCENTIVE

INCOME TAX

1.    

10-year corporate income tax exemption for the Project Company;

2.    

WHT on interest payments to related finance parties – rate of 10% reduced from the standard 15%;

3.    

WHT on interest payments to independent finance parties – 0%, as opposed to the standard 15%;

4.    

WHT due on payments to non-residents for technical and other services – rate of 5% as opposed to the standard 15%;

5.    

No WHT to be imposed on the import of goods for the direct and exclusive use of the EACOP Project;

6.    

No WHT on payments or deemed payments of dividends by the Project Company. Usual tax imposed on dividends is WHT at the rate of 15%;

VALUE ADDED TAX

1.    

Right to VAT registration, and applications for VAT registration are not to be unreasonably rejected;

2.    

No VAT on the supply of transportation and incidental services through the EACOP system by the project company;

3.    

No VAT on the import of goods and services for the direct and exclusive use by the EACOP Project;

4.    

No VAT on the import, sale for export or export of petroleum;

5.    

VAT Deemed paid provisions apply to supplies made by Level 2 Contractors to level 1 Contractors;

6.    

VAT Deemed paid provisions apply to supplies made by a Level 1 Contractor to the Project Company.

7.    

VAT cash refunds for VAT paid by Level 2 contractors on local purchases

IMPORT DUTIES/ CUSTOMS DUTIES AND EXCISE DUTIES

1.    

Supplies to the EACOP Project are never to incur Excise duties (these are not to be a cost to the project);

2.    

No customs and import duties to be imposed on machinery, other inputs and temporary importation of motor vehicles for the direct use of the EACOP Project;

3.    

No customs and import duties, African Union Levy or EAC infrastructure levy to be imposed on capital goods for direct and exclusive use for the EACOP Project;

4.    

No duty, processing fee, security or bond to be provided or paid for temporary imports by the EACOP Project;

5.    

No security to be provided for the import or sale for export of petroleum.

STAMP DUTY

1.    

A Stamp duty exemption for transfer of shares in the Project Company;

2.    

Instruments for grant, conveyance, transfer or other land acquisition – Stamp Duty to be limited to 10,000 UGX (normal rates per instrument usually range from 0.5%-1% of the Value);

3.    

Instruments effecting the transfer, novation, assignment or sub-participation of any interest of a finance party in a financing agreement- limited to 10,000 UGX. (normal rates per instrument ranges between 0.5% to 1% of the Value).

OTHERS LEVIES

1.    

No transit fees, taxes or other charges to be paid for the transportation of petroleum through the EACOP System;

2.    

A cap applies to all other charges (e.g. local government rates, trade license fees, investment license fees, fees for renewal of project authorizations). Capped to 100,000 USD per annum.