What does petroleum sector consist of?

The petroleum sector value chain is made up of upstream, Midstream and Downstream.  

  • Upstream– involves Acquisition, Exploration, Appraisal, Development, Production and Decommissioning of the crude oil projects.
  • Midstream– involves transportation of Crude (Pipeline), Refinery, gas processing and conversion.
  • Downstream– involves distribution, marketing and sales of the refined products

 

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All businesses in the petroleum sector in Uganda are required to be registered with

  • Uganda registration services bureau (URSB) for company registration.
  • Ministry of Finance, Planning and Economic Development
  • Uganda Revenue Authority (URA) for taxes
  • Ministry of Energy and Mineral Development for licensing
  • Petroleum Authority of Uganda (PAU) – regulation

 

For individual

  • National ID or any other two of the following valid identification documents;  Passport, Driving permit, Voter’s card, Village ID, Employment ID, Refugee ID, recent Bank statement, Work permit, financial card, Visa, NSSF card etc.
  • Certificate of registration (incase you are in business)
  • Statement of particulars and partnership deeds (incase of a partnership)

For non-individual

  • Company Form 20
  • Certificate of incorporation

Click here for details on requirements for registration

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

Click here for your rights  as a taxpayer.

Click here for your obligations as a taxpayer.

Corporation Income Tax (CIT)

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

 Withholding tax

The tax is divided into three

  • WHT for service providers to licensees – 10%;
  • WHT applicable to local providers – 6%;
  • WHT on interest and dividends – 15%;

Click here for more information on withholding tax

Branch Profit Tax (BPT);

This is tax imposed on the income of a non-resident company derived from running a branch in Uganda. Branches are subject to extra tax at a rate of 15% on any repatriated income for a year of income. 

Value added tax (VAT)

VAT is a consumption tax charged at a rate of 18% on all supplies made by taxable persons

Please note

It is mandatory for all VAT registered taxpayers to issue e-invoices or e-receipts as no tax credit is allowed or claimable on purchases unless they are supported by e-invoices or e-receipts 

Click here to register on EFRIS

For companies selling fuel it is a must have Electronic Dispenser Controllers (EDCs) to manage the issuance of e-receipts and e-invoices. at selling points or fuel stations  

Pay As You Earn (PAYE) – paid by employees in this sector who earn above UGX 235,000 per month

Click here for PAYE rates

Excise duty on fuel  

This is tax charged per liter of fuel sold. It is withheld by the petroleum company and remitted to URA. 

Import duties

This is a tax imposed on imports and some exports not listed in the exemption schedule by URA.

 

Click here for information on how to file your returns.

 

After filing a return, you’re required to pay the resultant tax using any of the available payment platforms e.g. banks, mobile money, EFT, RTGS, VISA, Mastercard, USSD code (*285#) etc.

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

 

Yes, Uganda has a friendly investment policy framework aimed at attracting investments in the sector and provides of tax incentives to investors as seen below.

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 5th 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

 

What Tax incentives are available specifically to the East Africa Crude Oil Pipeline (EACOP) project (the pipeline project)?

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.

 

 

 

  • The Petroleum Division under the Domestic Taxes department is equipped with knowledgeable trained staff to focus on tax administration for oil and gas companies (Licensees) and major industry contractors;
  • A dedicated desk in URA to fast track and expedite EACOP transactions and efficiently process VAT refunds;

 

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