What is textile processing?

Textile processing is process of turning and transforming raw materials into threads to create fabrics and garments through manufacturing, weaving, knitting, or felting. Textile products include clothing, upholstery, household items like Sheets, carpets and various industrial products. 

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A textile processing business is required to be registered with;

  • Uganda Registration Services Bureau (URSB) for registration of Company or business name.
  • Uganda Revenue Authority (URA) for taxes
  • Local council authority e.g. KCCA, municipal council, for a trading license

Please note:

Upon registration, you may be required to comply with the   requirements of statutory bodies like;

  • Uganda National Bureau of Standards (UNBS)
  • National Textile Board (NTB)

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 (in the case of a partnership)

For non-individual

  • Company Form 20
  • Certificate of incorporation

Click here for details on requirements for registration

As a taxpayer, you’re entitled to rights. However, there are obligations that you must fulfil.

Click here  for your rights as a taxpayer.

Click here  for your obligations as a taxpayer.

Small Business/Presumptive tax

This is a tax charged on businesses whose annual sales exceed UGX 10, 000,000 but below UGX 150,000,000.

Corporation tax

It’s a tax imposed on non-individual players in the sector at a standard rate of 30%.

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.

Click here to register for VAT

Please note:

Businesses that are VAT registered taxpayers are obliged to register for EFRIS and issue e-invoices

Click here for information on how to register for EFRIS

LOCAL EXCISE DUTY

This is a tax that is imposed on specified imported or locally manufactured goods, and services.

 Click here for the applicable excise duty rates

Withholding tax

Withholding tax (WHT) is an income tax that is withheld at source by one person (withholding agent) upon making payment to another person (payee). If textile processors supply goods above UGX 1 million, the person to whom those goods are supplied charges withholding tax at a rate of 6%. The plant receives a Tax Credit Certificate that helps offset tax liability in the final income tax return.

Please note

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

Click here for information on Withholding tax.

Pay As You Earn (PAYE)

This tax applies to a sector player who has employees (administrative or causal labourers) that earn an aggregate in excess of 235,000 per month. This form of tax is withheld every month.

Click here for the PAYE rates

 These returns are filed like any other Income tax returns

Click here for information on how to file your returns.

After filing a return, you’re required to pay taxes due using available payment platforms, e.g. banks, mobile money, VISA, Mastercard, EFT, RTGS, USSD Code (*285#), etc.

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

 

Excise Duty

Type of Incentive

Conditions for granting exemption

Nil excise duty on construction materials    of a manufacturer, (excluding a manufacturer dealing in agro processing, food processing, medical appliances, building materials, light industry, automobile manufacturing and assembly, household appliances, furniture, logistics and warehousing, information technology, or commercial farming)

Must invest a minimum of USD 50m or, in the case of any other manufacturer, who makes an additional investment equivalent to USD 50m

Nil duty on construction materials of a factory or warehouse exclusive of those available on the local market, locally produced raw materials and inputs.

Operator within the industrial park,

free zone or other business outside the industrial park or free zone who invests in processing agricultural goods; manufactures or assembles medical appliances, medical sundries or pharmaceuticals, building materials, automobiles, household appliances or manufactures furniture, pulp, paper, printing and publishing of instructional materials.

Must invest a minimum of USD 10m for  foreign investors and USD 300,000 for EAC citizens or USD 150,000 where the investment is made upcountry.

Incentive takes effect from the date

of commencement of the specified business, same incentives apply to an existing operator in an Industrial Park

or Free Zone. The investor must use at least 70% of locally sourced raw materials and employ at least 70% EAC citizens who must take up at least 70% of the wage bill.

STAMP DUTY

Type of incentive

Conditions for granting exemption

No stamp duty on execution of the following documents;

i)              debenture; whether a mortgage debenture or not, being of a marketable security – of total value;

ii)            further charge; any instrument imposing a further charge on a mortgaged property –of total value;

a) In case of a new manufacturer, who is subject to availability, has capacity to use at least 70% of the locally produced raw materials, and employs at least 70% citizens with an aggregate wage bill of

the new manufacturer and whose investment capital is at least 50 million US Dollars

 

       
       

 

iii)          lease of land – of total value;

iv)            increase of share capital;

v)           transfer of land;

vi)         an agreement to provide services on conducting a feasibility study or

developing a design for construction.”;

 

b) In case of an existing manufacturer who subject to availability has capacity to use at least 70% of the locally produced raw materials, and employs at least 70% citizens with an aggregate wage bill of the existing manufacturer from the date on which the manufacturer makes an additional investment equivalent of 35 million US Dollars

 

INCOME TAX

Type of incentive

Conditions for granting exemption

6% WHT exemption on payment for

goods

12 months renewable

Where the Commissioner is satisfied

that the taxpayer has regularly

complied with the obligations under the tax laws




For more information , visit the nearest URA office for assistance or call the toll-free line 0800117000/0800217000 or WhatsApp: 077214000

Click here to download A Guide to Taxation of the Manufacturing Sector
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