What is Manufacturing?

Manufacturing is the process of turning raw materials or parts into finished goods through the use of tools, human labor, machinery and chemical processing.

 

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The Uganda’s manufacturing sector is dominated by Agro-processing, food and beverages, households’ products, construction materials and fast-moving consumer goods

 

  • Registration for taxes
  • Timely return filing
  • Timely payment of tax

  • All businesses in the manufacturing sector in Uganda are required to be registered with;
  • Uganda Registration Services Bureau (URSB) for Company registration
  • Uganda Revenue Authority (URA) for taxes
  • Local council authority e.g. KCCA, municipal council, for a trading license

Please note:

Upon registration, manufacturing companies are required to comply with the requirements of statutory bodies like;

  • Uganda Investment Authority (UIA)
  • Uganda National Bureau of Standards (UNBS)
  • National Environment Management Authority (NEMA)

 

For individual

  • National ID or any other two of the following valid identification documents: Village ID, Employment ID, Passport, Driving permit, Voter’s card, recent Bank statement, Work permit, financial card, Visa, NSSF card, etc.
  • Certificate of registration

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 fulfill.

Click here  for your rights as a taxpayer.

Click here  for your obligations as a taxpayer.

This is imposed on manufacturers whose annual turnover exceeds UGX 10 million and below UGX 150 million.

Schedule for the computation of “presumptive” income tax for small businesses

Gross turnover per annum

With records

Without records

Not exceeding UGX 10 million

NIL

NIL

Exceeding UGX 10 million but does not exceed UGX 30 million

0.4% of annual turnover in excess of 10 million

UGX 80,000

Exceeding UGX 30 million but does not exceed UGX 50 million

UGX 80,000 plus 0.5% of

annual turnover in excess of

UGX 30 million

UGX 200,000

Exceeding UGX 50 million but does not exceed UGX 80 million

UGX 180,000 plus 0.6% of

annual turnover in excess of

UGX 50 million

UGX 400,000

Non- individual income tax

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

Individual income tax

The income tax rate for individuals depends on the income bracket in which the individual falls.

Rate of tax for Resident individuals

ANNUAL CHARGEABLE INCOME (CY) IN UGX

RATE OF TAX

0 to 2,820,000

Nil

2,820,000 to 4,020,000

(CY – 2,820,000UGX) x 10%

4,020,000 to 4,920,000

(CY – 4,020,000UGX) x 20% + 120,000UGX

4,920,000 to 120,000,000

(CY – 4,920,000UGX) x 30% + 300,000UGX

Above 120,000,000

[(CY – 4,920,000UGX) x 30% + 300,000UGX] + [(CY – 120,000,000UGX) x 10%]

 

Rate of tax for Non-Resident individuals

ANNUAL CHARGEABLE INCOME (CY) IN UGX

RATE OF TAX

0 to 4,020,000

CY x 10%

4,020,000 to 4,920,000

(CY – 4,020,000UGX) x 20% + 402,000UGX

4,920,000 to 120,000,000

(CY – 4,920,000UGX) x 30% + 582,000UGX

Above 120,000,000

[(CY – 4,920,000UGX) x 30% + 582,000UGX] +[(CY – 120,000,000UGX) x 10%]

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

All 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 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.

Pay As You Earn (PAYE)

Any person dealing in transport business and has workers earning a monthly salary more than 235,000 per month is required to register for Pay as You Earn (PAYE), withhold and remit tax to URA.

Click here for the PAYE rates

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. There are incentives available for manufacturers and they include:

Tax incentives under Domestic Taxes

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.

Duty remission Excise duty will be remitted on plastic products

manufactured for use in packaging of products for export, use in packaging medicaments and is manufactured from recycled plastic

Manufacturers of specified goods

Nil excise duty on construction materials of a manufacturer, whose investment capital is, at least 50 million US Dollars or, in the case of any other manufacturer, who makes an additional investment equivalent to 50 million US Dollars

Excludes 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.

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

NIL stamp duty on an agreement relating to the deposit of title-deeds, pawn pledge- of the total value.

Beneficiary: Loan applicants

NIL stamp duty on security bond or mortgage deed executed by way of security for the due execution of an office, or to account for money or other property

received by virtue of security bond or mortgage deed executed by a surety to secure a loan or credit facility-of entry value.

Beneficiary: Loan applicants

VAT

Type of incentive

Conditions for granting exemption

Exporters

Zero rated

Nil VAT on the supply of feasibility study and design services and on the supply of locally produced raw materials and inputs.

Investment in processing agricultural products; manufacturing or assembling medical appliances, medical sundries or pharmaceuticals, building materials, automobiles and house hold appliances; manufacturing furniture, pulp, paper, printing and publishing of instructional materials; establishing or operating vocational or technical institutes; or carrying on

 

 

business in logistics and warehousing, information technology or commercial farming.

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 applies 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.

VAT registered persons claim all the VAT

incurred.

Turnover of UGX 150m in any 12-month  period for first time registration, ability to keep proper books of accounts and

making taxable supplies.

Nil VAT on the supply of liquefied gas and

denatured fuel ethanol from cassava

 

Nil VAT on the supply of services to a

manufacturer other than [a manufacturer

who engages in supply of locally produced materials for construction of a factory or warehouse and the supply of locally produced raw materials and inputs or machinery and equipment to

an operator within an industrial park, free zone or an operator within a single factory or other business outside the industrial park or free zone].

The investment capital of this manufacturer should be at least USD 30 million for a foreign investor or USD 5 million for a local investor, to conduct a feasibility study or to undertake design and construction, or in the case of any other manufacturer from the date on which the manufacturer makes an additional investment equivalent to USD 30 million for a foreign investor or USD 5 million for a local investor;

•   who has capacity to use at least 70 percent of the raw materials that are locally sourced, subject to their availability, and

•   Who has capacity to employ at least 70 percent of the employees that are citizens earning an aggregate wage of at least 70 percent of the total wage Bill.

 

Deemed VAT: Tax payable on a taxable supply made by a supplier to a contractor executing an aid-funded project is

deemed to have been paid by the contractor provided the supply is for use by the contractor solely and exclusively for the aid funded project.

Contractors executing aid-funded projects

 

The supply of drugs, medicines and medical sundries manufactured in Uganda are zero rated

Manufactured in Uganda

Cash basis accounting for VAT on supplies

made to government

VAT registered suppliers

Zero rating the supply of menstrual cups and inputs for their manufacture

Suppliers and manufacturers of menstrual cups

INCOME TAX

Type of incentive

Conditions for granting exemption

6% WHT exemption on payment for

goods and services and professional fees

12 months renewable

Where the Commissioner is satisfied

that the taxpayer has regularly

complied with the obligations under the tax laws

Cost of constructing an approved Industrial Building

A person who incurs expenditure in constructing a building to be used as a factory/ manufacturing premise, and

is being used in generating income, is allowed a deduction in his return (Industrial Building Deduction) at a rate of 5% per year for a period of 20

years from the time he starts using the building.

Recognition of losses

 

 

 

 

If for any year of income, the total business income earned by a taxpayer is less than the total expenses relating to the generation of the business income, the excess (loss) shall be carried forward and allowed as a loss in the following year.

Note that it must be declared and proved by URA in the current year of income as a loss.

 

Wear and Tear

Wear and Tear allowance is granted for assets and equipment’s owned by the entity and registered in the business names.

The rates are as provided for in the Income Tax Act.

Allowable deduction of purchase expense from a supplier designated to use

e-invoicing system

Allowable deduction of purchase expense from a supplier designated to use e-invoicing system. These suppliers will be gazetted and these expenses should be supported by e-invoices or

e-receipts.

100% deduction of Scientific research

expenditure

A person who incurs expenditure for

scientific research

100% deduction of training expenditure

Employers who train permanent residents or provide tertiary education not exceeding in the aggregate 5 years

10-year Exemption of income derived from renting out or leasing facilities established in an industrial park or free zone.

Must invest a minimum of USD 50m for foreign investors or USD 10m for EAC citizens, Incentive takes effect from the date of commencement

of construction. Also applies to an existing investor making an additional investment of the same value.

10-year Exemption of Income derived by a person from undertaking any of the listed business activities in the Industrial Park or Free Zone.

Operator in an Industrial Park or Free Zone who invests in processing

agricultural products; manufacturing or assembling medical appliances,

medical sundries or pharmaceuticals, building materials, automobiles and house hold appliances; manufacturing furniture, pulp, paper, printing and publishing of instructional materials;

manufacture of tyres, footware, mattresses or tooth paste.

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 applies 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.

10-year exemption of Income derived by a person from undertaking any of the specified business activities outside an industrial park or free zone.

Investor outside an industrial park or free zone carrying out activities listed above

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 applies 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.

Exemption of Income derived by a person from undertaking the agro – processing.

One Year. May be renewed annually

Investor must use plant and machinery that has not previously been used in Uganda, apply for and be issued with a certificate of exemption from URA and

must be tax compliant.

Exemption of Income derived from the exportation of finished consumer and capital goods

10 years.

Exemption valid from the beginning of the investment. Investor must export at least 80% of production. Investor must apply for and be issued with a certificate of exemption.

 

Double Taxation Agreements (DTA): Investors from countries with active DTA’s with Uganda i.e. United Kingdom,

Denmark, Norway, South Africa, India, Italy, Netherlands and Mauritius. Withholding tax rates applicable to dividends, interests, management fees and royalties are 10% except UK at 15%

Beneficial owner of investment as defined in the Income Tax Act

established with economic substance

in a country with which Uganda has a DTA.

Deduction of 2% Income tax for employers that employ PWDs

5% of employees must be PWDs

 

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