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Uganda - Income Tax

Uganda - Income Tax

Taxation of international executives.

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

The final return is due by 31 December

What is the tax year-end?

Uganda’s fiscal and tax year end is 30 June. However, a person may be permitted to use a year end other than 30 June upon approval by the tax authority.

What are the compliance requirements for tax returns in Uganda?

Pay as You Earn (PAYE) - Filing by the employer is on a monthly basis by the 15th day of the month following the month in which payment was made.

Individual Income Tax returns are filed by 30 September (1st Provisional return), 30 June (amended provisional Return) and 31 December being the end of 6 months after the end of the year (Final Return). Please note that the provisional tax is paid in four installments on a quarterly basis.

Rental income is taxed separately from other incomes earned. The tax on rental income is also paid on a quarterly basis as with the other income tax.

Tax rates

What are the current income tax rates for residents and non-residents in Uganda?

Residents

Income tax table for 2019/2020

Resident individual rates per month, in Ugandan shilling (UGX)

Chargeable income

Rate of Tax

Not exceeding UGX235,000 per month

Nil

Exceeding UGX235,000 per month but not exceeding UGX335,000 per month

10% on the amount exceeding UGX235,000

Exceeding UGX335,000 but not exceeding UGX410,000 per month

UGX10,000 per month plus 20% of the amount exceeding UGX335,000 per month

Exceeding UGX410,000

UGX25,000 plus 30% of the amount exceeding UGX410,000; and

Where the chargeable income of an individual exceeds UGX10,000,000, an additional 10% on the amount exceeding UGX10,000,000 per month


Nonresident individual rates per month

Chargeable income

Rate of Tax

Not exceeding 335,000 per month

10%

Exceeding UGX335,000 per month but not exceeding UGX410,000

UGX33,500 plus 20% of the amount by which the amount exceeds UGX335,000

Exceeding UGX410,000

.UGX48,500 plus 30% of the amount exceeding UGX410,000; and

Where the chargeable income of an individual exceeds UGX10,000,000, an additional 10% on the amount exceeding UGX10,000,000 per month.


Local Service Tax

This is deducted within the first quarter of the Individual's fiscal year (1 July to 30 June). This may be submitted either as a lump sum by the 30th day of October or in 4 equal installments by the end of July, August, September and October.

Local Service Tax rates

 

Amount of monthly income

LST payable

 

earned net of tax (UGX)

per year (UGX)

1

>UGX100,000 but

<UGX200,000

UGX5,000

2

>UGX200,000 but

<UGX300,000

UGX10,000

3

>UGX300,000 but

<UGX400,000

UGX20,000

4

>UGX400,000 but

<UGX500,000

UGX30,000

5

>UGX500,000 but

<UGX600,000

UGX40,000

6

>UGX600,000 but

<UGX700,000

UGX60,000

7

>UGX700,000 but

<UGX800,000

UGX70,000

8

>UGX800,000 but

<UGX900,000

UGX80,000

9

>UGX900,000 but

<UGX1,000,000

UGX90,000

10

>UGX1,000,000

UGX100,000

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Uganda?

Residents

The Ugandan Income Tax Act, Cap 340 states that for an individual to be considered a resident person, they should;

  • have a permanent home in Uganda; or be present in Uganda –
    • for a period of, or periods amounting in aggregate to, 183 days or more in any 12-month period that commences or ends during the year of income; or
    • during the year of income and in each of the 2 preceding years of income for periods averaging more than 122 days in each such year of income.

Non-residents

A person is not resident if they do not meet the parameters for a resident individual

.Is there a de minimus number of days rule when it comes to residency start and end date?For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country/jurisdiction before their assignment begins?

Residency depends on the number of days present in Uganda. The number of days is counted from when the individual is present in Uganda and this information is usually obtained from the date of entry/departure in the passport.

Termination of residence

Are there any tax compliance requirements when entering or leaving the country/jurisdiction?

When leaving the country/jurisdiction, an individual is required to de-register for taxes and notify the tax authorities and immigration. It is also advisable for the exiting assignee to obtain a tax credit certificate as it may be needed in the assignee’s home country/jurisdiction as evidence that their income was taxed while in Uganda.

If the assignee has been contributing the social security, they will be required to make an application for the social security claim.

When arriving in Uganda, an assignee will be required to apply for and obtain a Tax Identification Number, a social security number and the relevant visas/work permits. Social security registration is mandatory ONLY if the expatriate intends to stay in Uganda for more than 3 years and the employer has at least 5 employees.

Departure tax

What if the assignee comes back for a trip after residency has terminated?

There is no restriction, however the assignee would be required to obtain a tourist visa.

Communication between immigration and taxation authorities

Do the immigration authorities in Uganda provide information to the local taxation authorities regarding when a person enters or leaves Uganda?

It is not common for immigration authorities to share information with the tax authorities. However, the taxation authorities may communicate to the immigration authorities if the assignee has outstanding taxes to be paid to the tax authority.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

No. Once an assignee has left Uganda and de-registered for taxes, there is no requirement to file tax returns in Uganda.

Economic employer approach

Do the taxation authorities in Uganda adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Uganda considering the adoption of this interpretation of economic employer in the future?

The taxation authorities exempt employment income if the conditions as set out in Article 15 of the OCED treaty are met. For anyone to benefit from the treaty, they must be resident in the other contracting state.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable

Types of taxable compensation

What categories are subject to income tax in general situations?

Employment income including benefits of any kind provided to the assignee by virtue of their employment in the company. The taxable benefits include:

  • accommodation education allowance
  • meals (provided it is not provided at the employers’ premises or during the course of operations and to all staff on an equal basis)
  • private travel
  • and any other benefit provided to the employee.

Intra-group statutory directors

Will a non-resident of Uganda who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Uganda trigger a personal tax liability in Uganda, even though no separate director's fee/remuneration is paid for their duties as a board member?

Yes.

Directorship of the company is defined as employment under Section 2(z) (ii) of the Income Tax Act. Based on this, the remuneration to a Director who is a member of a Board of Directors for a company situated in Uganda would be subject to tax in Uganda.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Uganda?

Yes. As long as the Director is remunerated for their role as Director of the Ugandan entity, their remuneration will attract tax in Uganda.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Uganda (i.e. as a general management fee where the duties rendered as a board member is included)?

Yes. In case the costs are directly or indirectly charged to the company in Uganda, the taxation of this income is triggered in respective of whether the member is physically present at the board meetings.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

The taxable income would be the cost that is directly or indirectly booked relating to the payment to the directors.

Tax-exempt income

Are there any areas of income that are exempt from taxation in your country/jurisdiction? If so, please provide a general definition of these areas.

  • Any benefit that is provided to an employee with a value not exceeding UGX10,000 (currently equivalent to 2.8 US dollars (USD))
  • 10 percent monthly NSSF contribution for employees.
  • Medical and life insurance provided to an employee. Please note that Life insurance exemption only applies where the employer is a tax paying entity.
  • Cost of passage to and from Uganda in respect to the particular employment to be exercised in Uganda.

Expatriate concessions

Are there any concessions made for expatriates in your country/jurisdiction?

Yes. This is dependent on the bi-lateral agreements between the Government of Uganda and the Foreign Government or International Development Agency.

Salary earned from working abroad

Is salary earned from working abroad taxed in Uganda If so, how?

For assignees who meet the definition of residents as defined above, income from all geographical areas is taxed. However, they are entitled to credits of tax paid abroad. This does not apply to short term residents who are present in Uganda for a period of not more than 2 years.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in your country/jurisdiction? If so, how?

Dividends, interest, and rental income

Yes.

We summarize below the applicable rates of tax.

Description

Amount of tax

Dividend and interest income

15%

Rental income

For resident individuals, the tax rate is 20% of the chargeable income exceeding 2,820,000.

Nonresidents are taxed at 15% on the rental income earned

Gains from employee stock option exercises

Yes. This is included in the individual’s employment income and taxed based on the PAYE rates as stated above.

Foreign exchange gains and losses

No.

Principal residence gains and losses

No

Capital gains

Yes, capital gains are taxed at the individual income tax rates specified above.

Capital losses

No.

Personal use items

Yes.

Gifts

Yes.

Foreign property reporting

Yes for resident individuals.

Non-resident trusts

The income derived from Uganda by a non-resident trust is taxed either to the trustee or to the beneficiaries of the trust at a rate of 30 percent.

Additional capital gains tax (CGT) issues and exceptions

Are there capital gains tax exceptions in your country/jurisdiction? If so, please discuss.

Pre-CGT assets

Yes. The following categories are exempt from CGT:

  • a transfer of an asset between spouses
  • a transfer of an asset between former spouses as part of a divorce settlement of bona fide separation agreement
  • an involuntary disposal of an asset to the extent to which the proceeds are reinvested in an asset of a like within 1 year of the disposal; or
  • the transmission of an asset to a trustee or beneficiary on the death of a taxpayer. any capital gain not included in business income

Deemed disposal and acquisition

Yes.

  • Assets are deemed to be disposed when the asset has been:
  • sold, exchange, redeemed or distributed by the taxpayer transferred by the taxpayer by way of gift
  • destroyed or lost; or
  • when there is a direct or indirect change of ownership of the company by 50 percent or more.

General deductions from income

What are the general deductions from income allowed in your country/jurisdiction?

Expenses or losses incurred by the person in the production of income included in gross income for the year of income.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in your country/jurisdiction?

Tax equalization.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in your country/jurisdiction? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYE), and so on.

Withholding tax and PAYE are accounted for on a monthly basis.

When are estimates/prepayments/withholding of tax due in your country/jurisdiction? For example, monthly, annually, both, and so on.

Withholding tax and PAYE is accounted for within 15 days after the end of the month in which payment was made.

Provisional income tax returns are paid in four installments on a quarterly basis.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in your country/jurisdiction? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Yes, to the extent that the foreign tax was paid and does not exceed the tax that would have ordinarily been paid had the income been earned in Uganda.

General tax credits

What are the general tax credits that may be claimed in your country/jurisdiction? Please list below.

Provisional tax paid, Foreign tax credits, Withholding tax credits.

Sample tax calculation

This calculation assumes a married taxpayer resident in Uganda with two children (spouse is not working), whose 3-year assignment begins 1 January 2019 and ends 31 December 2021. The taxpayer’s base salary is USD100,000 and the calculation covers 3 years.

 

2019

USD

2020

USD

2021

USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

12,500

12,500

12,500

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000

Other assumptions

  • All earned income is attributable to Ugandan sources, except interest income. Current 2019-tax rates are applied for 2020 and 2021 tax calculations.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • The company car is used for business and private purposes and originally costs in 2019 USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties are ignored for the purpose of this calculation, i.e. this is only a Ugandan tax calculation.
  • The employee lives in Kampala Uganda. The spouse has no income. 

Calculation of taxable income

Year-ended

2019

USD

2020

USD

2021

USD

Days in Uganda during year

365

365

365

Earned income subject to income tax

 

 

 

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car*

12,500

12,500

12,500

Moving expense reimbursement**

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Personal income

177,500

162,500

177,500

Interest income

6,000

6,000

6,000

Annual nontaxable threshold ***

762

762

-762

Total taxable income

182,738

167,738

182,738


Calculation of tax liability

 

2019

USD

2020

USD

2021

USD

Taxable income as above

182,738

167,738

182,738

Total Ugandan tax

72,798

66,798

72,798

Less:

 

 

 

Foreign tax credits

0

0

0


* Please note that this is not included as taxable income to the extent to which it relates to passage to and from Uganda after end of contract.

** Exchange rate: USD1: UGX3,700

*** The value of the motor vehicle benefit is calculated based on the number of days available for use and value depreciated at a rate of 35 percent annually.

Disclaimer:

All information contained in this publication is summarized by KPMG Tax regulatory services, the Ugandan limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on the Ugandan Income Tax Act Chapter 340 as amended; the National Social Security Fund Act Chapter 222; the Local Governments Act Chapter 243; the Uganda Citizenship and Immigration Control Act Chapter 66 as amended; and the Web site of the Ministry of Internal Affairs.

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