UGANDA Trends and Developments Contributed by: Arnold Lule Sekiwano, Ritah Nakalema, Evelyn Maria Nakigudde and Collette Melvina Awano, Engoru, Mutebi Advocates
Income Tax (Amendment) Act 2024 Income derived by private equity and venture capital funds regulated by the Capital Markets Authority is now tax exempt. The prior provision that granted non- recognition of capital gains tax on the sale of invest - ment interests in a registered venture capital fund, as long as at least 50% of the sale proceeds were rein - vested within the year of income, has been repealed. This is predicted to increase M&A activity by venture capital firms in Uganda owing to an improved fiscal climate. Investors that, within ten years from the com - mencement of business or additional capital invest - ment, invest at least USD10 million (for foreigners) or USD300,000 (for Ugandans in urban areas) or USD150,000 (for Ugandans upcountry) qualify for tax exemptions. However, such investors must meet these conditions: • at least 70% of their raw materials must be locally sourced, subject to availability; • at least 70% of their employees must be Ugandan, earning an aggregate wage of at least 70% of the total wage bill; and • they must be engaged in the manufacture of elec - tric vehicles, electric batteries or electric vehicle charging equipment; the fabrication of electric vehicle frames and bodies; or the operation of spe - cialised hospital facilities. The definition of a branch was replaced with “perma - nent establishment” to align with the nomenclature under the international tax treaties to which Uganda is party, defining it as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Exemption from stamp duty Investors acquiring shares in a private equity or ven - ture capital fund, or private equity or venture capi - tal funds regulated by the Capital Markets Authority,
are not required to pay stamp duty on nominal share capital or any increase of share capital, or a transfer of shares or other securities, to or by them. Additionally, instruments such as debentures and fur - ther charges, among others, executed by these enti - ties are exempt from stamp duty if the manufactur - ers substitute at least 30% of the value of imported products. However, some of the thresholds to be met by entities already operating in strategic investment projects to qualify for stamp duty exemptions were increased; eg, they should also: • have the capacity to use at least 80% (previously 50%) of locally produced raw materials, subject to availability; and • have at least 80% of employees who are citizens earning an aggregate wage of at least 80% of the total wage bill, as opposed to merely having the capacity to employ a minimum of 100 citizens. Companies (Beneficial Owners) Regulations 2023 The Companies (Beneficial Owners) Regulations 2023 require legal entities to maintain a register of beneficial owners containing “beneficial ownership information” and notify the registrar of companies through timely filing of a beneficial ownership form at the URSB. The penalty for non-compliance is the refusal of the regis - trar to accept subsequent filings on the company file in addition to a statutory fine of UGX500,000 (approx. USD135) for every corporate officer of the company for each day the company is in default. A beneficial owner is defined as a natural person who has the final ownership or control of the company or a natural person on whose behalf a transaction is con - ducted in a company, including a natural person who exercises ultimate control over a company. Thus, for companies with corporate shareholders, the beneficial owners are the individuals owning or controlling the corporate shareholder.
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