UGANDA, Kampala | Real Muloodi News | The Uganda Revenue Authority (URA) held a virtual conference on July 27, 2022 to educate the public on the new incentives available to taxpayers in the construction and tourism sectors.
Jude Ochieng, Tariff Supervisor for URA, says the government wants to boost the infrastructural development of Uganda, thereby easing the movement of people and businesses, while also encouraging growth in tourism.
“Government has thought that the vehicles that spur the development of infrastructure should come in with no tax or with as little as possible tax imposed on them,” Jude Ochieng said.
The tax authority urges investors to tap into the construction sector, as Government aims to invest in the construction of airports, oil pipelines, waterways, and railway systems, seeking a strategic partnerships with different investors to boost the construction of much needed infrastructure.
The construction sector is also critical for addressing Uganda’s housing deficit, which currently stands at 2.4 million housing units, out of which 210,000 units are in urban areas and 1.395 million units in rural areas. An estimated 900,000 units are substandard and in need of replacement or upgrading.
Tax Incentives in the Construction Sector
Infrastructure plays a big role in spurring development because it reduces the production costs and the time turnaround of goods and services. It also makes Uganda’s economy more competitive.
Therefore, Government has removed Value Added Tax (VAT) on capital equipment imported by a VAT-registered person. For example, concrete mixers are an item heavily relied upon in the construction sector that is exempted from tax duties and VAT deferment.
“When you’re VAT registered and you engage into production, or the supply of a vatable service, the government wants that equipment to be VAT0free because it will collect the VAT at the point when you start producing the service,” Jude said.
This also applies to products whose VAT exceeds 4000 dollars.
Other VAT-free items include earth movers, cranes for construction, and scaffolding for high-raised buildings such as airports or commercial structures. They all qualify for VAT deferment.
Equipment used in road construction and by surveyors like the Finders, and GPSs, no longer attract tax. This is to make it cheaper for people to carry out these activities.
Dump trucks that range from 5 to 20 tonnes now only attract 10% duty tax, and those exceeding 20 tonnes, attract no duty at all, yet it was initially 25%.
In a move to protect Uganda’s well-established steel and cement industries, the government has has increased taxes on imports in these areas. The policy is designed to favor local manufacturing of steel and cement, who face stiff competition from cement producers from UAE which had very low-cost cement. By protecting these industries, they also protect suppliers of limestone, and quarry workers, among others.
To encourage people to set up industrial parks, the government have removed VAT and duty on equipment used to establish these parks. Construction industries are being helped to grow by receiving tax incentives like pre-fabricated buildings such as production companies and construction of industrial parks such as Namanve, Mbale, Tanshan, Kapeeka etc.
Uganda is also developing the oil industry under the East African Community Oil Pipeline project, and the government has offered an exemption to contractors.
All contractors engaged in oil and gas will bring in all the equipment tax-free. This is to reduce government expenditure on such projects, and also benefit the economy. This, however, applies to only licensed contractors.
One can bring in any equipment from any neighbouring country temporarily for the time of your importation without being taxed. For example, if one is an international contractor working in Uganda, Rwanda and others, the only requirement is to execute a bond to protect the would-be taxes and then bring the equipment tax-free. At the end of the implementation period, one can carry the equipment out of the country.
Hydro-supply power projects have also been exempted from tax. Initially, Uganda had a problem with load-shedding. One could not spend three days in the neighbourhood without a power blackout, however, it is not the case nowadays. This is because the government has reduced the cost of power production to ease the development of hydropower projects.
Tax Incentives in the Tourism Sector
The incentives in the tourism sector are under the law of the East African Customs Management Act and will improve hospitality towards the tourists through serving healthy and diverse meals.
Items in the kitchen that are associated with the preparation of food like dishes, cutlery, and saucepans, among others, shall be exempted from tax as long as they bear the hotel logo of a hotel licensed to carry out hotel business in Uganda.
A cooker also has a tax incentive because different tourists have a particular way they would want their food to be cooked. It is therefore exempted from all taxes.
Fridges and freezers are also exempted from tax under the 5th schedule of the East African Management Customs Act.
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