DOMESTIC & INTERNATIONAL TAXATION IN UGANDA: The Law, Principles and Practice

Domestic and International
Taxation in Uganda
The Law, Principles and Practice
Joseph O. Okuja

Domestic and International Taxation in Uganda
I
First Edition - Published in 2016 with the Title:
“TAXATION OF INCOME AND CONSUMPTION IN UGANDA:
The Law and Practice”
Second Edition - Published in 2019 with the Title:
DOMESTIC AND INTERNATIONAL TAXATION IN UGANDA:
The Law, Principles and Practice
Copyright: Joseph O. Okuja, 2019
This book is Copyright.
Except to the extent of the uses permitted under the Copyright and Neighbouring
Rights Act 2006, no part of this publication may be reproduced or transmitted in
any form or by any means without the prior written consent of the author.
All Rights Reserved.
ISBN: 978-9970-9613-2-0
Cover Design, Print and Binding by Envisage Solutions INC.
Email: envisagesolutions14@gmail.com | Tel. +256 (0) 782 272394

II
What started in 2005 as an effort towards improving domestic tax administration
after being put in charge of Tax Audit Quality Assurance in the Domestic Taxes
Department of Uganda Revenue Authority has metamorphosed into this book
which covers the law, the principles and the practice under domestic and
international taxation in Uganda. This text has emerged from my various
accomplishments as a tax official, some of which involved compiling an updated
compendium of the domestic tax laws of Uganda, streamlining tax procedures
through issuance of operational guidelines, drafting the Domestic Tax Audit
Handbook, the Tax Procedures Code Act, re-engineering tax procedures for the
development of URA’s e-tax integrated tax administration system, and preparing
the URA training syllabus and materials for staff training purposes. I must admit
that many people have contributed in one way or another, directly or indirectly, to
my determination and ability to produce this book. Moreover, many have
encouraged me tremendously. Individually thanking everyone who contributed
towards the accomplishment of this work is therefore not possible. For that reason,
I want to convey my sincere gratitude for their support.
I want to especially thank my colleagues at TASLAF Advocates & Consultants, who
were very enthusiastic about this book. I give credit to Stephen Tumwesigye and
Robert Musoke who persuaded me to have it published. Cordelia Akahirwa, Gladys
Namata Kikule, Florence Kabagumya, Jemimah Atukunda and Sheila Magezi, thank
you for taking time to peruse and identify the typo errors, grammatical omissions
and commissions in the draft. Your contribution in ensuring that the language used
is simple and comprehensible to an ordinary person should provide a seamless
narrative for the readers. For any errors or misrepresentations, I take full and
personal responsibility.
Last but not least, my gratitude goes to my former boss and current Commissioner
General of URA, Ms. Doris Akol, who took time off her busy schedule to review
this work and write a Foreword endorsing and recommending it as a good source of
reference for any academic effort on taxation in Uganda, including its use by tax
administrators. Her input and enthusiasm inspired and gave me confidence to keep
working towards improving the content of this book, thus the publication of this
2nd
Edition. Thank you all and may God continue to bless you.

IV
If there is any frequently changing subject that tax officials, practising lawyers,
accountants and other tax professionals must reckon with, then that subject is tax.
Tax is complicated and yet mastery of tax is a must do and must have for any
business and entity that aspires to grow and thrive. Many people are looking for
knowledge and answers on how they can get hold of all matters tax for their
business, financial and investment decision making. Tax administrators and tax
jurists alike must also keep abreast of developments in the tax arena if they are to
remain relevant in their spheres of influence.
This book
could possibly be described as a one-stop centre
for all your questions and answers regarding the current position of the law and
practice on Domestic and International Taxation in Uganda. First published in 2016
with the title
this book contains a comprehensive analysis of all precepts, principles,
practices and perspectives arising in the taxation of income on natural and legal
persons in Uganda. No other publication offers as much coverage and analysis of
the tax system in Uganda. This makes it mandatory reading for anyone with the
desire to understand taxation in Uganda as a student, practitioner, teacher or even
arbiter in tax disputes.
The First Edition was a primer providing a comprehensive guide to all the key
issues in the taxation of income and the supply of goods and services. Although it
predominantly focused on income taxation, and this is because of the numerous
principles that income taxation covers, the last chapters that analysed the law and
practice in the administration of Value Added Tax (VAT) provided basic to
intermediate knowledge of the workings of the VAT regime. The author made a
complex subject understandable to the average person by giving an insight to
readers about the basic principles of direct and indirect taxes in Uganda.
This Second Edition has been updated to incorporate recent income tax and VAT
developments, and expanded to cover other indirect taxes applicable in Uganda.
The changes in this Edition continue to broaden the subject base and provide
current updates, thus ensuring that the text adheres to the ever changing policy
choices adopted by the government. It provides a comprehensive approach to some
of the most critical and problematic areas of taxation encountered by tax
practitioners when applying the following laws:

V
1. The Income Tax Act (ITA);
2. The Value Added Tax Act (VATA);
3. The Excise Duty Act (EDA);
4. The Stamp Duty Act (SA);
5. The East African Community Customs Management Act (EACCMA);
6. The Lotteries and Gaming Act (LGA); and
7. The Tax Procedures Code Act (TPCA).
The author’s goal in this Second Edition is to provide a reference book on all
applicable taxes in Uganda in a simple way that taxpayers and tax experts alike can
rely on as a quick one-stop source of the tax laws and the principles that underpin
them, including the practices adopted for their implementation. It is systematic,
insightful and contains a myriad of legal and procedural details that are crucial for
the practical application of tax law. Each chapter emphasizes the fundamental
principles of the topic and their relationship to the overall framework of the
Ugandan tax system. It is a comprehensive and all-inclusive resource that will save
you countless hours of research, time and money.
The text is structured with a view to enabling a proper understanding of the
philosophy and principles that guide tax administration in Uganda. It then goes on
to explain both legal and economic concepts that underlie the tax laws in Uganda,
touching virtually on all areas and vehicles through which income can be earned. It
is valuable in providing reading material in new areas of taxation of retirement
funds, natural resources, oil and gas, trusts and estates, as well as in areas that suffer
a dearth of literature such as the law and practice principles of International
Taxation, Tax Treaties and Transfer Pricing.
Over the more than twenty years I have worked in tax administration, I have been
involved in ensuring that tax officials and taxpayers alike navigate the complexities
associated with taxation, while contributing towards developing Uganda together by
complying with tax obligations. I am therefore proud to write the Foreword to a
book that reflects my career path. On a more personal note, I worked with the
author in URA and it is gratifying to see him utilize his vast knowledge and
experience to explain the principles, concepts and procedures of direct and indirect
taxation in Uganda very lucidly. I encourage everyone to take advantage of the
insightful information in this book, while bearing in mind that circumstances differ
for every taxpayer and the tax laws apply differently to those circumstances.
Understanding tax law principles is therefore crucial to the proper application of the
tax laws in day to day events, transactions and business decisions.

VI
The structure and content of the book qualifies it to be mandatory reading and
reference material for any academic effort on taxation in Uganda. I particularly like
the fact that it is written simply and it can be read, cover to cover, by anyone who
wants to get an overview of taxation in general and a sense of how various tax
issues in the different laws relate to each other. This makes it easy reading material
even for experienced practitioners who are looking to refresh their knowledge on
taxation in Uganda. I therefore highly recommend the book for those of us in tax
administration and I commend the author for adding valuable material to the body
of tax literature that will, without doubt, play a significant role in shaping the
direction and content of tax jurisprudence in Uganda. For many years to come, it
will serve as a comprehensive guide for the analysis of a wide range of tax policy
and tax administration issues. Going forward (barring a major overhaul to the
existing tax regime), any revisions to the tax laws are unlikely to render the reader’s
knowledge obsolete. Only minor adjustments on how to apply the knowledge will
be necessary.
Doris Akol
Commissioner General
Uganda Revenue Authority

VII
This book by Mr. Joseph O. Okuja is one of the best books on the Ugandan tax
system that is on the market. His practical experience in tax administration and in
handling policy issues is reflected in the rich literature and practical aspects in the
different chapters. He has made an effort to make it as up-to-date as possible with
new developments such as the tax procedures code (TPCA), taxation of petroleum
operations and the chapter on tax treaties being of much value to a reader.
I highly recommend this book to CPA (U) students, PODITRA students and all
university students pursuing business studies. Tax practitioners and URA staff will
find it a very useful reference material.
Begumisa Protazio CPA
President (2016/2017)
Institute of Certified Public Accountants of Uganda
Joseph Okuja has once again covered all aspects of tax law in Uganda in masterly
detail in this publication. I have been privileged enough to see his work at first hand
during his tenure as Tax Director at Grant Thornton Taxation Services Limited and
find this book a reflection of his art of interpretation of the tax laws, and putting it
in practice. I am happy that he has authored this book covering all areas of tax
which is much needed by various stakeholders.
The book provides a thorough understanding of the tax principles and manages to
capture both the intention and spirit of the law effortlessly. I am particularly
impressed that the Second Edition now includes content on Customs, Excise,
Stamp Duties, and Lotteries and Gaming Act. These inclusions in the book assist
professionals like us in backing up our research and help us to provide appropriate
advice to our clients.
I have no hesitation in recommending this book to students, tax practitioners and
those with a passion to understand and implement domestic tax laws in Uganda.
Anil Patel
Managing Partner
Grant Thornton Uganda CPA

i
...................................................................................................................... - 1 -
DISCLAIMER..............................................................................................................- 3 -
................................................................................................. - 5 -
Rights and Obligations under the Tax Procedures Code Act................................ - 5 -
Income Taxation .................................................................................................... - 6 -
Value Added Taxation (VAT)................................................................................. - 6 -
Customs Duties ..................................................................................................... - 6 -
Excise Duties......................................................................................................... - 7 -
Stamp Duties ......................................................................................................... - 7 -
Gambling & Lotteries Taxation .............................................................................. - 7 -
.................................................................................................................. - 8 -
........................................................................................ - 8 -
OVERVIEW ................................................................................................................- 8 -
COMPLEXITY OF TAX LAWS..................................................................................- 10 -
ROLE OF TAXATION ...............................................................................................- 12 -
PRINCIPLES OF TAXATION....................................................................................- 14 -
Equity................................................................................................................... - 14 -
Progressive and Regressive Taxes..................................................................... - 16 -
Economic Efficiency and Neutrality ..................................................................... - 16 -
Flexibility and Adequacy...................................................................................... - 17 -
Certainty and Simplicity ....................................................................................... - 17 -
................................................................................................................ - 19 -
.......................................................................... - 19 -
THE LEGAL SYSTEM ..............................................................................................- 19 -
THE BUDGET PROCESS AND TAXATION.............................................................- 20 -
Budget Preparation and Parliamentary Approval................................................ - 23 -
Budget Implementation and Audit ....................................................................... - 23 -
General Legislative Process for Bills................................................................... - 24 -
INTERACTION BETWEEN TAX LAW AND OTHER LAWS .....................................- 26 -
CONSTITUTIONAL VALIDITY OF TAX LAW...........................................................- 28 -
Constitutionality of the Requirement to Pay 30% before Appeal ........................ - 31 -
DISTINCTION BETWEEN CIVIL AND CRIMINAL LAW...........................................- 32 -
HIERARCHY OF COURTS IN TAX MATTERS ........................................................- 35 -
JURISDICTION IN TAX DISPUTES .........................................................................- 36 -

Table of Contents
ii
SOURCES OF TAX LAW......................................................................................... - 38 -
................................................................................................................- 41 -
.............................................- 41 -
OVERVIEW ............................................................................................................. - 41 -
TAX ADMINISTRATION IN UGANDA ..................................................................... - 42 -
Autonomy in Revenue Administration .................................................................- 43 -
URA Administration .............................................................................................- 44 -
Delegation, Powers and Authority of the Commissioner .....................................- 46 -
LEGAL CONCEPTS IN TAX LAW ADMINISTRATION............................................ - 47 -
Separation of Powers ..........................................................................................- 47 -
Rule of Law..........................................................................................................- 48 -
Natural Justice .....................................................................................................- 49 -
Ultra Vires ............................................................................................................- 50 -
Estoppel...............................................................................................................- 50 -
Procedural Rules .................................................................................................- 52 -
Procedural Fairness.............................................................................................- 53 -
Legitimate Expectation ........................................................................................- 54 -
Legitimate Expectation in the Tax Administration Context ..................................- 56 -
Doctrine of Supervening Illegality ........................................................................- 57 -
Discretionary Powers...........................................................................................- 57 -
Judicial Review ....................................................................................................- 59 -
Invalidation of Actions and Retrospective Effect .................................................- 62 -
Binding Precedent ...............................................................................................- 64 -
................................................................................................................- 67 -
.....................................................................................- 67 -
OVERVIEW ............................................................................................................. - 67 -
Direct and Indirect Taxation.................................................................................- 68 -
The effect of Taxes ..............................................................................................- 70 -
TAX REFORM IN UGANDA..................................................................................... - 71 -
Justification for Progressive Taxation..................................................................- 72 -
................................................................................................................- 73 -
...........................................................................- 73 -
OVERVIEW ............................................................................................................. - 73 -
TAX LAW INTERPRETATION................................................................................. - 74 -
SECTIONS, PARTS AND SCHEDULES ................................................................. - 76 -
Sections ...............................................................................................................- 76 -
Parts.....................................................................................................................- 77 -
Schedules ............................................................................................................- 77 -
RULES OF INTERPRETATION............................................................................... - 77 -
Literal Rule...........................................................................................................- 78 -

iii
The Tax Perspective............................................................................................ - 78 -
Purposive Approach ............................................................................................ - 81 -
Mischief Rule ....................................................................................................... - 81 -
Golden Rule......................................................................................................... - 82 -
Rule of Beneficial Construction ........................................................................... - 83 -
Rule of Harmonious Construction........................................................................ - 84 -
Construction of Charging Sections...................................................................... - 85 -
Construction of Relief Provisions ........................................................................ - 85 -
Construction of Procedural Sections ................................................................... - 86 -
Construction of Penal Provisions ........................................................................ - 86 -
Construction of Definitions................................................................................... - 87 -
The Rule of “Generalia Specialibus Non Derogant”............................................ - 87 -
Practice Notes and Notifications.......................................................................... - 87 -
Vested Rights after Repeal, Amendment or Re-enactment ................................ - 88 -
Deeming Provisions............................................................................................. - 89 -
‘Non Obstante’ Expressions ................................................................................ - 91 -
Use of Same Words ............................................................................................ - 91 -
Mandatory or Directory Provisions ...................................................................... - 91 -
Statutory Silence ................................................................................................. - 92 -
Operative Dates of Statutes and Provisions........................................................ - 93 -
Statute of Limitations ........................................................................................... - 96 -
Deadlines for Administrative Action..................................................................... - 97 -
Administrative Silence ......................................................................................... - 98 -
OTHER AIDS TO STATUTORY INTERPRETATION.............................................- 100 -
Intrinsic Aids ...................................................................................................... - 100 -
Extrinsic Aids ..................................................................................................... - 101 -
.............................................................................................................. - 104 -
................... - 104 -
OVERVIEW ............................................................................................................- 104 -
Tax Period ......................................................................................................... - 105 -
Self-Assessment................................................................................................ - 106 -
Tax Decision...................................................................................................... - 107 -
REGISTRATION AND TAX IDENTIFICATION NUMBERS....................................- 108 -
ASSESSMENT .......................................................................................................- 110 -
SELF- ASSESSMENT ............................................................................................- 111 -
ADMINISTRATIVE ASSESSMENTS .....................................................................- 113 -
TAX RETURNS ......................................................................................................- 116 -
TAX COLLECTION AND PAYMENT ......................................................................- 117 -
DUE DATE FOR PAYMENT OF TAX .....................................................................- 118 -
Due Date for Payment of Self-Assessed Tax.................................................... - 118 -
Due Date for Payment of Tax in Administrative Assessments.......................... - 119 -
Due Date for Payment of VAT........................................................................... - 120 -
Interest on Late Payment of Tax ....................................................................... - 120 -

Table of Contents
iv
Interest on Refunds ...........................................................................................- 121 -
Demand and Collection of Outstanding Tax......................................................- 123 -
Liquidation & Priority of Tax Debt ......................................................................- 124 -
What to do when faced with Challenges in paying Taxes .................................- 126 -
ENFORCED COLLECTION................................................................................... - 128 -
Distress Proceedings.........................................................................................- 128 -
Preferential Claim to Assets through Tax Liens ................................................- 129 -
Temporary Closure of Business ........................................................................- 130 -
Prevention from Departure ................................................................................- 130 -
Security for Tax..................................................................................................- 131 -
Seizure of Goods ...............................................................................................- 131 -
Agency Notices to Third Parties ........................................................................- 132 -
ALLOCATION OF TAX PAYMENTS...................................................................... - 134 -
OVERPAID TAX AND REFUNDS.......................................................................... - 135 -
ACCOUNTS AND RECORDS ............................................................................... - 136 -
The Importance of Keeping Business Records .................................................- 136 -
FURNISHING DOCUMENTS AND SERVICE OF NOTICES ................................ - 138 -
From the Commissioner to the Taxpayer ..........................................................- 138 -
From the Taxpayer to the Commissioner ..........................................................- 138 -
PRACTICE NOTES ............................................................................................... - 139 -
Announcements, Publications and Public Notices ............................................- 140 -
PRIVATE RULINGS............................................................................................... - 140 -
NOTICES, RULINGS AND THE LAW.................................................................... - 142 -
..............................................................................................................- 143 -
.............................................................- 143 -
OVERVIEW ........................................................................................................... - 143 -
Investigative Function ........................................................................................- 143 -
Audit Function....................................................................................................- 145 -
TYPES OF TAX AUDITS ....................................................................................... - 145 -
HOW TO PREPARE FOR AND MANAGE TAX AUDITS....................................... - 146 -
Facilitating a Smooth Tax Audit.........................................................................- 148 -
..............................................................................................................- 150 -
......................................................- 150 -
TAX REPRESENTATIVES & THE CORPORATE VEIL ........................................ - 150 -
TAX REPRESENTATIVES AND THEIR ROLES................................................... - 151 -
Persons Designated as Tax Representatives ...................................................- 152 -
Recovery of Tax from Tax Representatives ......................................................- 153 -
Personal Liability of Tax Representatives .........................................................- 153 -
TAX AGENTS AND THEIR REGULATION............................................................ - 154 -
Rationale for Tax Agent Registration.................................................................- 154 -
Tax Agents and their Roles ...............................................................................- 155 -
Application for Registration as Tax Agent .........................................................- 156 -

v
Registration of Tax Agents ................................................................................ - 156 -
Registration of Additional or Substituted Tax Agents........................................ - 158 -
Notification of Changes in Partnerships and Companies.................................. - 158 -
CANCELLATION OF TAX AGENT REGISTRATION .............................................- 159 -
By the Tax Agent ............................................................................................... - 159 -
By the Committee .............................................................................................. - 159 -
.............................................................................................................. - 161 -
........................................................................ - 161 -
OVERVIEW ............................................................................................................- 161 -
HOW DO TAX DISPUTES ARISE? ........................................................................- 162 -
OBJECTIONS & APPEAL PROCESS....................................................................- 162 -
Who Can Object to a Tax Decision ................................................................... - 163 -
What Constitutes a Valid Objection?................................................................. - 164 -
Making an Objection Decision........................................................................... - 165 -
Effect of an Objection Decision ......................................................................... - 166 -
Application for Review before TAT.................................................................... - 167 -
Procedures at the Tax Appeals Tribunal ........................................................... - 168 -
BURDEN OF PROOF.............................................................................................- 170 -
............................................................................................................ - 172 -
............... - 172 -
OVERVIEW ............................................................................................................- 172 -
Penalties Model ................................................................................................. - 174 -
Recovery of Penal Tax ...................................................................................... - 175 -
Protection against Double Jeopardy ................................................................. - 175 -
DEFAULT IN FURNISHING A TAX RETURN.........................................................- 176 -
FAILURE TO MAINTAIN OR KEEP PROPER RECORDS.....................................- 177 -
MAKING FALSE OR MISLEADING STATEMENTS...............................................- 178 -
What amounts to making a “False or Misleading” Statement? ......................... - 179 -
What is a “Material Particular”? ......................................................................... - 180 -
Making a Statement “Knowingly or Recklessly”? .............................................. - 181 -
UNDERSTATING PROVISIONAL TAX ESTIMATES.............................................- 182 -
FAILING TO APPLY FOR REGISTRATION...........................................................- 183 -
REMISSION OF PENALTIES.................................................................................- 183 -
OFFENCES UNDER THE ACT ..............................................................................- 183 -
Compounding of Offences................................................................................. - 184 -
IGNORANCE OF THE LAW IN TAX VIOLATIONS.................................................- 185 -
CRIMINAL PROSECUTION OF TAX OFFENCES.................................................- 188 -
............................................................................................................ - 190 -
........................................................... - 190 -
WHAT IS INCOME..................................................................................................- 190 -

Table of Contents
vi
Negative Propositions of Income.......................................................................- 191 -
Positive Propositions of Income ........................................................................- 194 -
BUSINESS AND NON-BUSINESS ACTIVITIES ................................................... - 195 -
INDICATORS OF A TRADING ACTIVITY ............................................................. - 196 -
Profit Seeking Motive.........................................................................................- 198 -
Number of Transactions ....................................................................................- 200 -
Nature of the Property .......................................................................................- 201 -
Existence of Similar Trading Transactions or Interests .....................................- 203 -
Changes or Alterations made to the Asset........................................................- 203 -
The Way the Sale was Carried Out ...................................................................- 204 -
Source of Finance..............................................................................................- 205 -
Period of Ownership ..........................................................................................- 205 -
Method of Acquisition ........................................................................................- 206 -
Memorandum and Articles of Association .........................................................- 206 -
REVENUE RECEIPTS AND CAPITAL RECEIPTS ............................................... - 206 -
REVENUE EXPENDITURES & CAPITAL EXPENDITURES ................................ - 208 -
RESIDENCE AND NON-RESIDENCE .................................................................. - 210 -
Residence of Individuals....................................................................................- 211 -
Illustration – Determining Residence for Individuals .........................................- 215 -
Residence of Legal Entities (Companies or Non-individuals) ...........................- 215 -
Non-Resident Persons.......................................................................................- 216 -
Tax Treaties and Residence..............................................................................- 217 -
............................................................................................................- 219 -
.............................................................................- 219 -
OVERVIEW ........................................................................................................... - 219 -
STRUCTURE OF INCOME TAX IN UGANDA....................................................... - 219 -
INCOME TAX DESIGN.......................................................................................... - 220 -
HOW INCOME IS TAXED UNDER THE INCOME TAX ACT................................. - 221 -
Charging Section ...............................................................................................- 222 -
Mutually Exclusive Categories of Income..........................................................- 224 -
A person who derives rental income .................................................................- 224 -
A person who derives Presumptive income ......................................................- 225 -
Exempt income ..................................................................................................- 225 -
General insurance income.................................................................................- 226 -
Non-Resident telecommunication income .........................................................- 226 -
Final withholding income ...................................................................................- 227 -
Property income.................................................................................................- 228 -
Repatriated income............................................................................................- 228 -
Petroleum income..............................................................................................- 229 -
ILLUSTRATION – Categories of Income...........................................................- 230 -
CHARGE TO INCOME TAX................................................................................... - 231 -
ILLUSTRATION – Taxation of Income ..............................................................- 233 -
CHARGEABLE INCOME....................................................................................... - 234 -

vii
Expense and Loss Deductions.......................................................................... - 234 -
Carry Forward Assessed Losses....................................................................... - 240 -
Losses and Corporate Reorganisations ............................................................ - 241 -
Schemes involving Tax Losses ......................................................................... - 242 -
Local Service Tax Deduction............................................................................. - 243 -
RULES FOR DETERMINING CHARGEABLE INCOME ........................................- 244 -
Valuation............................................................................................................ - 244 -
Recouped Expenditures .................................................................................... - 244 -
Compensation Receipts .................................................................................... - 244 -
Illustration for Tax Treatment of Compensation Receipts ................................. - 245 -
Income and Capital Receipts............................................................................. - 245 -
Compensation that is Revenue in Nature.......................................................... - 246 -
Compensation that is Capital in Nature............................................................. - 246 -
Court Awards..................................................................................................... - 247 -
General Prescriptions for Taxation of Compensation Receipts ........................ - 248 -
VAT Considerations........................................................................................... - 251 -
Indirect Payments and Benefits......................................................................... - 252 -
TAX PERIOD FOR INCOME TAX ..........................................................................- 253 -
WITHHOLDING AGENTS & WITHHOLDING TAXES............................................- 254 -
Payments Subject to Withholding Tax under the Act ........................................ - 255 -
Right to Claim a Withholding Tax Refund ......................................................... - 260 -
Who is a Taxpayer?........................................................................................... - 261 -
Meaning of “assessed to” and “due by”............................................................. - 261 -
PERSONS ASSESSABLE OR LIABLE TO INCOME TAX .....................................- 263 -
Taxation of Individuals....................................................................................... - 263 -
Taxation of Partnerships and Partners.............................................................. - 263 -
Taxation of Trusts and Beneficiaries ................................................................. - 264 -
Taxation of Companies and Shareholders: ....................................................... - 265 -
CAPITAL DEDUCTIONS........................................................................................- 266 -
Depreciation Allowance (Wear & Tear Allowance)............................................ - 267 -
Initial Allowance................................................................................................. - 270 -
Industrial Buildings Deduction (IBD).................................................................. - 272 -
Mining and Petroleum Deductions .................................................................... - 274 -
Intangible Assets Deduction.............................................................................. - 274 -
Farming Income and Farm Works..................................................................... - 275 -
Horticultural Plant Deductions ........................................................................... - 276 -
Scientific Research Expenditure........................................................................ - 276 -
............................................................................................................ - 277 -
............... - 277 -
OVERVIEW ............................................................................................................- 277 -
DETERMINATION OF TAXABLE INCOME OR PROFITS.....................................- 278 -
TAX ACCOUNTING RULES...................................................................................- 280 -
Trading Stock or Inventory ................................................................................ - 281 -

Table of Contents
viii
TIMING RULES ..................................................................................................... - 282 -
Claim of Right ....................................................................................................- 282 -
Change in Accounting Method ..........................................................................- 283 -
DEFERRED TAX ASSETS & LIABILITIES ............................................................ - 283 -
Timing Differences.............................................................................................- 284 -
Permanent Differences......................................................................................- 284 -
Temporary Differences ......................................................................................- 285 -
FOREIGN CURRENCY EXCHANGE GAINS AND LOSSES ................................ - 287 -
Foreign Currency Debt ......................................................................................- 287 -
Tax Treatment of Forex Gains and Losses .......................................................- 288 -
Hedging Contracts .............................................................................................- 289 -
LONG-TERM CONTRACTS.................................................................................. - 292 -
Carry Forward & Cary Back of Losses ..............................................................- 292 -
Loss Carry Forward ...........................................................................................- 293 -
Loss Carry Back ................................................................................................- 294 -
LEASES................................................................................................................. - 295 -
............................................................................................................- 299 -
................................................................- 299 -
OVERVIEW ........................................................................................................... - 299 -
WHAT IS EMPLOYMENT INCOME?..................................................................... - 300 -
Distinction between Employees & Independent Contractors ............................- 301 -
WHAT IS EXCLUDED FROM EMPLOYMENT INCOME?..................................... - 303 -
Employee Share Acquisition Schemes..............................................................- 304 -
DIRECTORS’ INCOME.......................................................................................... - 306 -
CHANGES IN EMPLOYEE STATUS..................................................................... - 307 -
IRREGULARLY PAID EMPLOYEES..................................................................... - 308 -
LUMPSUM PAYMENTS BY EMPLOYERS ........................................................... - 308 -
Employee Lumpsum Payments exempted from Taxation.................................- 309 -
VALUATION OF EMPLOYEE BENEFITS ............................................................. - 310 -
EXPATRIATE TAXATION...................................................................................... - 312 -
............................................................................................................- 314 -
.......................- 314 -
TAXATION OF BUSINESS INCOME..................................................................... - 314 -
TAXATION OF PROPERTY OR INVESTMENT INCOME..................................... - 317 -
Dividends ...........................................................................................................- 318 -
Interest, Discounts & Premiums ........................................................................- 322 -
Royalty...............................................................................................................- 324 -
Natural Resource Payment................................................................................- 326 -
Annuity...............................................................................................................- 326 -
Rent.. .................................................................................................................- 327 -
Any Other Income..............................................................................................- 327 -
Income from Illegal Activities .............................................................................- 327 -

ix
BUSINESS STRUCTURES AND TAX IMPLICATIONS .........................................- 329 -
Sole Proprietorship ............................................................................................ - 329 -
Partnership ........................................................................................................ - 330 -
Company ........................................................................................................... - 331 -
SUBSIDIARY AND BRANCH PROFITS TAXATION..............................................- 332 -
Branch Profits Tax ............................................................................................. - 336 -
............................................................................................................ - 337 -
............................................................ - 337 -
OVERVIEW ............................................................................................................- 337 -
THE TRADITIONAL BANKING BUSINESS MODEL..............................................- 338 -
Liabilities............................................................................................................ - 338 -
Assets................................................................................................................ - 338 -
Credit Risk and Liquidity Risk............................................................................ - 339 -
Expected and Unexpected Losses.................................................................... - 339 -
BANKING TAXATION.............................................................................................- 340 -
Income Tax Considerations............................................................................... - 341 -
Recognition of Income and Costs ..................................................................... - 341 -
Trading versus Portfolio Income........................................................................ - 342 -
Bad Debts.......................................................................................................... - 342 -
Bad Loans and Loss Reserves.......................................................................... - 343 -
Accounting for Loss Reserves........................................................................... - 343 -
The Tax Accounting Problem ............................................................................ - 344 -
THIN CAPITALISATION AND FINANCIAL INSTITUTIONS...................................- 346 -
VAT CONSIDERATIONS .......................................................................................- 347 -
ISLAMIC BANKING AND FINANCE .......................................................................- 348 -
Overview............................................................................................................ - 348 -
Islamic Concepts and Structures....................................................................... - 348 -
Tax Considerations............................................................................................ - 348 -
............................................................................................................ - 352 -
........................................................................... - 352 -
OVERVIEW ............................................................................................................- 352 -
CATEGORIES OF RENTAL INCOME....................................................................- 353 -
Rental Income of an Individual .......................................................................... - 353 -
Rental Income of a Company............................................................................ - 353 -
Rental Income of a Retirement Fund ................................................................ - 354 -
Rental Income of a Trustee ............................................................................... - 354 -
Rental Income of an Estate ............................................................................... - 354 -
Rental Income of an Incapacitated Person’s Trust............................................ - 354 -
Rental Income of a Partnership......................................................................... - 355 -
Foreign Sourced Rent Income........................................................................... - 355 -
Rent Derived by a Non-Resident Person .......................................................... - 355 -

Table of Contents
x
............................................................................................................- 356 -
.......................................................- 356 -
PRESUMPTIVE TAXATION .................................................................................. - 356 -
Why Presumptive Taxation?..............................................................................- 358 -
Determination of Tax Payable ...........................................................................- 358 -
............................................................................................................- 360 -
................................................................- 360 -
OVERVIEW ........................................................................................................... - 360 -
PARTNERSHIP TAXATION .................................................................................. - 361 -
Existence of a Partnership.................................................................................- 362 -
Reconstitution of a Partnership .........................................................................- 366 -
............................................................................................................- 367 -
..........................................- 367 -
OVERVIEW ........................................................................................................... - 367 -
PENSION SCHEMES............................................................................................ - 368 -
Publicly Provided Pension Schemes .................................................................- 368 -
Mandatory Personal Retirement Savings Schemes..........................................- 369 -
NSSF Exemptions .............................................................................................- 370 -
NSSF Benefits ...................................................................................................- 371 -
Voluntary Personal or Private Retirement Savings Schemes ...........................- 371 -
TAX CONSIDERATIONS....................................................................................... - 372 -
RESIDENT AND NON-RESIDENT RETIREMENT FUNDS .................................. - 373 -
CHARGEABLE INCOME OF A RETIREMENT FUND........................................... - 374 -
WITHHOLDING TAXES......................................................................................... - 375 -
............................................................................................................- 376 -
................................................................- 376 -
WHAT IS A TRUST?.............................................................................................. - 376 -
Trust Laws in Uganda........................................................................................- 377 -
Parties to a Trust ...............................................................................................- 378 -
REASONS FOR ESTABLISHING A TRUST.......................................................... - 378 -
Types of Trusts ..................................................................................................- 380 -
Trust Deed .........................................................................................................- 380 -
PRINCIPLES FOR TAXATION OF TRUSTS......................................................... - 380 -
Taxation of a Trust and Trustee ........................................................................- 382 -
Taxation of a Qualified Beneficiary....................................................................- 382 -
Taxation of an Incapacitated Person’s Trust .....................................................- 383 -
Taxation of a Beneficiary ...................................................................................- 383 -
Chargeable Trust Income ..................................................................................- 384 -
Taxation of a Settlor Trust .................................................................................- 384 -
ESTATES OF DECEASED PERSONS ................................................................. - 385 -

xi
Taxation Principles ............................................................................................ - 385 -
Trusts and Tax Avoidance................................................................................. - 386 -
Trusts as an Asset-Protection Strategy............................................................. - 386 -
............................................................................................................ - 388 -
............................................................................. - 388 -
OVERVIEW ............................................................................................................- 388 -
TAXATION OF CAPITAL GAINS OR LOSSES ......................................................- 389 -
TAXABLE CAPITAL GAINS....................................................................................- 390 -
Disposal............................................................................................................. - 390 -
Cost Base of an Asset ....................................................................................... - 391 -
Consideration Received on Disposals............................................................... - 392 -
Valuation for Capital Gains Purposes ............................................................... - 392 -
INDEXATION AND INFLATION..............................................................................- 394 -
TAX TREATMENT OF ASSETS LOST OR DESTROYED.....................................- 395 -
NON-RECOGNITION OF GAINS OR LOSSES......................................................- 395 -
............................................................................................................ - 397 -
................................................................ - 397 -
OVERVIEW ............................................................................................................- 397 -
How Insurance Operates................................................................................... - 398 -
INSURANCE PLAYERS.........................................................................................- 398 -
Insurance Companies........................................................................................ - 399 -
Re-insurance Companies.................................................................................. - 399 -
Insurance Brokers and Agents .......................................................................... - 399 -
Loss Adjusters and Assessors .......................................................................... - 400 -
Risk Inspectors and Underwriters...................................................................... - 401 -
TYPES OF INSURANCE........................................................................................- 401 -
Life (Long Term) Insurance ............................................................................... - 401 -
General Insurance (Non-Life or Short-Term Insurance) ................................... - 402 -
Re-insurance ..................................................................................................... - 402 -
TAXATION PRINCIPLES FOR INSURANCE BUSINESS......................................- 403 -
INCOME RECOGNITION.......................................................................................- 404 -
DEDUCTION RECOGNITION................................................................................- 404 -
Claims................................................................................................................ - 404 -
Unexpired Risk Reserves.................................................................................. - 405 -
Contingency Reserves ...................................................................................... - 405 -
NON-RESIDENT INSURANCE COMPANIES........................................................- 406 -
VAT ON INSURANCE SERVICES .........................................................................- 406 -
............................................................................................................ - 408 -
................................... - 408 -
OVERVIEW ............................................................................................................- 408 -

Table of Contents
xii
Key Issues for Taxation of the Sector................................................................- 409 -
Permanent Establishment..................................................................................- 411 -
Incentives for Exploration and Development Costs...........................................- 412 -
OVERVIEW OF MINING OPERATIONS ............................................................... - 413 -
Exploration Stage ..............................................................................................- 413 -
Development Stage ...........................................................................................- 413 -
Production Stage ...............................................................................................- 414 -
TAXATION OF MINING OPERATIONS................................................................. - 414 -
Mining Exploration Expenditure.........................................................................- 415 -
Private or Domestic Expenditures .....................................................................- 415 -
Intangible Assets ...............................................................................................- 415 -
Mining Extraction Expenditure...........................................................................- 415 -
Rehabilitation Funds ..........................................................................................- 416 -
OVERVIEW OF PETROLEUM OPERATIONS...................................................... - 416 -
The Oil Industry .................................................................................................- 417 -
Uganda’s Oil Sector...........................................................................................- 418 -
Oil Field Cycle....................................................................................................- 419 -
OIL AGREEMENTS............................................................................................... - 420 -
Concessions ......................................................................................................- 420 -
Contractual Agreements....................................................................................- 421 -
Key Contractual Provisions................................................................................- 421 -
Oil Price .............................................................................................................- 421 -
Taxation .............................................................................................................- 422 -
Stabilization Clause and Windfall Gains............................................................- 422 -
Joint Ventures....................................................................................................- 423 -
PRODUCTION SHARING AGREEMENTS (PSA)................................................. - 424 -
Production Sharing ............................................................................................- 425 -
Cost Recovery Limits.........................................................................................- 426 -
Assets Used in Oil Operations...........................................................................- 426 -
Government Profit Oil ........................................................................................- 427 -
Profit Oil and Income Tax ..................................................................................- 427 -
OIL AND GAS ACCOUNTING ............................................................................... - 427 -
Accounting for Exploration Costs ......................................................................- 428 -
Accounting For Oil and Gas Reserves ..............................................................- 428 -
Accounting for Under-liftings and Over-liftings ..................................................- 429 -
TAXATION OF PETROLEUM OPERATIONS ....................................................... - 429 -
Income from Non-Petroleum Activities ..............................................................- 430 -
Income from Petroleum Activities ......................................................................- 430 -
Royalty...............................................................................................................- 431 -
ALLOWABLE DEDUCTIONS ................................................................................ - 432 -
Capital Costs .....................................................................................................- 432 -
Private Expenditure ...........................................................................................- 432 -
Ring Fencing......................................................................................................- 432 -
Cost Recovery Limits.........................................................................................- 433 -

xiii
Licensee’s Chargeable Income ......................................................................... - 434 -
Signature Bonuses ............................................................................................ - 435 -
Rental Payments ............................................................................................... - 435 -
Withholding Tax................................................................................................. - 436 -
Finance Costs.................................................................................................... - 437 -
Decommissioning Costs .................................................................................... - 438 -
Farm-Outs.......................................................................................................... - 439 -
Indirect Transfers of Interests............................................................................ - 440 -
Transfer Pricing Considerations ........................................................................ - 441 -
TAXATION OF SERVICE CONTRACTORS ..........................................................- 442 -
INDIRECT TAXES - MINING & PETROLEUM OPERATIONS...............................- 443 -
Import Duties ..................................................................................................... - 444 -
OPERATION OF CROSS-BORDER PIPELINES...................................................- 444 -
Nature of Cross-Border and Transit Trade........................................................ - 445 -
Inter-Governmental Agreements ....................................................................... - 446 -
Guiding Principles for Taxation of Cross-Border Pipelines ............................... - 447 -
............................................................................................................ - 450 -
............................................. - 450 -
WHAT IS A PUBLIC-PRIVATE PARTNERSHIP?...................................................- 450 -
Scope................................................................................................................. - 450 -
Why Public-Private Partnerships?..................................................................... - 451 -
PPP MODELS ........................................................................................................- 454 -
Design-Bid-Build................................................................................................ - 454 -
Design-Build ...................................................................................................... - 455 -
Design-Build-Operate-Maintain ......................................................................... - 455 -
THE ESSENCE OF A PPP .....................................................................................- 456 -
Benefits and Potential Risks of PPP’s............................................................... - 457 -
PPP’S AND TAX CONSIDERATIONS ....................................................................- 459 -
Business Structure ............................................................................................ - 459 -
Income Tax Considerations............................................................................... - 461 -
Unitary Charge or Payment............................................................................... - 461 -
Lease................................................................................................................. - 461 -
Sub-Contracting................................................................................................. - 462 -
Third Party Income ............................................................................................ - 462 -
Revenue Sharing Provisions ............................................................................. - 462 -
Early Repayment of Debt .................................................................................. - 462 -
Capital Allowances ............................................................................................ - 463 -
Tax Treatment of Surplus Land introduced into PPP Contracts ....................... - 463 -
Design, Build, Finance and Operate Model (DBFO) ......................................... - 464 -
Design, Build & Operate (DBO) Model.............................................................. - 465 -
Design, Build & Finance (DBF) Model............................................................... - 466 -

Table of Contents
xiv
Operate only model. ..........................................................................................- 466 -
............................................................................................................- 468 -
..................................................- 468 -
OVERVIEW ........................................................................................................... - 468 -
INTERNATIONAL TAXATION ............................................................................... - 468 -
Concept of ‘Source’ and ‘Residence’.................................................................- 469 -
ENFORCEMENT OF TAX CLAIM ......................................................................... - 471 -
STRUCTURE OF SOURCE RULES IN THE ACT ................................................. - 473 -
Source Rules for Resident Persons ..................................................................- 473 -
For Non-Resident Persons ................................................................................- 474 -
Basic Approaches in Taxing Foreign-Source Income .......................................- 477 -
............................................................................................................- 478 -
..............................................- 478 -
OVERVIEW ........................................................................................................... - 478 -
TYPES OF REORGANISATIONS ......................................................................... - 479 -
Merger or Amalgamation ...................................................................................- 479 -
Consolidation .....................................................................................................- 479 -
Corporate Division .............................................................................................- 480 -
Asset Acquisition ...............................................................................................- 480 -
Share Acquisition...............................................................................................- 480 -
Change in Seat or Form ....................................................................................- 481 -
TAX TREATMENT OF REORGANISATIONS ....................................................... - 481 -
Roll-Over Relief .................................................................................................- 482 -
Effect of Non-Continuity.....................................................................................- 482 -
Share Acquisition in Excess of 50% Interest.....................................................- 482 -
Asset Transfer after Liquidation.........................................................................- 483 -
Continuity of Underlying Ownership ..................................................................- 483 -
Assessed Loss Benefit ......................................................................................- 484 -
Liability of Successor Companies......................................................................- 484 -
............................................................................................................- 485 -
...........................................- 485 -
OVERVIEW ........................................................................................................... - 485 -
EXEMPT ORGANISATIONS ................................................................................. - 486 -
General Overview ..............................................................................................- 486 -
Organisational Test............................................................................................- 486 -
Operational Test ................................................................................................- 487 -
Private Inurement Test ......................................................................................- 487 -
Rationale for Tax Exemption .............................................................................- 488 -
Distinction between NGO Status & Tax-Exempt Status....................................- 489 -
Requirements for Exempt Organisation Status .................................................- 490 -

xv
Procedures for Exemption ................................................................................. - 491 -
EXEMPT PURPOSES............................................................................................- 492 -
The meaning of Charitable Purpose.................................................................. - 492 -
The meaning of Educational Purpose ............................................................... - 493 -
The meaning of Religious Purpose ................................................................... - 494 -
TAXABLE INCOME OF AN EXEMPT ORGANISATION ........................................- 494 -
Unrelated Business Income of an Exempt Organisation................................... - 496 -
Business Income of an Exempt Organisation ................................................... - 496 -
TAX OBLIGATIONS OF AN EXEMPT ORGANISATION .......................................- 497 -
Employees, Independent Contractors & Volunteers ......................................... - 498 -
Separate Entity for Unrelated Business Income................................................ - 498 -
GRANT AGREEMENTS & TRADE CONTRACTS .................................................- 499 -
Income Tax and VAT Considerations................................................................ - 499 -
ACCOUNTING FOR GRANTS AND CONTRACT INCOME ..................................- 502 -
Recognition of Income....................................................................................... - 502 -
Entitlement to Income........................................................................................ - 503 -
Accounting Treatment ....................................................................................... - 504 -
TAXATION OF MUTUAL TRADING .......................................................................- 505 -
Exclusion of the Doctrine under the Act ............................................................ - 507 -
............................................................................................................ - 508 -
................................................................... - 508 -
INTRODUCTION ....................................................................................................- 508 -
INVESTMENT TAX INCENTIVES ..........................................................................- 509 -
What is an Incentive? ........................................................................................ - 510 -
What is a Tax Incentive? ................................................................................... - 511 -
Pros and Cons of Tax Incentives ...................................................................... - 512 -
TYPES OF TAX INCENTIVES................................................................................- 513 -
Tax holidays....................................................................................................... - 514 -
Accelerated depreciation and start-up costs ..................................................... - 515 -
Reduced tax rates ............................................................................................. - 515 -
Preferential tax rates ......................................................................................... - 516 -
Exemptions from various taxes ......................................................................... - 516 -
Investment allowances ...................................................................................... - 517 -
VAT INCENTIVES ..................................................................................................- 517 -
Zero-Rating........................................................................................................ - 517 -
Deferment.......................................................................................................... - 517 -
Exemptions........................................................................................................ - 518 -
Deemed VAT for Donor Financed Projects ....................................................... - 518 -
FREE TRADE ZONES............................................................................................- 520 -
EXEMPT INCOME..................................................................................................- 523 -
............................................................................................................ - 525 -
................................................................ - 525 -

Table of Contents
xvi
OVERVIEW ........................................................................................................... - 525 -
TAX PLANNING FOR AVOIDANCE...................................................................... - 526 -
Tax Evasion .......................................................................................................- 526 -
Informers and Whistle-blowers ..........................................................................- 527 -
Tax Avoidance Channels...................................................................................- 529 -
TAX AVOIDANCE BY MULTINATIONALS............................................................ - 529 -
AGGRESSIVE OR ABUSIVE TAX AVOIDANCE .................................................. - 533 -
TAX HAVENS ........................................................................................................ - 534 -
Holding Companies ...........................................................................................- 536 -
Trusts.................................................................................................................- 536 -
Investment and License Companies .................................................................- 537 -
Branches............................................................................................................- 537 -
Transfer Pricing .................................................................................................- 537 -
BEPS AND ANTI-AVOIDANCE ............................................................................. - 538 -
ANTI-AVOIDANCE PROVISIONS IN THE ACT .................................................... - 540 -
Associates..........................................................................................................- 540 -
Transactions between Associated Persons.......................................................- 541 -
Substance over Form ........................................................................................- 543 -
Deemed Dividends ............................................................................................- 544 -
Income Splitting .................................................................................................- 545 -
Thin Capitalisation .............................................................................................- 545 -
Tax Law Treatment of Interest and Dividends...................................................- 547 -
Thin Capitalisation Rules in the Act...................................................................- 548 -
The “Ratio” Approach ........................................................................................- 548 -
The Arm’s Length Approach..............................................................................- 549 -
The Re-Characterisation Approach ...................................................................- 550 -
Thin Capitalisation using Hybrid Financial Instruments.....................................- 550 -
Earnings-Stripping Rules...................................................................................- 551 -
Earnings Stripping Rule under the Act ..............................................................- 553 -
Rationale for Interest Limitation using ESR.......................................................- 556 -
Dividend Stripping..............................................................................................- 558 -
............................................................................................................- 559 -
.............................- 559 -
OVERVIEW ........................................................................................................... - 559 -
TRANSFER PRICES AND TRANSFER PRICING ................................................ - 561 -
Transfer Price Manipulation...............................................................................- 561 -
TAX ISSUES IN TRANSFER PRICING ................................................................. - 562 -
Allocation Issues................................................................................................- 562 -
Valuation issues.................................................................................................- 563 -
THE ARM’S-LENGTH PRINCIPLE........................................................................ - 563 -
Applying the Arm’s- length Principle..................................................................- 564 -
Comparability analysis.......................................................................................- 564 -
Transaction analysis ..........................................................................................- 564 -

xvii
Use of an arm’s length range ............................................................................ - 565 -
Use of multiple year data................................................................................... - 565 -
Losses ............................................................................................................... - 565 -
Use of customs valuations................................................................................. - 565 -
TRANSFER PRICING METHODS .........................................................................- 566 -
The Comparable Uncontrolled Price Method (CUP) ......................................... - 566 -
Resale Price Method (RPM).............................................................................. - 567 -
Cost-Plus Method (CPM)................................................................................... - 568 -
Profit-Split or Transactional Profit Split Method................................................. - 568 -
Transactional Net Margin Method (TNMM) ....................................................... - 569 -
TRANSFER PRICING REGULATIONS..................................................................- 569 -
Selecting the Transfer Pricing Method .............................................................. - 570 -
TRANSFER PRICING AND TAX RISK MANAGEMENT ........................................- 571 -
Areas of Transfer Pricing Risk........................................................................... - 572 -
Mitigating Transfer Pricing Risks....................................................................... - 572 -
............................................................................................................ - 574 -
............................... - 574 -
OVERVIEW ............................................................................................................- 574 -
Juridical Double Taxation .................................................................................. - 575 -
Economic Double Taxation................................................................................ - 576 -
PURPOSE AND SCOPE OF TAX TREATIES........................................................- 576 -
Enforcement of Tax Liabilities across Borders .................................................. - 579 -
RELIEF PRINCIPLES UNDER A TAX TREATY.....................................................- 580 -
Right to Tax ....................................................................................................... - 580 -
Residence.......................................................................................................... - 581 -
Permanent Establishment ................................................................................. - 582 -
Determining Existence of a Permanent Establishment ..................................... - 585 -
Preparatory or Auxiliary Activities...................................................................... - 586 -
Subsidiary Company ......................................................................................... - 586 -
Tax Exempt Persons ......................................................................................... - 587 -
Avoidance of Double Taxation........................................................................... - 588 -
TAX TREATIES & DOMESTIC LAW ......................................................................- 588 -
Comparison ....................................................................................................... - 588 -
Superiority of Tax Treaties ................................................................................ - 589 -
Treaty Override by Domestic Tax Law .............................................................. - 590 -
DOMESTICATION OF TREATIES .........................................................................- 590 -
TAXING RIGHTS ON SPECIFIC ITEMS ................................................................- 594 -
Income from Business and Independent Personal Services............................. - 594 -
Dividends, Interest, Royalties & Technical fees ................................................ - 595 -
Matrix of Tax Concessions under Effective Treaties in Uganda ....................... - 597 -
Income from Immovable Property ..................................................................... - 598 -
Capital Gains ..................................................................................................... - 598 -
Capital Gains and Offshore Indirect Transfers .................................................. - 600 -

Table of Contents
xviii
“Indirect Transfer” Taxing Rule for Resident Companies ..................................- 603 -
Income from Employment or Dependent Personal Services.............................- 604 -
Director’s Fees...................................................................................................- 606 -
Artistes and Sportsmen .....................................................................................- 606 -
Students and Apprentices..................................................................................- 606 -
Income from Shipping and Air Transport...........................................................- 607 -
Taxation of Associated Enterprises ...................................................................- 608 -
Other Income .....................................................................................................- 608 -
E-COMMERCE...................................................................................................... - 608 -
Overview............................................................................................................- 608 -
Tax Challenges in the Digital Sector .................................................................- 610 -
Tax Avoidance Practices using E-Commerce ...................................................- 612 -
TREATY SHOPPING............................................................................................. - 613 -
Reducing Source WHT on Dividends, Royalties & Interest...............................- 616 -
Schemes used to Circumvent DTA Limitations .................................................- 617 -
Prevention of Treaty Shopping ..........................................................................- 618 -
The Concept of “Beneficial Owner” ...................................................................- 619 -
Tax Arbitrage and Juridical Double Non-Taxation.............................................- 622 -
............................................................................................................- 625 -
.............................................- 625 -
OVERVIEW ........................................................................................................... - 625 -
TELECOMMUNICATIONS NETWORKS .............................................................. - 626 -
Support Systems ...............................................................................................- 627 -
VOICE SERVICES................................................................................................. - 627 -
Voice-over-Internet Protocol (VoIP)...................................................................- 628 -
Other Internet-based Voice Communication Services ......................................- 628 -
Wireless Communications Services ..................................................................- 629 -
Wireless VoIP ....................................................................................................- 629 -
DATA COMMUNICATION SERVICES.................................................................. - 629 -
VIDEO AND AUDIO ENTERTAINMENT SERVICES ............................................ - 630 -
Television...........................................................................................................- 630 -
Broadcast Television .........................................................................................- 630 -
Cable Television ................................................................................................- 630 -
Satellite Television.............................................................................................- 630 -
Internet Video Service .......................................................................................- 631 -
Audio Communication Service ..........................................................................- 631 -
INTERNET ACCESS SERVICE ............................................................................ - 632 -
DIGITAL PRODUCTS............................................................................................ - 632 -
TELECOM TAXATION........................................................................................... - 632 -
Income Taxation ................................................................................................- 633 -
Revenue Recognition ........................................................................................- 634 -
Revenue Sources ..............................................................................................- 634 -
Value Added Tax ...............................................................................................- 637 -

xix
Excise Duty........................................................................................................ - 637 -
Customs Duties ................................................................................................. - 638 -
............................................................................................................ - 639 -
.............................................................. - 639 -
PRINCIPLES AND CHARACTERISTICS OF VAT .................................................- 639 -
VAT DESIGN - UGANDA........................................................................................- 640 -
ILLUSTRATION - Invoice-Credit Method .......................................................... - 642 -
SCOPE OF VAT .....................................................................................................- 644 -
MEANING OF SUPPLY..........................................................................................- 644 -
Supply of Goods ................................................................................................ - 645 -
Finance Lease ................................................................................................... - 645 -
Supply of Services............................................................................................. - 646 -
THE VAT MECHANISM..........................................................................................- 646 -
Illustration - Vat Accounting for Taxable Supplies............................................. - 647 -
The Destination Principle................................................................................... - 647 -
............................................................................................................ - 650 -
........................ - 650 -
PERSONS WITHIN THE SCOPE OF VAT .............................................................- 650 -
Taxable Person ................................................................................................. - 650 -
VAT REGISTRATION & DEREGISTRATION.........................................................- 652 -
Registration........................................................................................................ - 652 -
De-registration ................................................................................................... - 655 -
TRANSACTIONS WITHIN THE SCOPE OF VAT...................................................- 656 -
Taxable Transaction .......................................................................................... - 656 -
Taxable Supply.................................................................................................. - 657 -
Supply of Goods ................................................................................................ - 658 -
Supply of Services............................................................................................. - 658 -
Distinction between Supply of Goods and Supply of Services.......................... - 659 -
Mixed Supplies .................................................................................................. - 660 -
Supply by an Agent ........................................................................................... - 660 -
Principal and Agent VAT Relationship .............................................................. - 662 -
Disbursements and Reimbursements ............................................................... - 664 -
DEEMED SUPPLIES..............................................................................................- 666 -
Application to Own Use ..................................................................................... - 666 -
Sale or Disposal of Business Asset................................................................... - 667 -
............................................................................................................ - 668 -
...................................................................... - 668 -
TRANSACTIONS LIABLE TO VAT.........................................................................- 668 -
Import of Goods................................................................................................. - 670 -
Time of Import.................................................................................................... - 671 -

DOMESTIC & INTERNATIONAL TAXATION IN UGANDA: The Law, Principles and Practice

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