Government offers Chinese various tax incentives in key priority sectors

Monday June 24 2019

Expo. Chinese check out items at the Uganda

Expo. Chinese check out items at the Uganda pavilion during the 2019 Beijing International Horticulture Expo. PHOTO BY DOROTHY NAKAWEESI  

By Dorothy Nakaweesi

Beijing. Government has said it will offer Chinese companies and individuals investing in Uganda various tax incentives and free land offerings to help mitigate job creation and youth unemployment.
The incentives, among them 10-year tax holiday for exporters of finished consumer and capital goods, VAT deferment on plant and machinery, duty draw-back, manufacturing under bond and zero rate tax for exporters, were contained in a speech delivered by Mr Michael Werikhe Kafabusa, the Trade state minister during the 2019 Beijing International Horticulture Expo at the weekend in Beijing, China.

Mr Werikhe pointed out that the incentives will only apply to priority sectors such as agriculture and agro-processing, mineral beneficiation, tourism, ICT, manufacturing and other viable sectors such as infrastructure development, packaging and real estate development.
“Government [of Uganda] continues to offer an enabling environment to encourage investment,” he said, adding that other incentives include duty-free importation of industrial spare parts and duty remission schemes for manufacturers.

Uganda has been in an overdrive to attract investors in the last 15 years to mitigate rising unemployment, which requires creation of at least 600,000 jobs annually, according to the World Bank.
Mr Werikhe also noted that there was need to close the trade imbalance between China and Uganda, which currently stands at $1.7b (for imports) against $30m (exports).

China has increasingly become a key trade and investment partner for Uganda. However, the partnership is largely skewed in favour of China.
Dr Chrispus Kiyonga, Uganda’s ambassador to China, said government was ready to support investors in key sectors, especially agriculture, industrial parks and mining.

“... definitely if someone is going to invest in agriculture and mining [they] will need land,” he said, explaining the various ways through which investors can access land.
In a speech read by Mr Nelson Rukundo Kasigaire, the first secretary at the Uganda Embassy in Beijing, Mr Lawrence Byensi, the Uganda Investment Authority acting executive director, said Uganda, under different EAC protocols, had eased cross border trade, which exposes investors to a potential market of more than $172b of GDP and a population of about 172 million people.

Some of the incentives
Key offerings
10-year tax holiday for exporters of finished consumer and capital goods.
VAT deferment on plant and machinery is granted on application to URA commissioner general and fulfilment of requisite conditions.
Duty draw-back: Customs refunds all or part of all import duty paid on material inputs imported to produce or used in a manner or for a purpose prescribed as a condition for granting import draw back.
Manufacturing under bond: Manufacturers apply for a customs licence to hold and use imported raw material imported for manufacture for export in secured places without payment of taxes.
Zero rate tax for exporters (except those exporting raw hides and skins)
Duty-free importation of industrial spare parts imported as replacement parts used exclusively on industrial machinery.
Duty remission schemes for manufactures

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dnakaweesi@ug.nationmeida.com

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