Guide to investing in Uganda
A GUIDE TO INVESTING IN SMALL AND MEDIUM ENTERPRISES
Definitions:
A Small Enterprise is an enterprise employing maximum of 50people; an annual sales/revenue turnover of maximum Dkk 1,412,507.51 and totalassets of maximum Dkk 1,412,507.51
A Medium Enterprise is an enterprise employing more than 50people; annual sales/revenue turnover of more than Dkk 1,412,507.51 and totalassets of more than Dkk 1,412,507.51
Why Invest in Small and Medium Enterprises in Uganda?
Strong Incentives for Foreigners
Uganda has very open investment incentives for foreigners,the most important include;
InvestmentCapital Allowances
DeductibleAnnual Allowances
Duty- andTax-free import of plant and machinery
Firstarrival privileges for personal effects and motor vehicles
Exportzones
Norestriction to 100% ownership of investments
Nobarriers to remittances of dividends
Fullyconvertible shilling, stable over last decade
Capitalaccount transactions and exchange market fully liberalised
Norestrictions on capital transfers
Main Sectors Where Small and Medium Enterprises Operate
Agriculture
Post harvesting equipment, such as packaging and foodprocessing facilities. Opportunities to invest in Small and Medium Enterprisesin the agriculture sector exist in:
Packagingof fruits and vegetables
Investmentin cold storage facilities at collecting points
Laboratorytesting services, material, equipment
Productionof sun-dried products
Manufacturing
Opportunities exist virtually in all. Main sectors for manufacturingbased Small and Medium Enterprises in Uganda are: Foods and beverages, textilesand garments, wood crafts, leather products, printing and graphics products,Chemical and Pharmaceuticals, Handcrafts, Building materials and ceramics.
Food and Beverages
Uganda has a competitive advantage in farming and processingof several foods and beverages. Possible investment opportunities are in:
Plantingand processing of coffee
Extractionof vegetable and essential oils
Packagingof beans and other vegetables for export
Printing and publishing
Investment opportunities exist in the various types ofprinting including:
Flexography
Screenprinting
Off-setprinting
Digitalprinting
Publishing
Building materials
Investment opportunities are available in:
Manufactureof pre-fabricated concrete systems
Establishmentof mini-cement factories
Exploitationof non-metallic minerals to provide floor/wall tiles, cement, glass, etc
Services
Investment opportunities in Small and Medium Enterprisesinvolved in the services sector range from financial services, tourism andinformation technology/electronics sector and they include:
Insuranceand management service support
Televisionand power conditioning equipment
Supply ofnon-sensitive printing stationary (banking)
Tourism promotion services (e.g. cross-border programscombining safaris to Kenya and Tanzania with excursions to Uganda)
Signs and decors, advertising and promotion
Procedures for Formalizing a Small and Medium Enterprise
It is advisable to register the business entity no matterthe size of operation. In order to set up a company in Uganda you need to:
Decide on form of company/type of business organisation
Identify a company name
Register with Uganda Registration Services Bureau
Obtain necessary secondary licenses from line ministries.Seek guidance from the Uganda Investment Authority.
Register with local authorities/councils/ for operatingpermits e.g. Trading Licence
Register with National Social Security Fund if you employ morethan 5 people
Register with Uganda Revenue Authority and obtain a TaxIdentification Number (TIN) and VAT number if your annual turnover exceeds Dkk1921414.16
Register with utility providers and obtain an account number
Regulatory Framework for Foreign Investors
Main Regulatory issues relevant for an investor in a UgandanSmall and Medium Enterprise:
Land
The right to all land is vested in the citizens of Uganda.Foreign investors may only own land in a joint venture with a majority localshareholder. Leasing is an option for all foreign investors, for terms anywherefrom five to 99 years from private owners, municipal councils and other publicagencies.
Land is available in three categories:
Public land: bothlocal and foreigners may lease public land, which is available throughmunicipal councils and District Land Commissions.
Leased land: Available fromBuganda Land Board and other landlords
Freehold: Available from private individuals for sale.
Paying Taxes
Foreign investors are required to pay taxes on theirinvestment in Uganda. Dividend and capital payments are allowed subject to thetax laws of Uganda. Dividends are subjected to withholding (rate for residentsand non-residents is 15%). With the approval of the Bank of Uganda, dividends canbe remitted to non-resident shareholders. Capital gains on business assets aresubject to a tax rate or 30%.
Ownership in Companies
There are no restrictions on the equity share that foreignnationals may hold in a locally incorporated company and no rules orregulations restricting joint ventures between Ugandan and foreign investors.These issues are subject to mutual agreement between the partners. However, allsuch agreements must be registered with the Registrar General at a nominal fee.
Performance Requirements
Foreign investors are subject to performance obligationsregarding the size of investment, staff training and local employment, localprocurement and environmental protection.
A minimum investment of Dkk 656787.76for foreign investors.This amount includes project pre-investment activities, land, equipment, plantand machinery and building & construction. Foreign investors may alsoinvest smaller amounts (minimum of Dkk 328393.88) if they are participating ina joint venture with a majority shareholding-local investor.
Investment Protection
The investment code protects licensed investors. Uganda hassigned various bilateral and multilateral agreements.
Fiscal incentives for foreign investors in Uganda
Uganda’s fiscal incentive package provides for generouscapital recovery terms, particularly for investors whose projects entailsignificant investment in plant and machinery and whose investments aremedium/long term. See flier on fiscal incentives.
Investment restrictions and sectors not entitled toinvestment incentives
The investment code allows foreigners to invest in allactivities except for those which compromise national security, or whichrequire the ownership of land.
Labour issues
Uganda has a large quantity of trained and educated, Englishspeaking workers. On the World Bank’s Doing Business Survey 2007, Uganda ranksfirst among all sub-Saharan countries in terms of ease of hiring. The countrydoes not have a history of labour disputes or strikes. Many existing investorssee the existing labour regulations as unproblematic.
Resolving Disputes
Arbitration outside court
Uganda law and practice recognizes arbitration. A Centre forArbitration and Dispute Resolution (CADER) was established in 1990. CADER hasdeveloped both mediation and arbitration rules in line with the Arbitration andConciliation Act 2000.
Parties to a dispute may opt for arbitration outside thecourt if they;
1. Have anarbitration clause in their agreement;
2. Agree andsubmit to arbitration.
Arbitration through the Commercial Court
It is important to note that the commercial court, as adivision of the High Court has evolved a unique process to ensure expeditioussettlement of disputes in the interest of time (which is of the essence to thebusiness/commercial community) and fees. Legal Notice No. 7 of 2003.
Service Providers
There are specialized legal service providers specificallyset up to handle business and commercial related disputes. For the followingservice providers have the capacity to handle and facilitate the resolution orprovide advice:
1. Centre forArbitration and Dispute Resolution (CADER)
Services:
Mediationin commercial related disputes including investment disputes.
Arbitrationand mediation between aggrieved parties.
Cost of Services: Depends on the magnitude or nature of thedispute.
2. CommercialDivision of the High Court
Services: Legal dispute resolution.
Cost of Services: Depends on the magnitude of the grievanceor case.
Procedure for accessing the services: Anyone who feels disputed can lodge in acomplaint in the commercial court and the case is resolved after summoning thealleged offender.
3. Tax AppealTribunal
Services: Tax Dispute resolution between taxpayers and URA
Cost of services: a non-refundableapplication fee. Costs for the major offences that include:
Failureto comply with summons
Failureto answer proper questions
Givingfalse or misleading evidence
(For the above cases, the offender is liable on convictionto a fine or imprisonment not exceeding two years or both)
Contemptof court
(In this case, the offender is liable to a fine orimprisonment not exceeding 6months or both)
Procedure for accessing the services: Prescribed forms arefilled then lodged to the tribunal and a copy served to the CommissionerGeneral.
Applications must contain the following:
Full names
Tax identification numbers
Income tax file number
VAT registration number
Nature of business
Particulars of the dispute and details of the assessment
Years of assessment and amount of tax in dispute
Reason/grounds for the appeal
List of documents/books that will be produced before thetribunal
Name and address of witnesses and date of application andsignature
The Uganda Investment Authority
As a foreign investor, you need to go through the UgandanInvestment Authority (UIA) in order to register your investment. The Authoritycan provide first-hand information on investment opportunities in Uganda suchas:
Issue investment licences
Secure other licences and secondary approvals for investors
Help investors to implement their project ideas throughassistance in locating relevant project support services
Provide assistance in the acquisition of industrial land
Obtain work permits and special passes for foreigners
Arrange contacts for investors and organise itineraries forvisiting foreign missions within the country
Assist investors in seeking joint venture partners and funding
Review and make policy recommendations to government aboutinvestment
Steps to follow before starting to implement your Smallor Medium Enterprise:
Step 1 – Make sure that the Small or Medium Enterprise isregistered
Register at the Uganda Registration Services Bureau andobtain the Memorandum and Articles of Association, and a Certificate ofIncorporation.
Duration: approximately 3 days
Costs: Stamp duty on nominal capital 0.5%
Step 2 – Get your investment license
All foreigners require an investment license. Apply for thelicense using UIA Form 1 attach the documents in step 1 plus a brief businessplan. The license is valid for five years.
Duration: Normal processing time for an investment licenseis 2-4 days.
Costs: None
Step 3 – Secure necessary secondary clearances
Sectors requiring secondary licenses include: Mining, airtransport, banking, forestry etc. Uganda Investment Authority will assist insecuring these licenses, obtaining suitable industrial land.
Step4 – Accessing Utilities
Duration: Telephone (up to 1 month for fixed lines,immediate for mobile), Electricity (1 week to 2 months), Water (up to one week)
Costs: Variable
Step 5 – Immigration
Apply for work permits
Duration: 2 to 4 weeks
Costs: Up to Dkk 1970.36 (per permit, per year)
Step 6 – Tax Registration
Registration as taxpayer and get a tax identificationnumber. This service is available at the Uganda Investment Authority
Duration: 2 visits
Costs: None
Step 7 – Obtain trading license from district or localcouncil
This is relevant for investors who want to operate abusiness in a municipality.
Step 8 – Full implementation of investments begins
Finding export markets for your Small and Medium Enterprisesproduct
Uganda’s location at the heart of Africa is ideal. It is amember of the East African Community along with Kenya, and Tanzania with acombined population of 90 million. The Community has established the EastAfrican Customs Union, with a common external tariff. Uganda is a member of theCommon Market for Eastern and Southern Africa, an organisation representing380million people in 20 countries. Uganda also has preferential access to theChinese markets.
Overview of export procedures
In order to export from Uganda, the investor needs to registerfor VAT with the Uganda Revenue Authority. The next step is to acquire anexport certificate from the Ministry of Tourism Trade and Industry (MTTI) andregister with Uganda Export Promotion Board (UEPB).
Export documentation requirements can be found on thewebsite of the Uganda Export Promotion Board:
http://www.ugandaexportsonline.com/documentation.htm
Agencies involved in registering investments in Small andMedium Enterprises
Capital Markets Authority
8th Floor, Jubilee Insurance Centre
P.O.Box 24565Kampala
Tel: 256 414342788
Fax: 256 414 342803
Email: info@cmauganda.co.ug
www.cmauganda.co.ug
Contact: Senior Research Officer
Organisation Brief:
Capital Markets Authority is a company formed to regulateand promote a robust, transparent, fair and efficient capital market in Uganda.
Services:
Licensing to companies joining the capital markets sector.
Regulation of the securities sector, and brokers, dealers insecurities
Cost of services: Percentage of issue and fixed fees
Electricity Regulatory Authority
15 Shimoni Road, Kampala
P.O.Box 10332Kampala
Tel: 256 414341852
Fax: 256 414 341624
Email: era@africaonline.co.ug
Website: www.era.or.ug
Services offered:
Regulation of the electricity sector for efficient andreliable supply at equitable prices
Licensing of wire men and electricity power projects
Ensuring compliance with terms and conditions of licensesthrough monitoring of the licensed projects
Developing uniform electricity standards and industry codesof practice
Supporting rural electrification projects through the RuralElectrification Agency
Procedure for Accessing Services:
Issuance of license to operate a power generation project. Aperson who intends to establish a project (above 0.5 MW), is required to notifythe Electricity Regulation Agency of the intended project by submitting aNotice of Intended Application forms to the authority.
Installation permits for wire men is administered by aspecial committee and requires technical qualification and class ofinstallation permits.
National Drug Authority
Plot 46/48 Lumumba Avenue
P.O.Box 23096Kampala
Tel: 256 414255665 / 347391/2
Fax: 256 414 255758
Email: ndaug@nda.or.ug
Website: www.nda.or.ug
Organisation Brief: The National Drug Authority is astatutory body formed to oversee and regulate the drugs sector in Uganda. Itmaintains and ascertains standards of both animal and human drugs.
Services Available:
Drug information including carrying pharmacovigilance,regulating drug promotion, practice and sensitising pharmaceutical serviceproviders.
Licensing and registration of drugs manufactured in oroutside Uganda.
Inspection and quality control for both human and animaldrugs
Training of local pharmaceutical manufacturers in QualityControl/Quality Assurance systems
Procedure for Accessing Services:
An application form is filled and is available at a nominalfee of Dkk 65.37 per application. This form is divided in two sections:Administrative information (i.e. particulars of applicant, particulars ofmanufacturers etc.), particulars of the product being applied (e.g. brand name,INN name, pack size, strength, etc.), authorized local technical representativein Uganda, specifications of packaging materials and the composition of theproduct, Chemistry and pharmaceutical information of the product, registrationstatus of the product in other countries, pharmacology and toxicology aspectsof the product and general information on the product (information on theproduct published in recognised international books, journal etc)
Uganda Investment Authority – One Stop Centre
Plot 22B Lumumba Avenue, (Twed Plaza)
P.O.Box 7418,Kampala
Tel: 256 414301154, 256 414 301000
Fax: 256 414 301151
Email: info@ugandainvest.com
Website: www.ugandainvest.com
Contact: Assistant Director SPD
Organisation Brief:
The Uganda Investment Authority (UIA) is a semi-autonomousgovernment agency operating in partnership with the private sector andgovernment to drive national economic growth and development. UIA is a one-stopcentre for both local and foreign investors.
Services:
Investmentlicense for both local investors with a minimum of Dkk 341,610 and foreign investors with a minimum Dkk 656758.92capital investments.
Workpermits issuance for licensed investors
Taxidentification numbers, and support in handling tax incentives
Businesslicensing and registration services
Follow-upand issuance of sector specific permits
Identificationand allocation of land for investors
Identificationof joint venture partners
Identificationof investment opportunities
Policyadvocacy
Cost of services:
Services are generally free of charge
Procedure for Accessing the Services:
Proposals and applications for investment licenses aresubmitted to UIA. For specific services, requests are submitted and processedby specific desk officers at the one-stop centre which has the followingorganisation representatives;
URA
ImmigrationDepartment
Ministryof Lands, Housing and Urban Development
UgandaRegistration Services Bureau
Uganda Registration Services Bureau
Amamu House, George Street
P.O.Box 6648 Kampala
Tel: 256 414 233219
Fax: 256 414 289254
Email: infor@justice.go.ug
Website: www.justice.go.ug
Contact: Assistant Registrar
Organisation Brief:
Registration Services Bureau is an independent agencyhandling all business registration related issue.
Services:
a) BusinessRegistration;
b) Soleproprietorship; is an individual engaged in a business on his own account andis personally liable for the business debt.
c) Partnership;this form of business is used for professional, small and family owned firmsand all partners are jointly and severally liable for the obligations of thepartnership.
d) Privatelimited liability company; is a type of company that enjoys a legal personalityfully distinguished from the people who run it.
e) Publiclimited liability Company; to incorporate this, there must be at least sevenmembers owning shares with no maximum limit.
f) Power ofAttorney; this is a document certifying that an individual is the lawfulrepresentative of a company or person.
g) Deed pollintellectual capital; includes intellectual property rights like inventions,patterns, music etc.
Cost of Services
a) Standardfiling fee: Dkk 96.07
b) CertificateFee: Dkk 144.11
c) StampDuty: 0.5% of the share capital;
d) Flat feefor the Ministry of Finance collected by the Registrar: Dkk 192.14
e) Registrationfees vary: fees for a share capital of Dkk 15660.60 are Dkk 22.10, and Dkk29.78 for a share capital of Dkk 31325436.64
f) Tradinglicense: Dkk 647.52
g) Companyseals: Dkk 707.08
h) Namesearch: Dkk 67.25
i) For soleproprietorship and a partnership, formation cost is Dkk 768.57 and the usualbalance sheet date is 30th June to coincide with the fiscal year.
j) Theformation cost for a private limited liability company and a public limitedliability company is Dkk 768.57 plus 1% stamp duty on nominal share capital andthe usual balance sheet date is 30th June.
Procedure for Accessing Services:
Toregister a sole proprietorship and a partnership, a statement in writing in theprescribed form containing the business name, the general nature of thebusiness, the name, surname, nationality and usual place of residence isrequired.
To form aprivate limited company, a memorandum and articles of association, a statutorydeclaration by a legal practitioner and statement of nominal capital must besubmitted to the Registrar.
Theprocedure for forming a public company is the same as for the private limitedcompany, with the following additional requirements; a statement with the namesand particulars of all the directors or secretary signifying their consent tobe such, and a prospectus.
Uganda Revenue Authority
Hannington Road,
5th Floor, Crested Towers,
P.O.Box 7279
Kampala
Tel: 256 414334408/317009
Fax: 256 414334418
Email:prte@ura.go.ug
Website:www.ugrevenue.com
Contact: UIA /URA Desk Officer
Organisation Brief:
URA is a body that assesses and collects specified taxrevenue, administers and enforces the laws relating to such revenue.
Services:
IssuingTax Identification Numbers (TIN); and VAT registration.
Taxedreduction through the various tax days and forums
Taxincentives for any capital investments and benefits to complaints
Levyingand collection of taxes; including value added tax, income tax, presumptivetax, drivers permits and third party insurance
Cost of Services:
Registrations services are generally free, but the followingtaxation rates also apply;
Managementfees, dividends, royalties and interest paid to non-residents are subject to a15% withholding tax which is a final tax
Residentcompanies and foreign branches of companies are taxed at the rate of 30% onprofits made in Uganda
Dividendsare subject to withholding tax: resident rate – 20% and non-resident rate –15%. Dividend income of residents is included in their taxable gross income,credit being given for the withholding tax deducted.
Allcompanies operating in Uganda must register as an employer with the Ugandarevenue department and deduct tax (Pay As You Earn) from the remuneration paidto employees. PAYE depends on the amount paid to employees.
VAT of 17%is charged on the sale of certain goods and services.
Procedure for Accessing Services:
An application for VAT and TIN registration is submitted tothe nearest Uganda Revenue Authority office.
Uganda Tourism Board
13/15 Kimathi Avenue, Impala House
P.O.Box 7211
Kampala
Contact: Administrative Manager
Services:
Marketresearch and joint marketing of Uganda as tourist destination to theinternational market
Providemarket trends information
Policyadvocacy for sector specific incentives and interventions
Registrationof all investors in tourism sector including travel and tour companies,resorts, and tour guides etc
Cost of Services: Free except for registration services.
Procedure for Accessing Services: Application forregistration is made to the Board.
Consular Information
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