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.