International Taxation: The Case of Uganda
In general, the worldwide tax system in place in Uganda removes any advantage resulting from investment in a low-tax country because it will collect tax at Ugandan rates after allowance of a credit for foreign taxes paid. Uganda has moved to gain conformi
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International Taxation: The Case of Uganda Jalia Kangave Abstract In general, the worldwide tax system in place in Uganda removes any advantage resulting from investment in a low-tax country because it will collect tax at Ugandan rates after allowance of a credit for foreign taxes paid. Uganda has moved to gain conformity with internationally accepted tax practices, in particular by assisting in drafting or ratifying multilateral tax administrative assistance conventions. Although the number is small, all of Uganda’s double taxation agreements contain exchange of information provisions. Additional treaties are under negotiation. In order to attract investment, Uganda has eliminated barriers to foreign ownership of private investments. It provides tax incentives to local and foreign investors that offer special allowances for research and development, workforce training, and asset depreciation. Certain industries, including farming, aircraft operations, and consumer goods exporting, benefit from certain tax exemptions. The practice of issuing incentive certificates that provided 3–6 year tax exemptions has ended. The government may, however, continue to provide tax holidays on an ad hoc basis in certain special circumstances. Synopsis Uganda taxes its residents on their worldwide income. A dividend paid by one Ugandan company to another (owning at least 25 % of the voting power) is exempt from Ugandan tax. Dividends paid by a Ugandan company to a nonresident company are taxed at the rate of 15 % if the recipient owns at least 10 % of the voting power of the payer. While there are no specific provisions targeting investments in tax haven jurisdictions, the worldwide tax system in place in Uganda removes any advantage of investing in a low-tax country because Uganda will collect tax at Ugandan rates after allowance of a tax credit for the foreign taxes paid. Regarding transactions between associated companies, the Uganda Revenue Administration (URA) has the authority to re-allocate income from a lower-taxed to a higher-taxed party in order to reflect arm’s-length dealings. Thin capitalization rules prevent stripping out of
J. Kangave (*) International Centre for Tax and Development (ICTD) at the Institute of Development Studies, UK e-mail: [email protected] © Springer International Publishing Switzerland 2017 K.B. Brown (ed.), Taxation and Development - A Comparative Study, Ius Comparatum - Global Studies in Comparative Law 21, DOI 10.1007/978-3-319-42157-5_17
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earnings as interest payments where a corporation’s debt to equity ratio is high (currently in excess of 1–1). The URA Commissioner has authority to re-characterize or disregard a transaction without economic substance and entered into in pursuance of a tax avoidance scheme. In addition, Uganda has adopted limitation-of-benefits type provisions that eliminate treaty benefits, such as a rate reduction or exemption, where the treaty beneficiary organized in a treaty country is in reality owned 50 % or more by nonresidents. Uganda is movi
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