Gov’t proposes more tax exemptions on investors in industrial parks

Starting July this year investors that set up facilities in Uganda’s industrial parks or free zones will enjoy enormous tax exemptions in move to encourage industrialization.

This is according to details contained in the tax amendment bill 2019.

Also, investors using agriculture raw materials and employing 60% local people will see their tax burden lessened when the new budget takes effect in July.

According to audit firm PricewaterhouseCoopers, this is intended to favour industrialisation in connection with local materials.

According to the tax measures, which will take effect in 2019/2020 year, there is going to be a ten-year tax exemption for the income of a developer from letting or leasing facilities in an industrial park or free zone with an investment of 187 billion shillings or more.

This increases the existing exception period from five years to ten years and reduces the investment for threshold from previous $100 million.

Also, income of an investor within an industrial park or free zone, or other person carrying on business outside the industrial park or free zone, whose investment capital is at least 37bn shillings for a foreigner or 7.5bn Shillings for citizens will be exempted for ten years up from the current five.

Government will reduce investment threshold in this fold from $15 million to $10 million for foreigners and from $5 million to $2 million for citizens.

Industrial parks or free zones already enjoy hefty tax exemptions. The new measures, if passed by parliament next month, will cement government’s intention to entice more investors in the country’s free zones.

Free zones expected to boost employment, increase value-addition on agriculture raw materials and improve country’s exports.

Another tax incentive is the introduction of the exemption for income of an operator within an industrial park or free zone, or an operator who owns a single factory or other business outside the industrial park of free zone, whose investment capital is at least $10 million for a foreigner or $2 million for a citizen.

PricewaterhouseCoopers Uganda will apply to processing of agricultural goods; manufacture or assembly medical; appliances, building materials, automobiles, household appliances; manufacture of furniture; setting up of vocational or technical institutes; logistics and warehousing; information technology or commercial farming.

At least 70% of raw materials should be locally sourced, subject to availability. The investor is required to employ at least 60% citizens.   In addition, there is a new exemption for a vocational institute operator meeting the $10 million (foreigners) or $2 million (citizens) investment thresholds.

That is materials used in the construction of premises and other infrastructure, machinery and equipment or furnishings and fittings for technical or vocational institute operators.

This is meant to promote vocational training to impart skills government see as an answer to unemployment problem in the country.

A citizen, in this case, is defined as one from East African Community partner states.

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