Uganda: What You Should Know About Investing And Investment Licences In Uganda

Last Updated: 5 October 2016
Article by Daniel Angualia

According to the Investment Code Act 1991, Section 15 (1 and 2), Uganda Investment Authority (UIA) shall issue to the applicant an investment license which shall; Authorize the holder of a license to make all arrangements necessary for establishing the business enterprise described in the license. The Executive Director shall liaise with Government Ministries and departments, local authorities and other bodies as may be necessary in order to assist an investment license holder to comply with any formalities or requirements for obtaining any permission, authorizations, licenses, land and other requirements for implementing the business enterprise.

After a company has been incorporated/ registered (foreign company) in Uganda, it is eligible for an investment license provided its capital investment exceeds US$ 100,000 (Foreign firms) and US $ 50,000 (Local firms).

Application for an investment license is made to Uganda Investment Authority. After all required documentation is submitted along with the filled application form, the investment license is issued within one week.

Documentation required includes:

  1. Copy of the Certificate of Incorporation
  2. Copy of the Memorandum and Articles of Association
  3. A business plan
  4. Proof of financial ability to implement proposed project i.e. bank statement or letter project support form a bank.
  5. Proof of proposed physical location of project Secondary Licenses.

There are some sectors that require regulatory approvals from the relevant entities and these include: energy generation, mining, banking, air transport, pharmaceuticals production, education and health. In most cases, the regulatory approvals/permits/or licenses must be acquired before applying for the Investment License.

Benefits Of An Investment License

  1. Benefits of an Investment License to the Holder

The benefits that accrue to the holder of an investment license include:

  1. Assistance in acquiring secondary licenses or approvals except in the following sectors, where a secondary license is mandatory i.e. mining, banking, drugs/ pharmaceutical, as well as the health and education services.
  2. Assistance in recommendations for various services e.g. loans from commercial banks, project development assistance from Development Partners, and introductions to Equity Funders etc.
  3. Assistance in recommendations and the follow up on the acquisition of work permits
  4. Assistance in access to land for investment. Industrial land can be allocated land in the operational and planned Industrial Parks and linkages to private land owners for purchase can be made.
  5. Possibility of Joint Venture Partnerships through the Match making of the licensed domestic investors with foreign inward missions, as well as the establishment of markets for licensed investors to supply raw material or finished products
  6. Participation in outward missions and organized international fora, at which licensed investors (domestic and foreign) get exposure, markets and machinery
  7. Timely access to the one stop centre for all necessary first hand information on any matters regarding their investment
  8. Provision of aftercare services in relation to specific challenges such as tax disagreements, closures due to non compliance, and support in negotiations with other parties e.g. Government Departments, equity funders, Community Based Organisations etc.
  9. Participation in free specialized training and workshops for especially domestic investors who need to build their capacity to measure up to best international practices in carrying out business with Transnational Corporations.
  1. Benefits of an investment license to the Government

The licensing of investments in Uganda provides vital information for the Government in the following areas:

  1. The Monitoring of private sector inflows for purposes of formulating policies that will sustain and increase the current levels of economic growth and development
  2. The assessment of confidence levels of the private sector in the economy deduced from the trends of inflows
  3. The provision of timely and reliable data on foreign assets and liabilities to formulate policies that will guard Uganda's economy from negative external effects experienced by down turns in the international economies. The data enables government to plan for mitigations against any such destabilizing effects.
  4. Management of the financial sector and planning for aversion of potential economic crises to foster stable growth. It is important in Uganda's investment promotion, facilitation and retention efforts
  5. Better decision making and to meet international standards and codes in reporting
  6. Compilation of Uganda`s Balance of payments and International Investment Position statistics
  7. Assessment of how foreign investment complements local investment in form of feedback from the private sector, which is critical for policy fine tuning that benefits all stakeholders in the economy
  8. Assessment of the perceptions of the private sector investors on the investment climate in Uganda in order to evaluate the impact of the existing policies. This can be done from the results of the periodic private sector surveys carried out among licensed companies.

Investment (Tax) Incentives In Uganda

The absolute exemption on plant and machinery only applies to plant and machineryusedin the agricultural sector. The plant and machinery items are specified under paragraph 1(s) of the second schedule to the VAT Act.

Other importers of plant and machinery benefit from VAT deferment provided under the statutory instruments provided in the VAT Act.

Other incentives under the Income Tax Act include; Income tax exemption on exporters of finished consumer and capital goods produced in Uganda as provided under Section 21(1)(y) of the Income taxAct; and Income tax exemption on income derived by the person carrying on agro-processing.

In addition, investors also benefit from industrial building deduction as per Section 29, and for those in agricultural sector Section 35 provides for more allowable expenditure.

Other reasons why you should consider investing in Uganda

  1. Uganda attained and has had political and social stability since 1986.
  2. Effective macro-economic policies that maintained economic growth at an average of 6.5% and enabled the country to withstand external economic shocks during the global economic downturn from 2008 to 2011 during which the economy still grew by 3%
  3. Natural resource rich country (Human and Minerals).
  4. Totally liberalised foreign exchange regime.
  5. Consistently improving infrastructures.
  6. Trainable and fast adaptable workforce from over 30 universities.
  7. Welcoming population.
  8. No labour tensions.
  9. Dedicated Commercial and Industrial courts for quick resolution of business disputes
  10. A unique multi climate varies from winter on the snow capped Mountain Rwenzori in the west, to the temperate highlands of Western Uganda and tropical forests of the Central region as well as the semi arid North Eastern Uganda.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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