In Uganda, there is a mixed legal system of English common law and local law
President Yoweri Kaguta Museveni
- Services (banking, telecommunication, insurance)
- Agriculture (sugar, coffee, tobacco, fishing, tea)
- Power Generation (hydropower, solar power, biomass)
- Construction (cement industries)
- Mining and Natural Resources
- Manufacturing industry (pharmaceuticals)
English (official national language, taught in grade schools, used in courts of law and by most newspapers and some radio broadcasts), Luganda (most widely used of the Niger-Congo languages, preferred for native language publications in the capital and may be taught in school), other Niger-Congo languages, Nilo-Saharan languages, Swahili, Rukiga and Runyankole among others.
Roman Catholic 41.9%, Protestant 42% (Anglican 35.9%, Pentecostal 4.6%, Seventh-Day Adventist 1.5%), Muslim 12.1%, other 3.1%, none 0.9%.
- Capital markets
Public offers/disclosure regulations
The Capital Markets Authority Act and the Capital Markets Authority (Prospectus Requirements) Regulations 1996, as amended, also contain various disclosure obligations. The Capital Markets Authority has powers to request the disclosure of such information as it may deem necessary from a stock exchange, or broker, or dealer, or a person that has acquired or sold securities. A broker, dealer, investment adviser and their respective representatives have obligations to disclose to the Capital Markets Authority any interest they may have in securities. Bankers also have reporting obligations to the Capital Markets Authority with respect to trust accounts held with them.
The Capital Markets (Registers of Interests in Securities) Regulations, places obligations on investment advisers, licensed brokers or dealers, broker or dealer’s representative, investment representative and financial journalist to maintain a register of securities in which they have interests and to update the register with any changes within seven days of the change. The Capital Markets Authority (Conduct of Business) Regulations requires a licensee to disclose to a customer any material interest it has in a transaction to be entered into with or for a customer; or a relationship which gives rise to a conflict of interest in relation to a transaction. According to the Uganda Securities Exchange Listing Rules 2003, an issuer of securities shall within 24 (twenty four) hours following the event or circumstance release an announcement giving details of the circumstances or events that have or are likely to have a material effect on the financial results, the financial position or cash flow of the issuer and any new developments which are not public knowledge which may lead to material movements in the price of the issuer’s listed securities.
The Capital Markets Authority Act has been amended twice in 2011 and 2016. The Capital Markets Authority (Amendment) Act, 2011 (“2011 Amendment”) introduced a new section 90 which provides various considerations before an offer of shares to the public can be made. These include but not limited to the instances in which securities will be deemed to have been offered to the public and a prohibition against an offer of securities to the public without a prospectus.
The 2011 Amendment further requires every lister of securities that is subject to a public offer or which is publicly held to keep the Authority promptly informed of any information relating to the issuer or its subsidiaries: is necessary to enable the public appraise the financial position of the issuer and its subsidiaries; is reasonably expected to affect the market activity of securities or affect the subsidiaries and that might be reasonably expected to affect the market activity in the price of its securities.
The disclosure obligation also applies to listed and non-listed issuers. Non-listed issuers are required to issue prompt press releases to the public. Listed issuers are required to comply with the disclosure obligations prescribed in the listing and the relevant stock exchange.
Corporate Governance Code
Currently, corporate governance provisions under the common law and the Companies Act, 2012 form the basis of companies regulation in Uganda with general duties of directors like the duty of care and skill, duty to disclose a conflict of interest, and other fiduciary duties. The Companies Act 2012 (which commenced on 1 July 2013), contains a Corporate Governance Code which codifies and sets out the minimum requirements of corporate governance. This Code is intended to be mandatory for all public companies but voluntary for private companies.
Some sectors have sector-specific corporate governance guidelines e.g financial institutions are governed by the Financial Institutions (Corporate Governance) Regulations 2005, and listed companies are governed by the Capital Markets Corporate Governance Guidelines 2003. The Institute for Corporate Governance in Uganda is a private sector initiative (no enforcement powers) that raises awareness of corporate governance and corporate responsibility through workshops and seminars. Membership is voluntary.
The Capital Markets (Takeover and Mergers) Regulations 2012 require any person who intends or proposes to acquire effective control in a listed company to announce the proposed offer by press within 24 hours and to serve a notice with details of such intention to the offeree, the applicable stock exchange and the Capital Markets Authority. Where a person acquires effective control of a listed company but has no intention of making a takeover offer, such person is required to make a public announcement containing reasons for an exemption and also apply to the Capital Markets Authority for an exemption from compliance with the takeover requirements under these regulations. There is an obligation on an issuer to notify the Capital Markets Authority of any material change in the status of securities issued by it.
Uganda is also a Member State of COMESA and recently passed the COMESA Treaty (Implementation) Act, 2016, which enables the applicability of the COMESA Competition Regulations as law in Uganda. Please see the COMESA summary in the AG section of the app to be found at the AG in Africa page.
USE Listings Rules, 2003; USE Listing Rules (Amendment) Rules, 2005
Capital Markets Authority Act (Cap 84), Capital Markets (Amendment) Act 2011 and 2016
Regulatory body or bodies
Capital Markets Authority and the Uganda Securities Exchange
Uganda Securities Exchange (USE)
Current number of listed companies
16 (8 domestic companies and 8 cross border listed companies)
- Competition regulation
The Communications Act (Cap 106), the Communications (Fair Competition) Regulations 2005, the Telecommunications (Licensing) Regulations 2005 and the Communications (Practice and Procedure) Regulations 2005, were enacted to ensure fair competition in the communications market, facilitate greater product choice, competitive pricing, and higher standards of service through competition.
According to the Communications (Fair Competition) Regulations 2005, a telecommunications operator licensed under The Communications Act shall not engage in any activity (whether by act or omission), which has, or is intended to, or is likely to have the effect of unfairly preventing, restricting or distorting competition where the act or omission is done in the course of, or as a result of, or in connection with any business activity relating to communication services. For the avoidance of doubt, an operator is taken to have engaged in anti-competitive acts if by commission or omission, that act has an appreciable effect on fair competition in the communications market.
There is currently no comprehensive legislation to regulate anti-competitive behaviour in Uganda, however, a draft Competition Bill 2004 is pending presentation before Parliament and consideration by stakeholders. It is not known when it will be passed into law.
In the interim, the Common Market for Eastern and Southern Africa Treaty (Implementation) Act, 2016 which gave the COMESA Competition Regulations (2004) the force of law in Uganda commenced on 25th August 2017 and the extent of its implementation is yet to be confirmed. Please see the COMESA summary in the AG section of the app to be found at the AG in Africa page.
- Corruption / transparency
Corruption Perception Index rank worldwide for 2017
Signatories to United Nations Convention Against Corruption (UNAC)?
Signatories to the African Union Convention on Preventing and Combating Corruption?
Corruption Perception Index score for 2017
Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?
Enforcement of foreign judgments
The Foreign Judgments (Reciprocal Enforcement) Act (Cap 9) allows the enforcement of foreign judgments in Uganda where:
- such judgment was a final decision passed by a superior court of a foreign territory, such territory having been declared as having reciprocal treatment of judgments, under a statutory instrument passed by the relevant minister in Uganda; and
- the person seeking to enforce it applies for its registration with the High Court within six years of the date of judgment.
The Reciprocal Enforcement of Judgments Act (Cap 21) provides for the enforcement in the Republic of Uganda, of judgments made by a superior court in the United Kingdom and other Commonwealth countries and the Republic of Ireland. The application of this Act was subsequently extended to Seychelles, Mauritius, Lesotho, Botswana, Swaziland, Sri Lanka and New South Wales in Australia. Such judgments must be registered with the High Court of Uganda before they can be enforced.
The Judgments Extension Act (Cap 12) provides for the enforcement in the Republic of Uganda of decrees and warranties passed by courts in Kenya, Malawi and Tanzania.
Effectiveness of the court system
Due to inadequate resources courts are significantly backlogged in Uganda, making the time it takes for a case to be heard rather lengthy and protracted. As a guideline, it will often take twelve to eighteen months to obtain a judgment from the Commercial Division of the High Court and this will be considerably longer where the matter is before the Land Division. Cases referred to the Court of Appeal take twelve to eighteen months to resolve.
Findings by the 2017 World Bank report on Doing Business, show that Uganda was ranked as 64 out of 190 economies benchmarked using indicators to measure the enforcement of contracts.
Structure of the court system
The hierarchy of the court system in Uganda is as follows:
- Supreme Court of Uganda;
- Court of Appeal of Uganda and Constitutional Court;
- High Court of Uganda (Civil Division, Land Division, Criminal Division, Family Division and Commercial Division, War Crimes Division, Anti-Corruption Court); and
- Magistrate Courts (Chief Magistrates Court, Grade I and II Magistrates Courts, although the Grade II Magistrate Court is currently being phased out).
Arbitration in Uganda is governed by the Arbitration and Conciliation Act (Cap 4). It provides for domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and generally defines the law relating to conciliation of disputes in Uganda. Uganda also has a Centre for Arbitration and Dispute Resolution (CADER), which facilitates the arbitration and mediation of commercial and other disputes.
Enforcement of arbitral awards
Uganda is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 and the Convention on the Settlement of Investment Disputes between States and Nationals of other States. Awards under these conventions are recognised and enforceable in Uganda subject to applicable registration requirements of the same in the High Court.
Perception of the local courts
In general, courts in Uganda are perceived by the local population as having an important function in the resolution of disputes that parties have failed to resolve. Courts ranking higher in the hierarchy are mostly perceived to be fair and are seen as the best way to administer justice in Uganda.
In pursuit of its mission to promote the rule of law, transparently administer justice and independently interpret the laws of Uganda, the Judiciary, to a certain extent, comes across as independent of the influence of the legislative and executive arms of government.
- Foreign investments
Foreign investment incentives
Section 10 (1)-(2) of the Investment Code Act (Cap 92) (the “Code”) outlines the regulation of foreign investment. It is detailed that foreign investors (as defined in Part III, section 9 of the Code) shall not operate a business enterprise in Uganda otherwise than in accordance with an investment licence issued under the Code. However, even with such a licence, a foreign investor may not:
- engage in any business concerning crop or animal production;
- provide material or other assistance to Ugandan farmers in crop production or animal production; or
- acquire or lease land for the purposes of crop and animal production.
The Code also sets out the priority areas in respect of which a foreign investor would qualify for investment incentives. More specifically, under section 22 (1)(a)-(c) of the Code, a foreign investor qualifies for incentives if the investor:
- makes a capital investment worth at least USD $500,000 by way of capital invested;
- holds a licence under the Code together with his or her expatriate staff are exempt from paying import duty and sales tax on vehicles for personal use and/or personal or household effects imported within 12 months of first arrival; or
- holds a licence under the Code, under which they may obtain credit in respect of the business enterprise to which the licence relates, from a local financial institution up to a limit established by the Bank of Uganda in consultation with the Uganda Investment Authority and having regard to the amount of foreign capital invested in the business enterprise.
The current Investment Code Act is undergoing review under a draft Investment Code Bill. The new proposed law will repeal and replace the current Investment Code Act, and will also introduce a penalty not exceeding UGX 20,000,000 (Uganda Shillings Twenty Million) (equivalent to USD 5,555) or imprisonment not exceeding 4 (four) years for foreign owned companies that carry on business in Uganda without the investment licence.
Foreign investment rules
Listed Companies are subject to capital and shareholding requirements. The Capital Markets (Cross Border Introductions) Regulations 2004 allow a foreign company registered in Uganda or a company registered as a public company in its home jurisdiction to apply to the Capital Markets Authority for a listing of securities.
The Uganda Communications Act, 2013 (“Communications Act”) repealed the Electronic Media Act, Cap. 104 and the Uganda Communications Act, Cap 106. The Communications Act regulates and governs the licensing for radio communications, telecommunications, radio and television broadcasting, and postal services in Uganda. The Communications Act prohibits any person without a licence from advertising or placing a notice, mark or word at any place which notice, would imply or mislead the public to believe that the advertiser is a holder of a licence under this Act. Non-compliance with this provision is an offence that attracts a fine of UGX 1,920,000 (equivalent to USD 533) or imprisonment not exceeding four (4) years or both.
The Uganda Communications Commission has also prepared new regulations which are in final form and awaiting the responsible Minister to sign them into law. The new regulations will among others provide guidelines on advertising by licensed persons within the communications sector. The Press and Journalist Act (Cap 105) regulates mass media and journalists, setting out their professional code of ethics.
Food and drug advertising regulations
The Food and Drugs Act (Cap 278) regulates false labelling and advertisement of food and drugs. Under this Act, it is an offence for a person to give any food, or sell any drug, or display any food or drug having a label (whether attached to or printed on the wrapper or container), or to publish or be party to the publication of an advertisement that falsely describes such food or drug or is calculated to mislead as to its nature, substance or quality.
Financial advertising regulations
The Capital Markets Authority Act and Capital Markets (Advertisements) Regulations 1996 regulate the publication of:
- advertisements offering services of brokers, dealers, investment advisors;
- advertisements offering securities for purchase or sale;
- advertisements in respect of securities and prospectuses by issuers of securities; and
- the form and contents of such advertisements and prospectuses.
The Financial Institutions Act, 2004 prohibits a person from issuing an advertisement in which they falsely represent that they are authorised to accept deposits or are licensed under the Act with the intention of inviting or inducing any person to make a deposit. Non compliance with this provision is an offence and is liable on conviction to a fine not exceeding UGX 7,000,000 (equivalent to USD 1,944) or imprisonment not exceeding two years or both. In addition, the Bank of Uganda Financial Consumer Protection Guidelines, 2011 provide that a financial services provider must ensure that all advertising and promotional materials are fair, clear and not misleading.
Export Processing Zone
According to the Free Zones Act, 2014 a licensed developer or operator within an export processing zone shall be granted exemptions from taxes and duties on all export processing zone imported inputs that are for the exclusive use in the development and production output of the business enterprise including machinery and equipment, spare parts, raw materials and intermediate goods.
Uganda has double tax treaty arrangements with Mauritius, the Netherlands, Denmark, India, South Africa, Norway and the United Kingdom. A person undertaking mining operations is entitled to deductions against the gross income derived by the person from the mining operations in the licence area for that year. An initial allowance of 50% is available for plant and machinery brought into use for the first time outside a radius of fifty (50) kilometres from Kampala. An industrial building allowance of 20% of the cost base of the building that is placed into service for the first time during the year of income. Industrial buildings does not include an approved commercial building.
Where in any year of income the total gross income of a company is exceeded by the total deductions allowed to that company, then the excess is carried forward as an assessed loss and deducted from the company's chargeable income in the following year of income. An assessed loss is reduced by the amount or value of any benefit to the company from a concession or compromise granted or given by that tax payer's creditors in the course of insolvency, provided such liabilities to those creditors were incurred in the production of the company's gross income.
A resident person who pays interest to another resident person must withhold tax on the gross amount of the payment at a rate of 15%. This does not apply to:
- interest paid by a natural person;
- interest paid by a company to an associated company;
- interest paid which is exempt from tax in the hands of the recipient; and
- interest paid to a financial institution other than interest from government securities.
Capital Gains Tax
Capital gains tax is charged on capital gains that arise from the disposal of assets held by a taxable person. The gain is the excess of proceeds over the cost of assets and related expenses, with no inflation relief. Gains are taxed at the company rate as part of business income.
With respect to involuntary disposal, there is no gain or loss where the proceeds are re-invested in similar assets within one year.
A resident corporate entity is subject to tax on worldwide income at a rate of 30%, while a non-resident corporate entity is subject to tax only on Ugandan-source income at the rate of 30%. In addition, a branch of a foreign company registered in Uganda is taxed on repatriated income at the rate of 15%.
Stamp duty is charged at nominal or ad valorem rates on a variety of financial instruments and transactions. Stamp duty at the rate of 1.5% is levied on the transfer of immovable property and on the transfer of shares and other securities (except for shares listed on the Uganda stock exchange).
The Income Tax Act imposes withholding tax at the rate of 15% on royalty payments to non-resident persons. However, there is no withholding tax on royalty payments to resident persons unless the payments are made by a government institution, local authority, company controlled by the government.
Value Added Tax
VAT is currently applied at a rate of 18% in respect of every taxable supply made by a taxable person in Uganda. Exempt supplies include, but are not limited to, the supply of financial services, insurance services (only health insurance, life insurance, micro insurance and re-insurance services), postage stamps and unprocessed foodstuffs.
Thin Cap regulations
Where a foreign-controlled resident company, other than financial institutions, has a debt-to-equity ratio in excess of 1.5 to 1 at any time during a year of income, a deduction is disallowed for the interest paid by the company during that year on the part of the debt that exceeds the 1.5 to 1 ratio for the period the ratio was exceed.
Personal income tax
A resident individual is subject to tax on worldwide income, while a non-resident individual is subject to income tax only on Ugandan-source income. The rate of tax payable is dependent on the income bracket of the individual.
Both the Income Tax Act and the Income Tax (Transfer Pricing) Regulations 2011, require transactions between associated parties to be on arm's length terms.
Technical service fees
Withholding tax is applied at a rate of 6% for resident persons and 15% for non-resident persons on technical service fees.
Payroll tax and social security
Under the National Social Security FundAct, an employer is required to withhold 15% of an employee's gross salary.
Real property tax
Rental tax is charged at a rate of 20% of rental income in excess of UGX 2,820,000 (equivalent to USD 783). Whereas a company is subject to rental tax at a rate of 30% of the rental income.
Dividends paid out to resident and/or non-resident shareholders are taxed at a rate of 15%.