Why Uganda?
Uganda is located at the heart of East and Central Africa and shares borders with other resource-rich and economically important countries. This makes it a regional trade and investment base. There are good macro-economic policies that have helped promote a stable economic environment.
The economy is also relatively liberal, for instance Uganda allows free in-flow and out-flow of capital, complete foreign ownership of Investments, permits importation of capital goods free of VAT and duty and currency exchange rates are freely determined by the market.According to the World Heritage and Wall Street Journal Report of January 2008, Uganda is ranked the 3rd freest Economy in 40 Sub-Saharan African Economies.
Uganda is a part of and therefore benefits from strong Regional Economic Groupings such as The Common Market for East and Southern Africa (COMESA) with 20 member countries and a market population of 380 million people and the East African Community (EAC) with 4 other member countries Kenya, Tanzania, Rwanda and Burundi which collectively have a market population of 120 million people.
Uganda has abundantly been gifted by nature in diverse ways for example, it has one of the best climates in the world with rainfall all year round, abundant fertile soils and the many fresh water bodies, all of which greatly favour investment in agriculture. Uganda currently leads in Organic Agriculture in Africa. The abundance of Mineral Deposits, both metallic and non-metallic Minerals, such as phosphates, iron ore, copper, marble, gold and the recently discovered vast deposits of petroleum in the Albertine region, provide an alternative from over dependence on agriculture. There are other sectors as well such as the Tourism sector, ICT, Engineering etc. the possibilities in Uganda are simply limitless.
According to the World Bank Report 2006, Uganda is one of the top 25 countries with simple labour hiring in the world. Uganda Produces over 25,000 University graduates every year trained through the country’s inherited British System of Education. This has earned Uganda a place as one of the best English Language speaking countries in Africa. Good English language skills make Uganda competent at Global Business level.
Investors and their establishments are also guaranteed protection.Uganda applies both Local and International Laws to protect private investments and business, through enactments and ratification. Such laws include: The Ugandan Constitution, The Industrial Property Act, The Trademarks Act, The Uganda Investment Code, Multilateral Investment Guarantee Agency (MIGA), The TRIPS Agreement, Overseas Private Investment Corporation (OPIC) of the United States, and Convention on the Recognition & Enforcement of Foreign Arbitral Award (CREFAA) etc.
Uganda also offers a safe environment characterized by a low rate of crime and violence, which permits for work to go on safely all day and night.
Last but not least the creation of the Uganda Investment Authority (UIA) The Authority is equipped to swiftly handle investor’s requirements for information, offer information on investment opportunities in, promote Uganda as an investment location for investors, help investors to implement their project ideas through professional advice, and assistance in locating relevant support services, help investors to secure secondary licenses and approvals, arranging contacts for investors and organizing itineraries for visiting foreign missions within the country and reviewing and making policy recommendations to government about investment. UIA is a one-stop facilitator for Investors and therefore gives Uganda an edge over all the other countries.
Trade and Investment
Agricultural products make the most exports in the country and also over 80% of the population is employed in the agricultural sector. It should however be noted that most of the products are exported with minimum or little processing which makes the returns on them very little.
Uganda is the leading producer of coffee in Africa. It is also a producer of tea, cotton, tobacco, cereals, oilseeds, fresh and preserved fruit, vegetables and nuts, essential oils, orchids, flowers and sericulture. Opportunities include commercial farming and value addition, as well as the manufacture of inputs and supply of agricultural machinery.
The other sectors include; real estate development, tourism, construction, mining industry, telecommunication development. The recently discovered vast oil deposits in the region of surrounding Lake Albert is another investment opportunity.
Setting up a business
The following alternative business entities are available to investors who want to conduct business in Uganda;
Sole Proprietorship: A Sole proprietor is an individual engaged in a business or profession on his own account. Any individual is free to establish a business in Uganda. The proprietor is responsible for the business and is personally liable for the business debts.
The cost of registering the name is very minimal (US$ 100). The usual balance sheet date is 30th June to coincide with the fiscal year. However, a person can opt for any other accounting date, the most common being 31st December.
Partnership: This form of business is mainly used for professional, small and family-owned firms. All partners are jointly and severally liable for the obligations of the partnership. A partnership is governed by the Partnership Act (Cap.86). The cost of registering a partnership is the same as that of a sole proprietorship.
Private Limited Liability Company: This form of business is the most common for foreign investors. Companies that incorporate under the Companies Act (Cap.85) enjoy legal entities separate and apart from those individuals who comprise the officers, members and shareholders of the company. This means that a company enjoys a legal personality fully distinguished from the people who run it. A private company must have at least two members and at least two directors and can commence business immediately upon incorporation.
The formation cost is US$ 1000 plus 1% stamp duty on nominal share capital and the usual balance sheet is 30th June. However, a company can opt for another accounting date.
Public Limited Liability Company: To incorporate a public company, there must be at least seven members owning shares with no maximum limit. In addition, it must have a certificate to commence business before operating.
Foreign Branch: Business may be carried out in Uganda through a company incorporated outside Uganda. Such a company must however register a branch in Uganda by submitting to the Registrar of Companies the following documents: a certified copy of the charter, statutes or memorandum and articles of association of the company in English, a list of directors and secretary, their names, usual postal address, nationality and business occupation, the full address of the registered or principal office of the company, a statement of all subsisting charges created by the company and the names and addresses of residents authorized to accept service of process and notice.
The cost of forming a foreign branch is approximately US$ 1000.
Legal, Accounting and Audit Requirements
For both private and public limited companies, a company secretary is required to file the necessary returns with the Registrar of Companies and an annual audit is required by law. Once a year an annual return is required to be filed with the Registrar of Companies within 42 days of the Annual General Meeting. For public companies, a copy of the audited financial statements is required to be filed together with the annual return and is available for public inspection.
For a foreign branch, audits are not required by law. However, for tax purposes the financial statements are required to be certified by Certified Public Accountants. The filing requirements for the Registrar of Companies are minor but the company financial statements as a whole may have to be filed. Once registered the company will be subject to the provisions of the Companies Act (Cap.85) and shall be expected to make appropriate returns to the Registrar of Companies.
For both sole proprietors and partnerships, the tax law requires their financial statements to be certified by Certified Public Accountants.
Who qualifies to start Business in Uganda?
Any person in Uganda who has reached the age of majority which according to the Constitution is 18 can start a company. However through representatives or next of kin, minors can also start business and be legally bound by their obligation according to the contract Act as well as the Companies Act.
Foreigners are also allowed to wholly own companies or part own companies with Ugandans. The laws that govern foreign investments are the Investment Code Act, the Foreign Exchange Act, Citizenship and Immigration Control Act, Land Act among others.
Foreign investors are required to incorporate a company and provide evidence of investment of at least USD$ 100,000 to be issued with investment license. They must apply and obtain the relevant license of the sector it intends to invest and apply for work permit.
In the event of relocation to another country, a foreigner is guaranteed total repatriation of capital.
When to Register a Business in Uganda.
It is possible to start and operate a business in Uganda for years without any formal Registration. Some small businesses can also be run legally without registration. However, as the business expands, as well as the clientele base, it becomes increasingly complex and almost impossible to enter into big deals without a fully registered business. A formalized business upfront is preferable if you want to reap the benefits of business growth.
Advantages of registering a business.
Access to credit from financial Institutions.
Increased dealings with other companies.
Can trade with the Government of Uganda.
Can benefit from the incentives given to new companies such as tax exemption for the first ten years of trading in the country.
Where to register business in Uganda
Where it is a micro business, registration can be within the locality, village or market. Registration can also be done with District Authorities for bigger businesses localized in a particular district. Last but not least, a business intended to operate across the country and beyond the geographical boundaries of the country.
Registration Procedure
Reserve the company name at the Office of the Registrar.
Pay fees at the bank.
Obtain necessary forms from the Uganda Bookshop.
Sign the declaration of compliance before a Commissioner for Oaths.
Obtain requisition for bank pay-in slip and bank payment advice forms from the Uganda Registration Services Bureau.
Make payment of registration fees at a given bank.
File with the Registrar General.
File a personal inquiry form for each director, as well as a corporate preliminary inquiry form, with the local office of the Uganda Revenue Authority (URA).
Receive a uniform tax identification number (TID).
Apply for corporate tax file number.
Apply for VAT registration.
Have an inspector from URA inspect the business premises.
Apply for PAYE.
Obtain application forms for trading license.
Arrange an inspection of the premises by a licensing officer, who will fill out an assessment form.
Pay the license fee at the bank.
Obtain the trading license.
File a form with the National Social Security Fund (NSSF).
Make a company seal.
Taxation
Taxation of resident and non-resident companies in Uganda is governed by the Income Tax Act.The tax system is residence-based, with a standard corporate tax rate of 30 percent. Capital gains are aggregated with business income and taxed at the standard corporate income tax rate.
VAT at a standard rate of 18 percent is imposed on imported goods and the local supply of goods and services.
Uganda tax residents are subject to income tax on their world-wide income, whereas non-residents are subject to tax on income from a source in Uganda. A company is a Ugandan tax resident if it is incorporated or formed under the laws of Uganda, has its management and control exercised in Uganda or undertakes the majority of its operations in Uganda during the year of income.
The corporate Tax rate is 30% for big corporations while the small businesses are taxed on turnover basis. Capital gains are aggregated with business income and taxed at the standard corporate income tax rate of 30%. Expenditure and losses incurred in the production of income are general deductible for corporate income tax purposes. Ugandan residents are subject to income tax on their worldwide income, whereas non-residents are subject to tax on income generated in Uganda. There is also an obligation to contribute on a monthly basis to the National Social Security Fund 15% of the employee’s monthly salary, wages and cash allowances.
Tax exempt entities include religious, charitable or educational institutions of a public character, trade unions, employees’ associations, association of employers, and certain associations established for the purpose of promoting farming, mining, tourism, manufacturing, or commerce and industry and amateur sporting associations.
Investment Climate
The government of Uganda has put in place several incentives intended to attract foreign investors into the country. These incentives are mainly listed out in the Uganda Investment Code Act and they include;
Foreigners are allowed to own companies fully or part own companies in Uganda. Where a foreigner decides to close business in Uganda, he is entitled to the full returns from his business.
Investors are exempted from import duties and sales tax. They can also obtain credit from domestic financial institutions where they hold an investment license.
Legal system
Uganda was colonized by Britain and as such, the English legal system and law are predominant. The legal system is based on English Common Law and customary law although customary law will only apply when it does not conflict with statutory law. The laws applicable in Uganda are statutory law, common law; doctrines of equity and customary law as stipulated by the Judicature Act. The Constitution of Uganda is the supreme law of the land that has binding force on all the citizens of the country, agencies and government organs and in instances of conflict the constitution will always prevail.[1]
Judicial precedent is important as decisions of the higher court have binding force on the lower courts. There is a hierarchy of courts which forms an integral part of the legal system. The supreme court of Uganda is at the apex of the court system. The supreme has appellate jurisdiction in matters emanating from either the constitutional court or the Court of Appeal only. The court of appeal only hears appeals from the high court and will therefore not act as a court of first instance. The High Court is the only court with original, unlimited jurisdiction to hear all matters arising within Uganda.[2] There are also magistrate courts, the highest being the Chief Magistrate’s court and they are governed by the Magistrate’s Court Act.
Disputes between corporate bodies are usually resolved by the Civil courts especially the commercial division of the High Court.
Dispute settlement between foreign investors and Government of Uganda
The Uganda Investment Code Act provides that where a dispute arises between a foreign investor and the Uganda Investment Authority or the Government in respect of a licensed enterprise, all efforts shall be made to settle the dispute through negotiations for an amicable settlement.[3]
Where negotiations fail, the dispute may be submitted to arbitration at the option of the aggrieved party within the framework of any bilateral or multilateral agreement on investment protection to which the Government and the country of which the investor is a national are parties.[4] If parties disagree on the method of dispute settlement, the International Centre for Settlement of Disputes Rules may apply or the aggrieved party can apply to the High Court of Uganda for redress.
Intellectual Property
The legal system in Uganda strives to protect intellectual property as applicable in other parts of the world. However it should be noted that the concept of Intellectual Property is relatively new in Uganda. Industrial Property Act 2014, the Trademarks Act of 2010 and the Copy Rights and Neighbouring Rights Act of 2006 are the key statutes used to protect Intellectual Property. There are various categories of Intellectual property rights protected such as patents, trademarks, copyright and industrial designs.
Trademarks
To be registered, a mark must be capable of distinguishing the goods and services of one trader from those of another and be capable of graphic representation.[5] Trademarks are registered in the Trademarks register and archived at the trademark registry.[6]
The registration of a mark is for an initial period of seven years and can be renewed every ten years upon payment of a prescribed fee.[7]
Copyright
This is automatically conferred when a work is created and fixed in a material form. A copyright owner may register the right with the registrar.[8]In Uganda copyrights are protected during the life time of the holder and fifty years after the death of the author.[9]
Uganda is also a signatory to several copyright treaties including the Berne Convention for the Protection of Literary and Artistic Works, Universal Copyright Convention Agreement on Trade-Related Aspects of Intellectual Property Rights and World Intellectual Property Organization Copyright Treaty.
A claim for infringement of Copyright can be made by the owner, assignee or an exclusive licensee of the copyright in the Commercial Division of the High Court of Uganda.[10]
Patents
The requirements for registration are newness or an improvement on an already patented invention, results from inventive activity and invention that possesses industrial application. These applications are made to the Patents Registry. Patents expire at the end of twenty years from the filing date of the application.[11]
For more information on Patents, see the Industrial Property Act available at www.cehurd.org.
Industrial Design
An industrial design means that aspect of a useful article which is ornamental or aesthetic that may consist three dimensional features like shape or surface of an article or a three dimensional feature such as patterns, line or colours. [12]To be registered an industrial design must be new and must not be contrary to public policy or morality.[13]
Application for registration is made to the registrar of Industrial property[14] and the registration of an industrial design shall expire at the end of the fifth year following the date of registration, which can be renewed for two further consecutive periods of five years.[15]
For more information on Industrial Designs, see the Industrial Property Act available at www.cehurd.org.
[1] Article 2 of the Constitution of Uganda 1995.
[2] Judicature Act Cap 13.
[3] Section 28(1) of the Act.
[4] Section 28(2) of the Act.
[5] Section 1 of the Trademarks Act 2010.
[6] Section 2 of the Trademarks Act 2010.
[7] Section 21 of the Trademarks Act 2010.
[8] Section 43 of the Copyright and Neighbouring Rights Act 2006.
[9] Section 13 of the Copyright and Neighbouring Rights Act 2006.
[10] Section 45 of the Copyright and Neighbouring Rights Act 2006.
[11] Section 46 of the Industrial Property Act 2014.
[12] Section 71(1) of the Industrial Property Act 2014.
[13] Section 73 of the Industrial Property Act 2014.
[14] Section 5 of the Industrial Property Act 2014.
[15] Section 75 of the Industrial Property Act 2014.
