Uganda NGO's and taxation
Question What tax exemptions are NOG's entitled to especially with regard to witholding tax and import duties?
The NGO sector in Uganda is governed by a number of legal, regulatory and policy framework which clearly outline the process of registering an NGO and the necessary fees charged. The following are important to take note of, one of legal frameworks governing the NGO sector is the Income Tax Act 1997.
Uganda’s Income Tax Act provides that an organization is exempt from paying income tax if it falls within the definition of “exempt organization” under Section 2(bb) of the Income Tax Act and has been issued a formal ruling from the Tax Commissioner qualifying it as an exempt organization. The Income Tax Act defines an exempt organization as a company, institution, or irrevocable trust that is:
- an amateur sporting association;
- a religious, charitable, or educational institution of a public character; or
- a trade union, employees’ association, an association of employers registered under any law of Uganda, or an association established for the purpose of promoting farming, mining, tourism, manufacturing, or commerce and industry in Uganda.
All income of an exempt organization is free from income tax, with the exception of property income received. Rental income of immovable property, however, may be exempt if it is used by the lessee exclusively for the activities of the organization specified in the Act.
In addition, business income received by an NGO that is not related to the function constituting the basis of the organization’s existence is subject to tax (Income Tax Act S 21(f)).
For NGOs providing social welfare services, medical services and agricultural services the foreign grants they receive are exempt from Value Added Tax (VAT). Certain supplies are exempt from VAT, including: unprocessed foodstuffs and agricultural products; educational, medical, dental or nursing services; social welfare services; and medical equipment (VAT Act. Schedule 2, Section 19).