Which goods does Uganda Revenue Authority exempt from taxation?

Wednesday, 27th April, 2011

Since the economic situation started biting hard with the value of money declining and buying fewer items, many have been forced to adjust their budgets while others have decided to take to the streets in protest. Others have demanded for government to cut taxes and exempt some goods from taxes but it is important to understand what tax exemptions are and how they arise.

Tax exemptions are provided for under section 21 of the Income Tax Act, the Value Added Tax Act and the East African Customs Management Act (EACMA).

According to the VAT Act, a supply of goods or services is exempt if it is specified in the second schedule of the same Act.

A taxable supply is a supply of goods or services, other than an exempt supply, made by a taxable person for consideration as part of his or her business activities.

For a supply to be considered taxable, it must not be listed among the exempt supplies listed in the Second Schedule of the VAT Act. This taxable supply has to be made by a taxable person who is supplying to get a consideration (make a profit from it).

The VAT Act (Section 20) defines an exempt import if the goods being imported are exempt from customs duty as stated in the Fifth Schedule of the 2004 East African Community Customs Management Act or would be exempt had they been supplied in Uganda.

The list of exempt supplies under the second schedule of the VAT Act is on the URA website (http://ura.go.ug) under the Tax Laws. Some of the exempted supplies include unprocessed foodstuffs, unprocessed agricultural products, postage stamps, supply of financial services, supply of insurance services, unimproved land, education services and supply of social welfare services amongst others.

The other supplies that are exempt include lifejackets, lifesaving gear, headgear and speed governors.

Under the Income Tax Act, there are many incomes that are exempt from tax like income of a listed institution (first schedule of the Act), income of any organization or entitled to privilege under the Diplomatic privileges Act to the extent provided in the regulations and orders made under that Act and income of any local authority amongst others.

In the Fifth Schedule of the 2004 East African Community Customs Management Act (EACCMA), there are a number of items which are exempt from tax like goods for use by Presidents of the partner states, all goods including materials, supplies, equipment, machinery and motor vehicles for the official use of partner states’ armed forces.

The other items exempted from tax under the EACCMA are goods and equipment for use in aid funded projects, one motor vehicle and spare parts for each rally driver amongst many other beneficiaries.

Peter Kaujju
Public & Corporate Affairs, URA