Electric car makers will not pay stamp duty in Uganda

Companies that manufacture electric vehicles, electric batteries or electric vehicle charging equipment or manufacturers of the frame and body of an electric vehicle; and employing 80 percent of Ugandans will not pay stamp duty in the 2024/2025 financial year.

The exemption is part of the amendments to the Stamp Duty (Amendment) Bill 2024 that was passed during the plenary session on Monday, May 6, 2024, chaired by Speaker Anita Among.

According to the bill, to improve the quality of the exemption; Companies will have the capacity to use at least 80 percent of locally produced raw materials, subject to availability;

The Chairman of the Finance, Planning and Economic Development Committee, Hon. Amos Kankunda added that the company must have a minimum investment capital of 10 million dollars in the case of a foreigner, 300,000 dollars in the case of a citizen or 150,000 dollars in the case of a citizen who invests in the country.

“This aims to promote investment in an environmentally friendly transport system in Uganda,” he said.

Honorable. Nathan Nandala-Mafabi (FDC, Budadiri West County) said Uganda is endowed with herbs and therefore promoting their use by manufacturers is a step in the right direction.

Pian County Member of Parliament, Hon. Remigio Achia stated that the exemption is timely since young people increasingly invest in science and innovation.

“Young people are committed to innovations and that is very good,” said Achia.

Honorable. Karim Masaba (Indep., Industrial Division, Mbale City) welcomed the exemption and said that by employing 80 per cent of Ugandans in such companies, the government would be protecting the citizenry.

Representative of the municipality of Kira, Hon. Ibrahim Ssemujju, however, disagreed with the committee’s report, arguing that, according to the Auditor General, of the 36 companies that obtained tax incentives and exemptions, 22 were performing below the 50 percent threshold, thus failing to achieve the levels of desired employment.

“The Auditor General advises us to suspend the tax exemptions because they do not serve their purpose. They may not listen to the opposition, but at least listen to the Auditor General,” he said.

He added that the tax breaks cost the government Sh1.4 trillion a year.

Butambala County MP, Hon. Muhammad Muwanga Kivumbi, called for a thorough study of companies being considered for tax exemption, stating that some of them exert pressure to evade taxes.

“We have no income and we are exempting without specific studies to form our exemptions. We can exempt but let’s be very elaborate with the studies,” she said.

Lawmakers also approved a proposal for exemption from stamp duty on shares or other securities by an investor in a private equity or venture fund regulated by the Capital Markets Authority Act.

The Minister of State for Finance, Planning and Economic Development (General Functions), Hon. Henry Musasizi stated that this will stimulate the growth of the economy.

He added that taxing private equity and venture capital has forced potential investors to relocate to neighboring countries such as Kenya and Tanzania.

“It is a new area and to attract capital, we need to exempt them from stamp duty,” Musasizi said.

Honorable. Dicksons Kateshumbwa (NRM, Sheema Municipality) supported the minister, saying that based on the nature of capital and venture investments, it is prudent for tax exemption until profits are made.

“When someone (an investor) comes in, we must reduce our appetite for taxing what there is no interest in yet,” Katesumbwa said.

In this regard, lawmakers passed the Tax Procedures Code (Amendment) Bill, 2024, which aims to ensure that a taxpayer seeking to claim a deduction or credit for destroyed goods informs the Commissioner General of the Revenue Authority of Uganda prior to the destruction of the assets.