In a move to boost the electric vehicle industry and promote local employment, companies engaged in the manufacturing of electric vehicles, electric batteries, charging equipment, as well as fabricators of electric vehicle frames and bodies, will be exempted from paying Stamp Duty Tax for the 2024/2025 financial year.

The exemption, outlined in the Stamp Duty (Amendment) Bill, 2024, was approved during a plenary sitting chaired by Speaker Anita Among on Monday, May 6th, 2024. To qualify for the exemption, companies must ensure that at least 80 percent of their workforce comprises Ugandan nationals.

Furthermore, eligible companies are required to demonstrate their commitment to utilizing locally produced raw materials, subject to availability, with a minimum threshold of 80 percent. Additionally, they must meet certain investment criteria, including a minimum capital investment of US$10 million for foreign-owned companies, US$300,000 for Ugandan citizens, or US$150,000 for citizens investing in upcountry regions.

Amos Kankunda, the Chairperson of the Committee on Finance, Planning, and Economic Development, emphasized the importance of these measures in stimulating economic growth and job creation within the electric vehicle sector.

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

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

Pian County Member of Parliament, Remigio Achia, said that the exemption is timely since youths are increasingly investing in science and innovations.

“Young people are engaged in innovations and it is very good,” said Achia.

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

Kira Municipality MP, Ibrahim Ssemujju, however, dissented from the committee’s report, arguing that according to the Auditor General, out of the 36 companies that obtained tax incentives and exemptions, 22 were performing below the 50 percent threshold, thereby failing to achieve the desired employment levels.

“The Auditor General is advising us to stop tax exemptions because they are not serving the purpose. You may not listen to the Opposition but at least listen to the Auditor General,” he said.

He added that tax exemptions cost government Shs1.4 trillion annually.

Butambala County MP, Muhammad Muwanga Kivumbi, called for comprehensive study companies that are considered for tax exemptions, saying that some of them lobby so as to avoid taxes.

“We do not have revenue and we are exempting without specific studies to form our exemptions. We can exempt but let us be very elaborate with studies,” he said.

The lawmakers also approved a proposal of Stamp Duty exemption on shares or other securities by an investor in a private equity or venture capital fund regulated under the Capital Markets Authority Act.

The Minister of State for Finance, Planning and Economic Development (General Duties), Henry Musasizi, said that this will stimulate the economy’s growth.

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

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

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

“When someone [Investor] is coming in, we should reduce our appetite to tax where there is no interest yet,” Katesumbwa said.

Relatedly, legislators passed the Tax Procedures Code (Amendment) Bill, 2024 whose objective is to ensure that a tax payer who intends to claim a deduction of or credit for goods destroyed informs the Uganda Revenue Authority’s Commissioner General before destruction of goods.