Why electric vehicle makers have been exempted from paying Stamp Duty

Companies manufacturing electric vehicles, electric batteries, or electric vehicle charging equipment or fabricator of a frame and body of an electric vehicle; and employ 80 percent of Ugandans will not pay Stamp Duty in the 2024/2025 financial year.

The exemption is part of the amendments in the Stamp Duty (Amendment) Bill, 2024 passed by Parliament chaired by Speaker, Anita Among on Monday, 6 May 2024.

To qualify for the exemption however, the companies shall have the capacity to use at least 80 percent of the locally produced raw materials, subject to availability.

The Chairperson of the Committee on Finance, Hon. Amos Kankunda, who presented the committee report on the Bill, said that the company is required to have a minimum investment capital of US$10 million in case of a foreigner; US$300,000 in case of a citizen; or US$150,000 in case of a citizen who invests up country.

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

Hon. Nathan Nandala Mafabi (FDC, Buadadiri 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, Hon. 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.

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

The Shadow Minister of Finance, Hon. Ibrahim Ssemujju, however dissented from the committee, presenting a Minority 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 of the 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 inform 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.

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

He added that taxing private equity and venture capital has pushed 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 stamp duty tax,” said Musasizi.

Hon. 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.