Double Taxation Treatiesin UgandaBy Busingye Nelly

Presentation at Tax AcademyDec 2014

Nairobi, Kenya

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CONTENTS

• Introduction• DTTs/ DTAs in Uganda• Key issues from our report• Conclusion

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Introduction

• DTAs have twin purpose to avoid double taxation and prevent fiscal evasion

• First DTA signed between Austria-Hungary and Prussia in 1899;

• Most DTAs signed before the 1960s were between developed countries. Since 1960s, an increasing number of DTAs signed between developed and developing countries, with a few between developing countries;

• By 2008, more than 50% of the DTAs concluded were between a developed country and either a developing country or an economy in transition. Around the same period, there was a surge in global foreign investment flows with both developed and developing countries experiencing significant inward increases;

• By 2010, there were 2976 DTAs [Compare this with 322 DTAs at the end of the 1960s and 1193 DTAs in 1990].

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DTTs/ DTAs in Uganda. Key issues from our report

• Report analysed key provisions in Treaties withMauritius and Netherlands• Records from UIA, show that the top FDI sources • To Uganda for the period 1990-2010 were UK, India,

Kenya. Mauritius brings in FDI amounting to slightly below (US$ 506million)

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Mauritius

• Has an extensive treaty network with 38 existing DTTs already in force, 13 of which are with African countries.

• Has a network of 36 investment promotion protection agreements under which Mauritius offers full protection of foreign investments including with 18 African Countries

• It has a low tax jurisdiction, with tax rates ranging from 0-20%, compared to Uganda’s 6-30%.

• Uganda – Mauritius DTT – effective since 1st July 2005.

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Mauritius continued

• The DTTs with Mauritius restrict taxing rights of capital gains tax on the sale of shares at rates ranging from 30-35%.

• Since there is no CGT in Mauritius, the potential tax savings for the Mauritius, the potential tax savings for the Mauritius registered entity are therefore very profitable, being taxed 0% instead of 35%

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Netherlands• Netherlands is also considered a conduit jurisdiction with low tax rates for

certain types of income e.g royalties.• Netherlands has been ranked the 6th country in receiving Ugandan exports

at a value of US$90million; whereas Uganda imported goods worth US$133million and was ranked 9th as a source of imports

• Two major companies in the oil sector, Tullow Oil and Total are also both operating with and through subsidiaries in the Netherlands.

• Netherlands exempts Capital Gains Tax • However, both DTTs (Mauritius and Netherlands) provide that on the sale

of immovable property, moveable property owned by a permanent establishment and ships and aircraft can be taxed in the source country.

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CLOSING REMARKS

• Provisions in DTTs can restrict developing countries’ ability to collect tax revenue

• CSOs need to carry out analysis of the DTT framework in their countries and point loopholes

• We need to influence and participate in policy processes around DTTs.

• We need to advocate for renegotiation of DTTs in our countries

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