Page 25 - EPSI Magazine Issue 8 final 2018.indd

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industrialisation of the country, Uganda has had
to focus on its goal. This widely known goal of the
energy policy dates back as far as 2002. It states
that the energy sector should meet the energy
needs of Uganda’s population for social and eco-
nomic development in an economically sustaina-
ble manner.
With such a goal it is possible that this sector
can also become a revenue stream for the gov-
ernment. Already from before the turn of the cen-
tury the energy sector has been a chief provider
to the treasury resources from foreign earnings
from power exports, VAT on electricity, fuel taxes,
license fees and loyalties.
According to articles in the Business Focus
online magazine of November 2017, Uganda was
earning 123 Billion from its exports of electricity
to Kenya. With such potentially earned revenues,
it is easy for the revenue authority in Uganda to
gain money for the country through taxes. Before
delving into the taxation system in this sector, it
is important to note there are some exemptions.
Exemptions have been made on the electric-
ity supply industry, solar energy industry and oth-
er renewable technologies. These exemptions ex-
tend to the gas oil used by thermal power plants
such as the Electromaxx Thermal plant in Tororo.
In the cases of these thermal plants they have
been exempted from excise duty. These exemp-
tions are based on the Implication of the 2014 tax
amendments. However in the recent past, Ugan-
da’s government has sort to revise their current
law on taxation; most especially in the Energy
Sector.
In the 2016/2017 income tax (Amendment)
bill, solar energy was omitted from the list of ex-
empt supplies and is currently exposed to 18%
VAT as thermal and hydroelectricity. Keep it in
mind that a tax exemption is a monetary ex-
ception that reduces taxable income. Such op-
portunities easily attract investors who are well
equipped with the appropriate resources to help
a country like Uganda explore and develop their
energy resources. Tax incentives inspire investors
to keep investing in Uganda otherwise chances
are that they could run to other countries like
Rwanda and Kenya.
The Bill extends the current exemption for
supplies to the contractors and subcontractors
of hydro power projects, to now also encompass
solar power and geothermal power projects.
This means that VAT will not apply to construc-
tion and other pre-operation costs incurred by
such projects up to the point that they com-
mence commercial production. Given that the
VAT Act currently does not permit such projects
to be VAT registered until the start of produc-
tion, this will prevent preoperational VAT from
becoming an additional cost. Combined with
removal of the exemption for the supply of so-
lar power, this now puts most renewable energy
generation projects (hydro, geothermal, solar)
on a level playing field. It might be expected
that the same treatment should be extended to
other renewable sources such as wind.
Exemptions are made on the Bujjagali pow-
er project, Uganda Electricity Generation Com-
pany as well as Uganda Electricity Transmission
Company Ltd. However, the government is sug-
gesting a corporate income tax exemption for
Bujjagali Hydro Power Plant till 2033. Conced-
ing to this tax will save the units from increas-
ing $0.11cets per unit to between $0.13 and
$0.16costs per unit.
Uganda Revenue Authority’s 2017/ 2018
FY Tax structure was scheduled in a way that
UGX 780 is excise duty on petroleum. This is
with exemptions as result of power generation
and sales to diplomats. By 2017, Umeme was
gathering domestic tariff of 20cents, 18 cents
for commercial consumers, 16 cents for medi-
um scale,10 cents for large and extremely large
industries. These statistics are as per The Daily
Monitor 12 July,2018.
Basing on the current budget, power gen-
eration is assessed at 930MW with anticipation
of 783MW as a supplementary to the nation-
al grid on the accomplishment of the 183MW
Isimba power project and 600MW Karuma dam
in the next two years. The tax measure of fuel
bought is to produce UGX1.96 billion from the
UGX 1300 levied on fuel hence used for road
maintenance.