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Tax Incentives For Agriculture Sector

by Wangah Wanyama
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By Ali Twaha

Uganda’s agricultural sector currently accounts for over 50% of the country’s exports, but unfortunately, it only contributes 1% of the annual revenue collections according to data from Uganda Revenue Authority.

In spite of the many people employed in the agricultural sector, it only accounts for 4% (about 38,528) of the URA’s register are currently registered for taxes, of which 96% are engaged in crop and animal production, 2% in forestry and 2% in fishing and aquaculture 

To promote commercial agriculture and value addition, the government put in place several tax incentives with an aim of encouraging economic growth, investment and creation of quality jobs in the sector.

What are tax incentives? A tax incentive is a government policy that offers a reduction in taxes or other favorable tax treatment to encourage certain behaviors or activities that the government wants to promote.

The tax incentives take many forms such as tax deductions, tax exemptions, and tax holidays among others.

For example, a tax deduction reduces the amount of income that is subject to tax while a tax exemption in the context of agricultural sector exempts a certain income type from taxation.

What tax incentives exits today?

To ensure that agriculturalists get a fair return on investment, the Government of Uganda has continued to prioritize the sector and over the years many incentives have been introduced to boost the sector development and these include;

A farmer who operates in an Industrial Park or Free Zone and is engaged in processing agricultural products gets a 10-year exemption on income. 

The is also a value added tax (VAT) exemption on agricultural supplies such as animal feeds and premixes, crop extension services, irrigation works and sprinklers, supply of agriculture insurance among others.

The exemptions when imported by persons engaged in agriculture under the he 5th Schedule of the East African Community Customs Management Act, 2004.

When you invest in agricultural processing machines, these attract no VAT. Hoes, ploughs, harrows, seeders, planters and trans planters, manure spreaders and fertilizer distributors are exempted from all taxes when imported.

Others include; refrigerated trucks, veterinary chemicals, agricultural tractors, aluminum cans for the dairy industry, insulated tankers, feeds for poultry and livestock are exempted from all taxes

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