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Uganda Update
Introduction of Transfer Pricing regulations
in Uganda
The Minister for Finance, Planning and Economic Development
in Uganda finally published the Income Tax (Transfer Pricing)
Regulations, 2011. These regulations are based on provisions
of Section 90 and Section 164 of the Ugandan Income Tax
Act and took effect from 1 July 2011. The Ugandan Revenue
Authority is joining the global trend towards laying emphasis
on non-traditional revenue sources and moving towards
Transfer Pricing and related party transactions. In this regard,
these regulations are meant to ensure that transactions
between Ugandan taxpayers and related non-resident
entities are at arm’s length.
Who do the regulations apply to?
The Transfer Pricing regulations apply to a controlled
transaction where a person who is party to the transactions
is located and subject to tax in Uganda and the other party
in the controlled transaction is located in or outside Uganda.
The regulations define ‘a person’ to include a ‘branch person’
and a ‘headquarters person’.
Distinction between ‘a branch person’ and
headquarter person’
Under the Transfer Pricing regulations:
(a) ‘a branch’ is deemed to be a separate and distinct
person (branch person) from the person in respect of whom
it is a branch ie the ‘headquarters person’
(b) a branch person and headquarters person are deemed
to be associates
(c) a branch person and a headquarter person are located
where their activities are located.
The Arm’s Length Principle
Entities entering into a transaction or series of controlled
transactions in Uganda are now required to determine the
income and expenditure resulting from such transactions,
in accordance with the Arm’s Length Principle (ALP). Failure
to do so will mandate the Commissioner to effect necessary
adjustments so as to ensure adherence with the ALP which
may be to the detriment of the taxpayer.
Transfer Pricing methods to be adopted
The Transfer Pricing methods acceptable under the Transfer
Pricing regulations are consistent with the globally accepted
norms under the Organisation for Economic Development
and Co-operation (OECD) regulations. Entities in Uganda
can adopt either of the following methods for purposes of
arriving at their transfer prices:
(a) the Comparable Uncontrolled Price method
(b) the Resale Price method
(c) the Cost Plus method
(d) the Transaction Net Margin Method
(e) the Transactional Profit Split method; or
(f) any other method that may result to an Arm’s Length
Price in a comparable controlled transaction.
44 // PKF International Tax Alert All Regions
Issue 8 November 2011