There are tax incentives on irrigation related equipment
Uganda Revenue Authority (URA) has urged farmers to transform their livelihoods through utilisation of the various tax incentives that are applicable to the agricultural sector.
This happened at the recently concluded 3-day tax hub on Agri-business and Renewable Expo at the OPM grounds in Arua City. This hub is aimed at educating, promoting awareness and improving compliance in the Agribusiness area.
According to UBOS, agriculture accounted for about 24.1% of GDP and contributed 33% of export earnings in FY 2021/2022. With about 70% of Uganda’s working population employed in agriculture, this makes it a dominant sector in Uganda’s economy.
The agricultural sector has a value chain that involves several players at the different points in the production chain and these are involved in a wide range of activities which include; input supply, farmer organization, farm production, post-harvest handling, processing, provision of technologies of production and handling, grading criteria and facilities, cooling and packing technologies, post-harvest local processing, industrial processing, storage, and transport.
URA advised the farmers in West Nile that the activities in their value chain attract value added tax (VAT) establishments which then calls for players to register and use the EFRIS system in issuing e-receipt and e-invoices.
In spite of the large numbers employed in the agricultural sector, URA notes that the sector only accounts for 4% of the tax register with only 38,528 registered for taxes by FY 2022/2023, of which 96% are engaged in crop and animal production, 2% in forestry and 2% in fishing and aquaculture.
Government offers a number of incentives geared towards making the sector more attractive for investment and more profitable. For example, VAT Exemption on agricultural supplies: animal feeds and premixes, crop extension services, irrigation works and sprinklers, supply of agriculture insurance, for taxpayers in the agriculture sector. In addition, to cash basis accounting for VAT on supplies made to government for the same taxpayers.
URA encouraged farmers to also import some of their common inputs that are currently VAT exempted when imported by dealers under the VAT Act. These include hoes, ploughs, harrows, seeders, planters and trans-planters, manure spreaders and fertilizer distributors, agricultural sprayers, fertilizers, agricultural–chemicals (fungicides and pesticides), agricultural tractors, machinery for processing dairy products and the supply of irrigation works, sprinklers and ready to use drip lines.
The good news is that there are goods that are exempt from all taxes under the fifth schedule of the East African Community Customs Management Act, 2004 which farmers can comfortably import such as refrigerated trucks, aluminum cans for the dairy industry, heat insulated milk tanks for the dairy industry, insulated tankers, seeds for sowing, spores and cut plants.