Double Taxation Agreements: A ‘Legal’ Avenue for IFFs in Uganda?

Uganda, which recorded GDP growth above 6% in 2019, has made extensive use of Double Taxation Agreements (DTAs), in hopes of facilitating foreign investment.

Watchdog organisations, however, have pointed to extensive abuse of these arrangements, arguing that in cases such as Uganda’s that DTAs put too much of the country’s tax burden on the poor, and increase the risk of illicit financial flows (IFFs).

A 2018 report from Global Financial Integrity and Ugandan civil society organisations highlighted the low rates of tax imposed on non-resident investors under DTAs, particularly on dividends, royalties and other passive income flows. It cited the risk of encouraging IFFs through those incentives, and echoed widespread criticisms of the room for abuse of DTAs with Mauritius and the Netherlands in particular.

Uganda has DTAs with Denmark, India, Italy, Mauritius, Netherlands, Norway, South Africa, UK and Zambia. The agreements with Egypt, EAC, and China are pending ratification while Seychelles and UAE await negotiation.

DTAs prioritise avoiding taxing the companies with multi-national subsidiary entities twice, and mostly follow the guidelines of either the OECD model for such agreements, established in 1963, or a UN model established in 1980 that incorporates adjustments meant to better suit the position of developing countries.

A 2016 study of Uganda’s tax treaties recommended drawing on additional models associated with the EAC and COMESA to offset elements of the UN and OECD models that have undermined against Uganda’s revenues.

Paul Corti Lakuma, a seasoned tax expert and researcher at the Economic Policy Research Centre (EPRC), echoed calls for the revision of DTAs including the Netherlands and Mauritius agreements as a move to plug tax loopholes.

Common abuses such as treaty shopping could be countered with greater enforcement of some existing regulation.


Stella Nyapendi, Assistant Commissioner Board affairs, Policy and Rulings, with the Uganda Revenue Authority, pointed to Income Tax Act of Uganda Section 88(5) which requires a person to own 50% of the company and be resident to the state with which Uganda has a DTA, if they are to claim the benefits of DTAs.

Related proposals for capturing more revenues while DTAs are re-negotiated include boosting manpower at the agencies tasked with enforcement and implementation.

Health Costs of Lost Revenue During Global Pandemic

The scale of the costs of responding to the Covid-19 pandemic illustrates how much Uganda could use the revenue that slips through the cracks of its DTAs.

On 6 May, the IMF announced approval to disburse $491 million of its institutional currency, Special Drawing Rights, to help Uganda to deal with the pandemic, citing the blow to tourism, transport, construction and agriculture, as well as the effects on revenue collection.

Earlier in the pandemic, President Museveni urged well-wishers to donate four wheel drive vehicles to be distributed around the country for emergency cases. Health workers relied on improved budgets to source protective gear to allow them to treat Covid-19 patients safely.

In 2017, a state of the art hospital (New Mulago) was constructed at a total cost of $34.1million borrowed from the Islamic Development Bank.

The amount of revenue estimated to be lost under DTAs, based on that cost, would cover six hospitals with vital signs monitors, ventilators and 4,240 modern hospital beds. The same sum would cover 24,161 ambulances, based on a November 2019 National Emergency Medical Services proposal for a budget to procure ambulances for every health sub-district.


This story was produced by It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation in partnership with the African Centre for Media Excellence. More information at The content is the sole responsibility of the author and the publisher.
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