Africa-Press – Uganda. It is illegal to enter, stay and work in Uganda unless the expatriate has a valid work/ residence permit or pass. Tax consequences for expatriates in Uganda depend on whether they are resident or non-resident, Denis Kakembo writes.
Expatriates are individuals employed in a foreign country. Global mobility of employees is common and encouraged. Companies with mobility programmes do not only attract new talent but also retain it. International companies in Uganda usually facilitate their employees to work in other countries as part of their talent development. As businesses ponder expatriate deployment decisions, this article highlights the key Ugandan compliance issues.
Structures for expatriate deployment
Three common structures are used to deploy expatriates. Expatriates work for a specified period of time in a foreign country before returning home. Under the split payroll arrangement, an expatriate on international assignment is paid both in his home and the host country. An expatriate can also be employed in a country where the sending employer has no legal presence. There are arising legal and tax consequences that must be considered before choosing the most appropriate structure for expatriate deployment.
Employment law
The Employment Act 2006 principally regulates employment exercised in Uganda. The Courts enforce expatriate labour rights as they do for Ugandan nationals. Clauses in the employment contract are unenforceable at law if they restrain to the detriment of the employee the application of the Employment Act.
However, expatriates can apply to the Minister responsible for labour matters to exclude part or whole of the Act as long as they can prove that they have a special arrangement which affords protection that is equivalent to or better than that provided in Uganda’s law.
Right of entry and work in Uganda
It is illegal to enter, stay and work in Uganda unless the expatriate has a valid work/ residence permit or pass. Expatriates must process and obtain the class G2 work permit. There are punitive consequences for working in Uganda without authorisation.
Tax consequences
The tax consequences for expatriates in Uganda principally depend on whether they are resident or non-resident.
Resident persons are taxed on their world-wide income while non- residents are taxed only on income sourced in Uganda.
A resident individual is one who has a permanent home in Uganda or is present in Uganda for 183 days or more in a 12 month period that begins or ends during the year of income or is present for periods averaging more than 122 days per year for the last three years.
Non-resident individuals do not benefit from the exempt income threshold available to resident persons.
Social security
Employers with five or more employees must register with the National Social Security Fund (NSSF). The standard contribution to be remitted by an employer to NSSF on behalf of an employee is 15 per cent of the employee’s wages. The employer is legally allowed to deduct 5 per cent from the employee’s wages and pay the remaining 10 per cent.
However, the employer can choose to settle the entire cost. The expatriates are ordinarily entitled to their social security contributions on departure from Uganda.
Resident or non-resident?
It is relevant to establish whether an expatriate is a resident employee or a non-resident for social security purposes. This is because non-resident employees are exempt from remitting contributions to NSSF.
A non-resident employee for NSSF purposes means an employee not ordinarily resident in Uganda who is to be employed in Uganda for a continuous period of not more than three years or such a longer period as approved by the managing director of NSSF.
An employer with expatriates who are not eligible for registration with NSSF must however remit a special contribution of 10% of the employee’s wages to a reserve account provided by the NSSF. This contribution cannot be claimed by the employee at the end of their tour of duty.
Expatriates can be exempted by the managing director of NSSF from making contributions. This can be achieved if the expatriate can prove that they are already contributing to a similar social security scheme in another country.
The law governing employment relationships in Uganda is more inclined towards the interests of the employees. Expatriates seeking deployment in Uganda should therefore be reassured of a robust legal framework that would protect their rights.
The compliance issues notwithstanding, what usually is more challenging for the expatriates is settling into their new work environment.
Obtaining suitable accommodation, social clubs, schools for children and the requisite regulatory registrations can be overwhelming if not planned out well in advance.
The author is the managing director of Cristal Advocates.
