Uganda offers tax incentives to flower exporters in economic zones

Tuesday November 14 2017

A worker from Victoria Flower Ltd arranges flowers for export.

A worker from Victoria Flower Ltd arranges flowers for export. Export revenue expected over the next five years after all the 11 new licences are taken up. PHOTO FILE | NATION 

By RAYMOND TAMALE
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The Uganda FreeZones Authority (UFZA) has come up with incentives to attract investment in the sector. Flower farms Rosebud and Premier Floriculture are the latest licensees — the 10th and 11th — in the two years the agency has been in existence. They were licensed on October 27.

The Authority was created by an Act of Parliament in 2014 to promote fresh produce exports.

The latest initiative, which officials say is meant to boost export revenues with a target of at least $100 million in the next five years, has benefited producers and exporters, with seven of the 11 licences going to floriculturists.

Floriculture

Officials see floriculture as a high potential sector that does not need massive investment. The sector brings in export revenues of at least $30 million.

Kenya, the continent’s third leading exporter of cut flowers, produces some 360 tonnes of cut flowers, earning it the title of “the world’s flower garden.”

A key condition of the incentives is that new entrants must guarantee they will start production within 12 months of receiving the licence while existing producers must commit to continued production.

Apart from exemption from taxes and duties on all export-processing zone imported inputs, the government is giving a tax holiday for 10 years on exportation of finished consumer and capital goods, exemption from tax on income from agroprocessing, exemption from capital gains tax on plant and machinery used in the free zones for five years and one day upon disposal; exemption from all taxes, levies and rates on exports from the zones and exemption from taxes on personal income of persons offering technical assistance.

It offers a deduction of 50 per cent off the cost of property put into service for the first time outside a radius of 50km from the boundaries of Kampala.

Non-fiscal incentives include warehousing and onsite Customs inspection of buildings, premises, vehicles, vessels and aircraft entering and leaving the free zone.

Licenses

Two licenses were taken up by wood producers, two to phosphate producers (Nilus Ltd, Uganda Wood Impex, Wagagai Flower Ltd, Jambo Roses, Fiduga Roses, Ugarose Ltd, Royal Van Zanten Ltd) and two to Dong Song Company.

“In the past year we have received applications from investors in all sectors ranging from minerals to wood production that are undergoing scrutiny from the evaluation committee before they are given a license which usually takes 30 days,” UFZA public relations officer Doreen Kembabazi told The East African.

“New investors who are approved for production are required to start production within 12 months from licensing and for already existing investors they are required to continue with production once they are given a developers license,” she said.

But there are challenges in the flower business such as inflation, tough economic times in Europe, which is the primary destination for East Africa’s flowers and competition, especially from Ethiopia and Kenya.

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