Electric car makers get stamp duty exemption

by Business Times writer
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In the financial year 2024/2025, companies manufacturing electric vehicles, electric batteries, electric vehicle charging equipment, or engaged in the fabrication of electric vehicle frames and bodies, and employing at least 80 percent Ugandan nationals will benefit from a Stamp Duty Tax exemption.

The exemption is part of the amendments outlined in the Stamp Duty (Amendment) Bill, 2024, passed by Parliament on Monday.

According to the Bill, to further qualify for the exemption; the companies shall have the capacity to use at least 80 percent of the locally produced raw materials, subject to availability.

The Bill which was proposed by Government at the beginning of April had been sent to the Parliament’s Committee on Finance, Planning and Economic Development for scrutiny.

The Committee Chairperson, Amos Kankunda, while reading the Committee report at the floor of the House on Monday, said that the electric car company is required to have a minimum investment capital of US$10 million in case of a foreigner, or US$300,000 in case of a citizen or US$150,000 in case of a citizen who invests up country.

“This is intended to promote investment in an environmentally friendly transport system in Uganda,” he said.

This exemption marks a substantial boost for the electric vehicle industry in Uganda.

Uganda aspires to establish itself as one of the leaders in the global electric vehicle sector and achieve its vision of widespread e-mobility adoption.

To realize this dream, President Yoweri Museveni, last year announced that Uganda’s lithium will not be exported to the outside world.

“We have designed and we are making our own electric vehicles, electric buses, mini buses which we call Kiira, and we are struggling to make lithium batteries here because we have the lithium. Our lithium will not be exported, we shall make the batteries here. So, if you get me investors (I have some, but if you you get me more), then we will use the lithium batteries in our own vehicles, and export others for other people. So, that is another area you can help me get some investors,” said Museveni while dressing investors at the Uganda – South Africa Trade and Investment Summit in Kampala in September 2023.

Lithium is a key component in the batteries that power electric vehicles. Lithium-ion batteries are the most common type of battery used in electric vehicles, and they offer a number of advantages over other types of batteries, such as a higher energy density and longer lifespan.

With the increasing demand for electric vehicles, the need for lithium is also on the rise. Recognized as a crucial mineral, lithium’s global supply is under scrutiny due to concerns about its capacity to keep pace with escalating demand.

As the demand for electric vehicles grows, so does the demand for lithium. Lithium is now considered to be a critical mineral, and there are concerns about the global supply of lithium being able to meet the growing demand.

In 2021, global lithium production totaled 540,000 metric tons. However, the World Economic Forum anticipates that by 2030, worldwide demand will surge to surpass 3 million metric tons. With the rapid adoption of electric vehicles, this disparity is forecasted to expand further in the years ahead.

Budadiri West lawmaker, Nathan Nandala Mafabi said that Uganda is endowed with resources and hence, promoting their use by manufacturers is a move in the right direction.

Pian County Member of Parliament, Remigio Achia backed the exemption saying that is timely since youths are increasingly investing in science and innovations.

“Young people are engaged in innovations and it is very good,” said Achia.

Mbale City Industrial Division MP, Karim Masaba also welcomed the exemption, saying that by employing 80 percent of Ugandans in such companies, government would be protecting the citizenry.

However, Kira Municipality lawmaker, Ibrahim Ssemujju Nganda dissented from the committee’s report, arguing that according to the Auditor General, out of the 36 companies that obtained tax incentives and exemptions, 22 were performing below the 50 percent threshold, thereby failing to achieve the desired employment levels.

“The Auditor General is advising us to stop tax exemptions because they are not serving the purpose. You may not listen to the Opposition but at least listen to the Auditor General,” he said.

He added that tax exemptions cost government Shs1.4 trillion annually.

Butambala County MP, Muwanga Kivumbi, called for a comprehensive study on companies that are considered for tax exemptions, saying that some of them lobby so as to avoid taxes.

“We do not have revenue and we are exempting without specific studies to form our exemptions. We can exempt but let us be very elaborate with studies,” said Kivumbi.

The sales data from the International Energy Agency’s Global EV Outlook for 2023 reveals a remarkable increase in electric vehicle sales, with a surge of 55% compared to the previous year, surpassing the milestone of 10 million units sold.

“Electric car sales — including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) — exceeded 10 million last year, up 55% relative to 2021,” the IEA’s report reads in part.

This number is forecasted to continue its upward trajectory.

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